Posted by Jost on August 16, 2006, at 20:11:07
In reply to Re: only in the oil business » Jost, posted by AuntieMel on August 16, 2006, at 17:19:46
One minor point, though about drug companies is that their fraction of their budgets devoted to R&D is not very great, especially considering their profitability. Enough so as to raise questions about whether this is best way to encourage R&D.
But drug prices are largely determined by the power of insurers and other groups (like Medicaid and Medicare) to bargain effectively to keep prices low for members of the group. Problem with the new Medicaid program is that government gave up right to bargain with the drug companies for Medicaid drugs, which had been one way that drug prices for Medicaid recipients were held down.
So it could be that at least for those on Medicaid, drug prices will rise substantially in future years.
I did check on the California situation, which had more to do with suppliers of electricity than oil companies. There was a lot of manipulation of the market by energy suppliers and sophisticated traders (such as Enron), supported by the unacceptable accounting practices used by Arthur Anderson (the firm, not the person, who died in the 1970's). It was the Houston office of Anderson that carried out the fraudulent accounting, but that's not the oil company's fault. Whole other kettle of fish, having nothing to do with oil companies either--
Probably just overzealous free=market thinking, without understanding consequences of deregulating wholesale market without deregulating retail market, in the presence of a small group of powerful energy supply firms, who had a controlling market share. This opened the way for market manipulation, which unfortunately, occurred.
So perhaps the oil companies have an undeservedly bad reputation-- and it's really the government's unwillingness to tax gasoline, to raise the price and therefore to reduce demand (through conservation), without giving all the profit to the oil companies. At the moment, the sole vehicle for affecting the market is level of prices set by oil companies, so as to condition demand to supply.
Jost
poster:Jost
thread:675260
URL: http://www.dr-bob.org/babble/poli/20060809/msgs/677231.html