Monday, April 24, 2006

Solution to Gas and Other Problems

Shell, Exxon-Mobil, and every other gas producing company have every right to manage their inventories of oil and gas using a just in time (JIT) methodology similar to how General Motors and other automobile manufacturers manage their inventories of parts and manufactured vehicles. These gas producing companies also have every right to manage their business in a way that produces the greatest return on investment for investors by turning capital into profits. The profits from gas are just as beneficial to the economy as profits from any other product.

Profits mean that an enterprise has developed an improved or more efficient way to produce and deliver a product. Profits are capital that can be reinvested in a way that will create more profits for the company or profits can be spent in ways that will generate profits for other companies and investors. High profits by gas producing companies are an indicator that other companies have an opportunity to profit by moving investment capital into the gas producing industry which in the long run will help to lower the price of gas as more companies compete with each other.

In recent years the gas producing companies have also benefited from an almost monopolistic competitive environment. New companies and new investors are reluctant to invest the amount of capital necessary to be competitive in the gas producing industry because of the risk involved with government threats and regulatory restrictions. Republicans get most of the blame for this problem because of the tax breaks to the gas producing companies, but Democrats are just as responsible for the problem because of the way they constantly threaten gas producers. When it comes to the price of gas, just like everything else, anyone expecting help from the government better hold on tightly to their wallet.

The answer to the problem of high gas prices is for companies that are adversely affected by the price of gas to begin the process of vertical integration into refining their own gas. Companies like General Motors, United Airlines, and others need to step up and start investing in refineries. Both of these companies as well as many others are being hurt by high gas prices and both of these companies have the ability to deal with all of the government red tape and regulations in building new refineries. Both of these companies have labor problems that could be reduced by putting employees to work building and operating refineries. Both of these companies would profit from lower gas prices even if their refineries were not that profitable. Both of these companies could do a lot for their own profits and help to reduce the price of gas if they would be more proactive in creating a better market environment for their products and services by becoming gas producers as well as automobile manufactures and airline carriers.

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