Increasing Profits by Selling Less

I got this anonymous comment to my last post on the Obama victory, where I mentioned the simple solution to global warming:

“Once they understand that producing and selling less increases their profits as well as the value of their fossil fuel reserves, their lobbying payments will go in the opposite direction.”

Um, selling less will increase their profits? That’s a good one.  Lets look around and see where this approach has worked effectively in the past. ..lets see..Blockbuster video sold less and went out of business, Nortel sold less and went out of business, Speigel sold less, Bethlehem Steel sold less, Swissair sold less, Enron sold less and went out of business.

Hmm, not looking good for your “sell less, make more” business model. Lol!

I can predict with some confidence that you HAVE NEVER run your own business, not even a curbside lemonade stand. Let me guess, you’re a government employee. Gotta be.

I am pleased to read this comment, since it shows that my proposal needs some explaining.

First off, OPEC already has been in the business of making more profit by selling less for the last 52 years. They understand quite well, as does everyone else involved in oil, that lowering production gets prices up.

Actually, the demand for oil is what economists call “not elastic”, which means that relatively small reductions in production can get high price hikes.

While the comment above notes some examples, all those companies are not in the oil business. In contrast, recently ExxonMobil and Shell (number one and two on the Fortune 500 list) announced their third quarter earnings, which were $9.6 billion and $6.1 billion, which brings their total earnings for 9 months of 2012 to $35 billion and $18.9 billion. And they did that while producing 5% less.

The comment is right in one point: I have never run an oil company, or even any business. I am not sure why that should matter when discussing my opinion, though.

Related post: My Global Warming Science Fiction Novel “Great News”

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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