11/15/2005

Price Gouging

Recently the oil industry reported record profits for the last year. I saw that and was furious. In a time where all you hear about is the outrageous gas prices, the oil industry reported a record gain. Then I read this article and my thinking became more rationalized. We are taught daily in business classes that the main purpose of business is to maximize profits. That is just what the oil industry did. In a time where the demand for oil is high, the oil company took advantage of the market. If there was no demand for the product the price would not be as high. It was a smart business move by the oil industry and all we can do is deal with it.

3 comments:

Ava said...

Unfortunately I have to agree with Nate. They did do the right business thing, but there still is the question of ethics. They are making profits now but in the future, when there will be more hybrid vehicles; they could be damaging relationships and the customers’ value in the company and may lose money

Jasmine said...

While I don't like the high prices of gas, I too have to agree that the oil companies are just practicing good business. However, the catch is that is they continue to "gouge" to an extreme it will hurt them in the long run. They might have record profits now, but they will open the doors to new ways of thinking and new types of innovations for transportation.

Dr. Tufte said...

Hmmm.

Have you ever heard of price ungouging? I didn't think so.

I think that everyone should back off until they can explain why we have an asymmetry where raising prices is gouging but lowering them isn't ungouging. Without that, I think that complaints of gouging are nothing more than the majority shouting down the minority.