Do some countries boost and lower production based on politics? Sure. However, these decisions produce temporary disruptions in the market that create incentives to either boost or lower production, too. Saudis, as important as they are to the world oil market, do not control it. Their decisions can certainly influence it, but only for a short time.
Well something’s definitely happening. Gasoline at two stations in my town was $3.08 for regular just last week. It’s now $2.64 at one and $2.69 at the other.
One contributing factor in the high prices and the current drop may be contango. This is a term for the situation where future prices of a commodity are significantly higher than the current spot price. When that happens to a non-perishable commodity, companies start buying on the spot market and storing the commodity. This has been happening with oil, to the point where storage space was pretty much at capacity. So demand on the spot market has been boosted by speculators looking to lock in a future profit by selling futures at $78 and buying on the spot market for $70. As storage space for such speculative (actually sure-thing) arbitrage plays fills up, that part of the demand will level off. Some think this is already happening.
The companies make money off refining ,distribution and digging and exploration. The incredible amount of money they have gatherered ,billions , is not reflective of that.
No price fixing. Do you believe that the companies all have the same cost of labor ,distribution, and marketing. and salaries. Therefore the prices are the same. Could it be possible that all the costs work out even. I do not believe it.
http://www.redorbit.com/news/science/403304/gas_company_to_pay_772m_f
av=news&storyID=10768 Not just me . there are hundreds of stories like that.
http://www.redorbit.com/news/science/403304/gas_company_to_pay_772m_f
av=news&storyID=10768 Not just me . there are hundreds of stories like that.http://www.state.ia.us/government/ag/consumer/press_releases/gasprice-tjm.html Some unenlightened people smell a rat.
gonzo, your analysis is a bit flawed. Anyone who has examined the issue of price fixing has determined there is no basis to make this charge. Essentially, most companies’ costs are the same. Oil is bought on a worldwide market, and all companies buy off that market. Government mandates cost the same (depending on region). Taxes cost the same.
The price you pay at the pump also has a lot to do with the local gas station operator. That person is, in the end, the person who prices the gasoline you buy. These people are colluding to keep gas prices high. If the Exxon station has gas at $2.69, the BP would be foolish to keep gas prices at $2.75. Gas prices rise and fall to essentially the same levels in a place essentially because gas station owners know that it’s hard to keep customers if you have the highest prices in town.
And as far as oil company profits, they are only historically large based on the total number. If you look at the percentage of profit they make, it’s not all that big. Many companies have much higher profit margins, but since oil companies are so big, their average profit margins produce billions of dollars.
gonzo, your Red Orbit link isn’t working. As far as the Iowa AG investigating, that’s a joke. Every time gas prices go up Attorneys General rush to investigate and trumpet their actions as trying to protect the public. It’s all bull. These investigations find no evidence of wrongdoing and are both a waste of taxpayer money and a political stunt to play on the fears of people who don’t understand the energy markets.
If you were correct and demand is the big drive. And we accept that supply and demand are as always just fluctuating up and down. Then how do you explain billions of dollars in excess profits. ?They are showing profits on an scale that is unbelievable. If these were practtically fixed and profits were a mere 10 cents the profits would not grow. The baron are paying themselves hundreds of millions of dollars in wages and benefits. Yet profits are skyroketing.
You are ignoring that hundreds of billions in profits are coming from somewhere. Pleasr explain. It is not in the 10 cents .
I’d just like to point out that according to my cite above, sales for this year so far are down slightly compared to 2005.
gonzo, my post clearly stated that oil companies are not making record profits if one looks at their profit margin instead of the highly misleading total amount of profits. They are not “excess profits” (how would you even define what amount of profit is “excess”?). They are normal profits that are large because the scale of the companies is so large. It’s true that they are higher than profits for oil companies have been in the past. So what? Rising profits is not a sign of theft. It means they are selling a product that people want to buy.
The ten cents on a gallon of gasoline (or roughly around that amount) is responsible for the “record” profits our news media ignorantly trumpets. Traditionally, oil companies have been less profitable than most companies. Now, they are only slightly more profitable than average. Banks, pharmaceutical companies, software companies, and real estate companies all have higher profit margins.
The oil companies aren’t stealing from anyone and their profits aren’t “excess.”
Sales are down and profits are up hugely . What could I be missing. 23 mergers in the last 10 years. Consolidation into a few corporations must be a good thing.You must undnerstand given the parameters you provide 10 cents agallon and demand not increasing, that it does not add up to a huge increase in profits. Can you see that.
Oil companies making ten cents a gallon is higher than they’ve made in the past. I’m not saying their profits aren’t larger than they have been in the past, I’m simply saying that they are not “record” or “excessive.” Anyone who claims that is ignoring the fact that oil companies have slightly higher profit margins than average.
And demand isn’t necessarily lower. While U.S. sources may be using less oil than in 2005, worldwide demand continues to increase. China, India, and other nations are becoming richer and using more oil. Demand is also shakier than in the past.
As much as you want to believe oil companies are shafting you, facts simply aren’t on your side. If anyone is shafting you, it’s the U.S. government, which is taking 18 cents a gallon in taxes and your state government, which is taking up to 30 cents a gallon. And, if you live in a metropolitan or suburban area, new government environmental mandates raise the price of gas by around 30 to 40 cents. When you compare this to the “record” oil company profits of 10 cents a gallon, you can clearly see that tax policy and envioronmental policy do much more to screw you than the evil oil companies.
http://www.cbsnews.com/stories/2004/06/01/eveningnews/main620626.shtml I dont trust them. And taxes do pay for roads and bridges which we all use. They are fixed prices and do not count for increase profits.You must explain how with a steady demand and fixed taxes how profits skyrocket.You do admit they are making profits at levels never seen. do you not? The whole presidential cabinet is oil men. A cooincidence . The math is not there. The ones getting screwed are the service stations. They are at a relatively fixed rate of profit per gallon. Their profits are not skyrocketing. The logic is overwhelming.
I wonder how much is being used in the war in Iraq 
http://www.signonsandiego.com/uniontrib/20060801/news_1b1gas.html They are the refiners and disguise profits there too.
gonzo, go back and re-read my posts. Demand is not steady; it is rising worldwide. I never said that taxes have anything to do with profits. I said that taxes and governmental environmental policy contributes much more to the price of a gallon of gas than the oil companies’ profits. The whole cabinet is not “oil men” by any stretch of the imagination, and even if it were, the government does not set oil prices.
You can think what you want about some conspiracy to set prices, but there are no facts to back up such a ridiculous assertion. Oil companies are making higher profits than in the past. So what? Demand is up and they are supplying a product that people want. Making a profit isn’t bad. No one is forcing you to buy gas. People voluntarily drive into a service station to fill up.
BP doesn’t control the oil market. It is only a single energy company.