HTTAP – Bachmann’s $2 gas (simple)

Y es, there were lots of numbers in there.  I’ll give everyone a simple example of capitalistic forces.

Coke costs, for simplicity, $1 a can.  Maybe it’s high, maybe it’s low, whatever.  You’ll quickly see this makes no substantive difference for my argument. 

Coke sells 27,375,000,000 gallons a year.  That’s the equivalent of 292 billion cans a year. 

Producing Coke costs about $.055 per can. 

Coke has an annual advertising budget of $1.6 billion dollars.  Let’s be absurdly generous, discount every single other product line and company Coke owns, and say it all goes to selling those cans.  For the record Coke owns, well, take a look for yourself:  http://en.wikipedia.org/wiki/List_of_Coca-Cola_brands

That means Coke spends $.0055 per can in advertising.  Total cost of a can of Coke:  Let’s say $.06. 

Soooo…why is Coke $1 a can?  That’s a hell of a markup. 

The price of soft drinks is fairly consistent across the market.  So WHY…don’t “natural capitalistic forces” result in a price war between all the companies to drive prices into the toilet?

The reason is simple:  America thinks that’s reasonable and we’re willing to pay it.  ‘Natural capitalistic forces’ as defined by conservatives is a gross oversimplification of the real world.  Bottom line, things are worth whatever people are willing and able to pay.

How does this relate to gas?  Exactly the same way.  It doesn’t necessarily matter how much oil costs, because energy companies will charge whatever people can pay.  There’s just one big difference here.  We NEED gas.  We don’t NEED Coke.  Unregulated oil companies can FORCE us to pay a price so long as they are slightly below what will cut their sales.   So now the oil companies really have us by the balls, because true ‘capitalistic forces’ don’t directly apply if we can’t simply stop buying something.  Now we need regulations to make sure they don’t gouge us into the dirt because they have a major advantage over consumers.   

Remember when gas was about $4 a gallon?  Everyone had a ton of money because we were borrowing so much to buy houses.  Now oil was selling at $120 a barrel, which means that dollar for dollar the oil companies were making significantly LESS profit than they are today off that same crude.  Yeah.  And every last one of us, be honest now, ALL OF US, were bitching that gas companies were gouging us.  All of us.  And we still paid it because, survey says…we had to.  Now Michelle Bachmann is telling us we need to remove all the regulations against oil companies so they can function in the free market like Coke does.  With their 1800% markup on a can of soft drink.  Except we have to buy it…

It ceases to be a question of how much “should” we pay for gas, and becomes how much “can” we pay for gas. 

Michelle Bachmann:  Please explain to me how deregulating an industry which supplies a vital commodity so that it operates essentially like Coca Cola will lower gas prices by a third.

Ben Tomkins
Ben Tomkins is a violinist, teacher, journalist and critically acclaimed composer currently living in Denver, Colorado. He hates stupidity and generally believes that the volume of one’s voice is inversely proportional to one’s knowledge of an issue. Reach Ben Tomkins at BenTomkins@DaytonCityPaper.com.

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