But his good friend King Abdullah can, and has.
Excess profits, not my term. Excess profits tax debated in congress ,must be something I said. I simply state that their profits are huge. Mcbee is correct that they own the oil production from land up to distribution. The oil they have in the ground increases thee profit line hugely.
I saw on line a study on oil companies by the state of Calif… They had charts showing the profit from each step of production. Refining profits ranged fron 16 to 58 cents per gallon.That also adds to the so called 10 cents at retail. The only site I found in agreement to 10 cents was the Conoco site. They are perhaps a little one sided. But even saying that on this site is dangerous.
The claim that 10 cents per gallon accounts for the huge gain in profits is so absurdt hat I havn’t even botherered to post .Mathematically and logically impossible.
My understanding is that the oil industry is pretty vertically integrated
- the oil companies do every stage from pumping, refining to the pump
Which rather makes one wonder what the spot and futures markets are doing
Incidentally the USA Govt can influence the price of oil, it keeps a ‘strategic reserve’ which it can top up or run down.
As for profits, BP and Shell have posted massive profits, which is not too much of a problem as they plough them back.
Cite, please? I remember the gas lines in 1980 (I thought the Nixon-era price controls were long gone by then), and I also remember the price of gas not dropping until their abrupt collapse in 1986, I think it was. That’s more than a few months - that’s about 70 of them.
Oh, gimme a fucking break. Of course the Saudis control it; the amount they pump absolutely dwarfs the amount of slack in the market. If they chose to pump 2 million bpd instead of 12M, the price of gasoline would jump to insane levels. If Islamic radicals ever manage a coup there, we’re in trouble.
The only limit on their control is that they can only increase production by a few million bpd at best, which means there’s only so much they can do to drop the price of oil (and oil products including gasoline). Although in a market as tight by historical standards as this one, even that would ease prices considerably.
That’s not total control over the oil market, but it’s one hell of a lot of control.
Well, the OPEC embargo happened in 1973, so I doubt that any gas lines you saw in 1980 had anything to do with it. There was some disruption around the Iran-Iraq war starting that year, so that may be it.
As far as gas prices in the 80’s, the did drop dramatically in 1986 but had been declining less dramatically the entire decade.
IMHO, you have made the most on-target and concise synopsis here of the current recent drop.
That’s a cornerstone of modern Republican political strategy, really – assume the populace has the IQ of a turnip, and then manipulate them with terror alerts/Swift Boats/oil price manipulation/Clinton-blaming as needed.
OK, so I’ve asked previously and no one has yet stepped up to plate yet: how is the administration manipulating oil prices? Describe the mechanism, please.
As it has been pointed out to you, by many people, demand is increasing. However, no one mentioned anything about consolidation, and since that’s what I’ve been doing for the last three months, I’ll mention a little something about that.
These mergers and acquisitions within the oil industry is a good thing if done right. By that, I largely mean increasing economies of scale. Typically, at least in my industry, mergers are proposed to increase economies of scale, increase capacity and production, and shore off duplicate efforts. A lot of our production is software based, just like I suspect many other companies have a large IT component to their production. I can use the same software to run 100+ more servers, plastic mold injectors, data centers, switch boxes, prefab press machines, etc. That means I can stop payin the maintenance fees on the old company’s software, decrease user counts, etc. If my finance and operations team is underworked, I can fire the other company’s finance and operations teams and let my employers work more, thus saving my company on labor. I can close plants and send resources to my existing and more efficient production centers, and so on and so forth. All of these moves increase my company’s bottom line, thus increasing my profits, and I can do all this with demand for my products remaining stagnant (I’ll just take over the other company’s customers).
I threw out my city’s newspaper which delved into the numbers (though, in retrospect, it might have been Time magazine), and the analysis breaks down to 10 cents a barrel profit. The profit could’ve come from anywhere: consolidation, better tax strategy, lay offs, other mergers and acquisitions, not just increased demand. Any company’s balance sheet is too complicated to simply state that “we sold more gas today, to the tune of 10 cents more a gallon, yea us!” The 10 cents per barrel number is just an easy to guage index.
The 10 cents is easy to find. Go to Conoco site. That is where I go for the truth. It is the figure used in front of congress by the oil executives. How can I dispute neutral sources like those.
The consolidation was pointed out by me. There are 23 merges ,some huge, in the last 10 years. That would consolidate power in a few people. Of course why would they collude.
Oligarchy and Oligopoly. In some circles they are terms to fear. You people are comfortable with natural resources being distilled into fewer and fewer powerful people. Good for you. I am not. American history is replete with chicanery and horrors visited upon the people . Remember Standard Oil and the eventual trust busting. What industry was that ? Monopolistic industries have been fought here for a hundred years. Somehow I do not think this admin is likely to go that way. I did hope the masses could question and see the potential dangers. I was wrong.
http://www.opensecrets.org/pressreleases/energybriefing.htm This was simple generosity. No quid pro quo. Corporations making 10 bill a quarter need tax breaks and deserve them too… I saw a site Californis Governmentg agency made showing the profit at each step. It included a refining profit ranging from 16 to 58 cents. per gallon. That I feel is inadequate because they do attempt to keep as much secret as possible.
They own the oil in the ground. In some cases they lease the areas. Ten cents sure. Howm any dimes would they have to make per gallon to pay for political donatiolns alone.
I was actually looking at BP’s profits.
Without making some wise-crack comment on how governmental powers and law-making is elected to hands of the few, I should direct you to a website on the economic discussion of fallability of cartels and oligopolies. Since you brought up those terms without any context, then I’ll assume that you mean price-fixing. If so, continue reading, if not, stop and tell me what you meant. Anyway, this discussion is complete with graphs and charts containing classroom data and real world data (OPEC comes to mind, but I think they also used whisky or sugar (maybe cotton) of 19th century America as other examples). Actually, now that I think about it, it might be in my econ history books.
Since it’s getting late, and I still have a conference call to attend (rather than hunt down cites for you), I’ll just highlight the main points: oligarchial price raises come to the detriment of the oligarchy either off-setting any short-term gains, or providing a windfall in a competitor. The oligarchy by definition has the largest supply of the widget (in this case, I’ll say oil). If they set the price artificially high, their number of buyers will decrease, and buyers will go to other competitors, enriching their market position by giving them money.
If they set the price artificially low, they sacrifice profit in the vain attempt to dissuade competitors from entering. If it’s too low, they are operating at a loss, at best, they’re breaking even. Since the oligarchy is, like I said, the biggest player in the market, they’re suffering even larger losses than their next competitor (on avg per unit). In this time frame, there is nothing stopping the non-oligarchy companies from participating in the low prices. Even those that do try to compete at the lower price point and do happen to get crushed/go bankrupt, still leave the oligarchy in a weak position (because the oligarchy had to sell at a loss). The companies that didn’t compete at that price point will be stronger companies for not having to sell at a loss.
Weak/bankrupt companies can be bought by others on pennies on the dollar, thus putting them in a better position than the oligarchy (i.e. low market entry point). Many economists insist that there never ever has been price fixing. Lowering prices is just another method of competition.
Oh, and there’s nothing to stop oligarchies from cheating one another (like with OPEC). The price set by the oligarchy comes from a meeting/discussion by the various participants. This gives inside information to all groups involved. Weaker participants within the oligarchy have strong incentives to cheat or to use pricing information to their advantage.
What are these corporate horrors you speak of? Murder? Enslavement?
Perhaps you should take this argument up with my last post in the Wal-Mart thread (I posted yesterday). If I knew how to link to my post, I would, but at this point, I’ll just say that at the height of Standard Oil’s dominance in market share, prices have never been lower, likewise production costs have never been lower. Efficiency, which is something you seem to abhor, had never been better. Prices had been steadily declining under Standard Oil’s empire for like 20 years.
I am the enemy of efficiency now. Please. You apparently see no danger in the consolidation of industries. Our history shows price fixing and restraint of trade a result of such systems. Perhaps the magnanimous corporations that exist in your world could come to mine. Trust busting has existed because it was needed . It was a reaction to the restraint of trade which is anathema to the welfare of the people. I was going to cite past trusts ,but you are aware of them. You also are aware of why they were broken up. If you love the efficiency of oligarchy ,you should get orgasmic over the efficiency of monopolies.
I am sorry many find danger in these institutions. The restraint of trade and price fixing come to mind. Collusion is very difficult to prove. It is after all done in secret.
When I pointed out the money given to politicians ,it was to show how much free cash they have sitting around.They pay 100ilion salaries 400 million retirements pay millions on swaying our government and show 10 billion dollar quarterly profits. All this on a margin of ten cents a gallon. Wow they are efficient.
We’ve already explained these companies provide more than just gasoline. Are you deliberately clinging to this fantasy?
I also call “cite” on your "100 million salaries and 400 million retirements.
Facininating my old econ classes were so far off. They claimed competition made efficiency and innovation. I am surprised to see lack of competition has those results. How could they have erred so badly.
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Dick Cheney breaks out his Rolodex.
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Dick Cheney calls his oil-company buddies, tells them he wants more money in his “blind” trust to buy Yet Another Yacht™.
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Oil company buddies order refineries shut down for maintenance/safety/day-ends-with-the-letter-Y
(or, alternately, oil company buddies order critical pipelines shut down for maintenance/safety/day-ends-with-the-letter-Y) -
Gas prices go up.
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Repeat/reverse as desired.
Or, as Huey Freeman would say, “That’s so simple – oil man becomes President, gas goes up” (otherwise known as “Americans too stupid to put two and two together” 
).
But Rjung, think for a minute.
OK, you’re an oil company CEO. Dick Cheney gives you a call, “Rjung, I want gasoline prices up tomorrow!” Since you’re an oil company CEO, when Dick Cheney says “Jump”, you ask “How high, sir?”.
So you shut down your pipelines, you shut down the refineries. In other words, you stop making as much gasoline. Reduced supply, inelastic demand, prices go up, Econ 101. Ah, sweet sweet high prices! You’re making a fortune now, and you owe it all to your buddy Dick Cheney.
But wait. How are you making a fortune? Each gallon you sell is for a higher price…but since you’ve shut down your pipelines and refineries, you sell many fewer gallons of gas. You see those high prices. If only you could open up the spigots just a leeeeeetle bit, you could sell those extra gallons for obscene profits. After all, the more gas you sell, the more money you make, right? D’oh! Too bad you didn’t think of that when you sabotaged your own production! So you start cranking up production to take advantage of the high oil prices. D’oh! What happens when you crank up production? Increased supply, inelastic demand, what does Econ 101 say will happen? Damn, falling oil prices! The master will be furious!
If you cut supply you sell fewer units at a higher price and make a smaller profit. If you increase supply you sell more units at a lower price but make a larger profit.
And of course, this totally ignores the fact that Rjung Oil and Bioweapons Inc is only one oil company, you compete with Shell, BP, Exxon, whatever. If Rjung OB cuts production but your competitors don’t, what happens? Production decreases, prices increase…but your fucking competitors reap the profits!
And so it goes. Oil companies don’t control the price of oil any more than oil consumers do. Which means, they control it absolutely, same as oil consumers.
Inelastic demand, remember? I’m still selling to the same market, albeit at a higher price. And it’s not as if shutting down production is an all-or-nothing matter; I could just reduce refining by 10% and still reap a nice profit.
Yeah, because the idea that the oil companies might be in collusion with the White House is just way too radical to be believed for a micro-second…
But yet, wonder of wonders, you’re still making money thanks to your profit-sharing agreements with OPEC producers and the value of your own reserves. See post #42.
It’s the gasoline consumers vs. the oil companies. Heads they win, tails we lose.