From television to newspapers, the media have gone wild over oil companies’ profit reports this week, asking “how much is too much?”
That question alone demonstrated journalists’ omission of free market principles in their reporting. America’s free market allows the small businessman to become a large business if he is able. Once companies are publicly traded, millions of others share in the business’s profits. Yet, the media have pitted businesses against consumers, leaving out the fact that these large companies distribute dividends to millions of individuals.
Covering oil companies’ profits, reporters operated on the assumption that there should be a profit ceiling for a business, and that anything above that would be unacceptable. They also attempted to whip up consumer “outrage,” even though it is consumer demand and oil scarcity that drive up prices – not an arbitrary decision by oil companies. Just a few highlights:
▪ Get angry!: CNN’s Miles O’Brien offered his audience “something to get your blood boiling” and “get you a little outraged” on the October 28 “American Morning.” He said, “Profiteering is the term? … Could this be something that there is some law they have violated?” When Andy Serwer said he didn’t think so, O’Brien continued: “it must mean that the price they are charging us is going up faster than the price of oil. I mean, I’m not an economist, but …” O’Brien is indeed not an economist, and he didn’t entertain the idea that increased demand for gas, combined with a scarcity, would raise prices.
▪ Profits make us poorer?: “But those rising prices at the pump are taking fuel out of the economy, by taking spending money out of our pockets and making the country poorer.” – CBS’s Anthony Mason on the October 27 “Evening News,” ignoring millions of individual shareholders who benefit, not to mention how the exchange of goods and services works in the economy. Although gas prices rose in the aftermath of Hurricanes Katrina and Rita, the rise in one sector’s prices does not mean the entire economy is suffering from inflation, as the Free Market Project has reported.
▪ They swim, we sink: “Oil companies, ringing up profits that boggle the mind. The outraged Americans who say they are paying dearly, while the producers swim in money.” – ABC’s Bob Woodruff, “World News Tonight,” October 27.
▪ The voice of reason: ABC’s financial contributor Mellody Hobson finally added an economically sound perspective to the issue on the October 28 “Good Morning America.” She said the widespread outrage is “not warranted,” because the oil companies have “nothing to do with how gas prices are set.” She explained the basic principles of supply and demand, saying that market forces set prices. Hobson also explained that additional regulation and government price-setting are harmful to both businesses and consumers in a capitalist system.
