Is a $10 Billion Profit Looting?

MT made a very good point the other day. Gas prices has soared because of a cut in production capacity--so that, according to the laws of supply and demand, the prices goes up because of shortages.

So far, so good. A business exists to make money, and if an oil company needs to pay more to produce gasoline, they are perfectly within their rights to pass on the cost increases.

But when does a legitimate price increase became price gouging? The Boston Herald suggests that something is wrong when Exxon posts a record quarterly profit $10 billion of as a result of Hurricane Katrina.

Here's how the Herald put it:


That's $110 million a day, and more net income than any company has ever made in a quarter. It's also a stunning 69 percent increase over the same period a year ago and a 34 percent jump from the $7.6 billion Exxon made just last quarter.


Something a little more than supply and demand is going on here.