huafist
15+ Year Contributor
- 1,164
- 12
- Sep 25, 2004
-
Morristown,
Tennessee
Dark_Horse said:In any business class/economics class you take, they usually talk about the law of diminishing returns.
Basic law of diminishing returns - there is an optimal production level for businesses that allows the per unit cost to be the lowest it can be. Once this production level is surpassed, the cost per unit rises quickly.
If refineries are running at 100% of capicity, they have obviously exceeded their optimal production level.
Oil companies will make profits no matter if they're running at 1% of capacity or 100% of capacity. They just jack up the prices to compensate for higher production costs.
I'm not debating the law of diminishing returns doesn't exist, I'm just questioning it's application as a reason for high gas prices. I'm simply observing that the "compensation" is exceeding the "higher production costs" and is just being used as an excuse to gouge people on a necessity of modern life.