Greens, Pols Unfairly Point Fingers at Big Oil

The price for anything, be it a share of stock, a gallon of gas or a Hannah Montana concert ticket, isn't arbitrary but governed by supply and demand. Oil companies can't unsustainably manipulate the price of gas any more than McDonald's (MCD) can unrealistically jack up the price of a hamburger. Rightly so, both companies charge what the market will bear.

As oil executives pointed out numerous times during Wednesday's Congressional hearings, the vast majority of the cost of gasoline stems from the price of crude oil, which has been hitting record highs for weeks. And yes, record prices for crude have led to record profits for oil companies.

But while profits are big, so is the scope of accomplishing what oil companies do every day. Unleaded doesn't magically appear at the service station. It takes massive investment to keep the nation stocked with safe, reliable sources of energy. The profit margin enjoyed by big oil companies is around 8.3%, less than earned by the average computer company, bank, electrical equipment manufacturer or restaurant. Yet Congress isn't ready to accuse IHOP (IHP) of gouging you on your Rooty Tooty Fresh 'N Fruity breakfast, is it?

Like Wal-Mart or any other successful large enterprise, it's we who make Big Oil big. Profits come as a result of providing a service most Americans are happy and willing to pay for. Indeed, even gas at current prices hasn't markedly affected domestic consumption. Indeed, many of those who complain about $4 gasoline from Exxon Mobil (XOM) don't hesitate to buy a $4 latte at Starbucks (SBUX).