April 21, 2006

Fetishizing profit

Marx argued (somewhere in Capital, I'm too lazy to dig out a quotation right now) that one of the major fallacies committed by economists of his day was commodity fetishism, the reification of communal values and beliefs -- for example, treating money as a physical, material object and the profit motive as an inevitable law of nature.

In the intervening century and a half, things haven't improved. Let's examine a list of reasons why the cost of gasoline to the consumer has jumped up so high in the past year:

-- The showdown over Iran's nuclear program has pushed crude-oil prices to new heights, with a barrel costing $71.95 Thursday on the New York Mercantile Exchange.

What does the possibility of a war have to do with the current relationship between supply and demand in the crude oil market? Well, nothing, of course. Except for speculators buying as much oil as they can now, anticipating scarcity when (if) a war starts, and thereby creating scarcity now. So, technically, it's speculation and opportunism among investors over the showdown in Iran that's driving up crude oil prices.

-- Several states have started blending ethanol into their gasoline, driving up costs for the additive.

Driving up the costs for refinery and gas station owners. They could, of course, choose to absorb the cost of adding ethanol.

-- Some refineries knocked out by last year's hurricanes remain closed, while others untouched by the storms have throttled back for long-overdue maintenance. That's driven down gasoline production 457,000 barrels per day compared with the same time last year, while demand is up slightly, according to the Department of Energy

This is the only explanation that seems genuinely beyond the choices any individuals have made. However, one might still ask why the former refineries are still closed, and simultaneously, production has slowed at the latter.

-- Refinery profits have soared, adding to the price at the pump.

This is essentially the same explanation as the ethanol one: the owners of refineries have chosen to maintain, or even increase, their profits, at the expense of working- and middle-class folks (who do not generally get reimbursed by their employers as completely, if at all, for their transportation and travel expenses as the upper-middle class and wealthy).

All four explanations, then, are misleading: it is not that impersonal economic forces have accidentally aligned in such a way that pump prices have inevitably floated up, but that speculators, refinery owners, and gas station owners have all made opportunistic choices to enrich themselves at the expense of others.

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