Letters to the Editor
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Exxon just as utility?
Economists wedded to their supply demand curves always get it wrong. They assume that while intrinsic value remains constant, any rise in the cost of production results in a lower price paid for the raw material, in order to balance the equation.
The housing market offers a analogy to the problem. Housing costs are based on raw material, labor, and the cost to borrow money. Typically when interest rates go down, homes are worth more. Alter any point in the equation and the other variables should fall into line, assuming inflationary pressure are not a factor. Inflation is the only reason to change the intrinsic value of something,( or maybe the government threatens to jail everyone who doesn't own a home).
Now in this instance lower interest rates may actually drive home prices lower, because bankers refuse to lend, and buyers with cash or a large down payment are more reluctant, because they are putting their own skin in the game, and paying inflated costs which reflects the devaluation in the credit markets, and not any intrinsic change in value. With credit markets tight, its hard to sell price increases based on inflationary pressures.
Like bankers who won't lend money, at some point the oil suppliers simply shut off the spigot, circa 1970's. There is no hard cash to offer the suppliers, only increasingly worthless dollars, which are probably being manipulated higher through bogus government intervention.
Exxon is like the banker who doesn't want to loan money, (and part of the problem in housing is that banks became utilites, which simply passed on the mortgage paper to investors, without risking any of their money. That was the plan...)
Exxon's profit margin isn't there, they have to pay too much for the raw product, and they cannot pass on their costs to the consumer. The COngress can make them sell gasoline, which they will respond by telling Congress that gasoline is too cheap, and ask for more subsidies. The housing problem has caused national angst, but who cares about the energy market? Nobody really.