Posted on 04/26/2006 6:35:00 PM PDT by Blood of Tyrants
Okay, I have seen a LOT of threads claiming that oil companies aren't really making that much on each gallon of gasoline.
Oh, really? (blink, blink) Then explain the record profits by the oil companies.
Why sure. First, US oil companies don't import all of their oil. In fact several companies actually import very little. Where do they get it? Why, from wells on private and federal land that they drilled on years and years ago. What is the extraction cost to get it out of these wells? You can be darned sure that it is nowhere near $75 a barrel. In fact, I read that it is somewhere around $7 to $15 a barrel. Add to this cost a small royalty that they pay the federal government or private land owner and refining and transportation cost and you come up with maybe $25 a barrel.
Now, mix in the oil they bought 3 or 4 months ago at $52 a barrel that is just now coming to the refinery and you have an average of between $25 and $40 a barrel.
So what we have is huge profits at the expense of the consumer. How long will it last? The prices will start to drop once they feel they are starting to harm the economy. Congress and the media and the consumers stop bothering them and they look for the next opportunity to do it all over again.
.... To each according to their need.
Why?
What are you talking about? Do you not understand leases, royalties and taxes?
It's not all supply and demand.
The increase in oil price is many times what the increase in oil demand has been.
Is world demand 7 or 8 times what it was a few years ago, like the price of oil is?
No it isn't!
Of course a lot of the oil price increase right now is over speculation on war with Iran, and continued war in Iraq.
However, Alaska is suing the oil companies for blocking oil and gas production.
Memos show oil companies chose to shut down refineries, and not build new ones.
Giants like Exon/Mobile Chevron/Texaco have the power to turn back the tap, to keep prices high.
OPEC has been doing that openly for decades.
That's not supply and demand.
That's naked market manipulation, price fixing, and restraint of trade.
There are laws against that, if only they were enforced.
Saudi Arabia's Arab Light
The United Arab Emirates's Dubai
Nigeria's Bonny Light
Algeria's Saharan Blend
Indonesia's Minas
Venezuela's Tia Juana Light
and Mexico's Isthmus.
All others are priced somewhere down the scale.
Excellent point. The problem is that most folks think the idea of the other guy realizing a profit on an investment is obscene.
Of course, the gains they make on a really hot stock buy... are just deserved good luck.
Now tell me your credentials and why you shouldn't go back to DU.
Your stupidity and rudeness will not affect my opinion.
Here is an excerpt. If you don't understand it then maybe you just don't understand economics.
snip
"The oil company profits are not obscene. As of September of last year the total take for local, state and federal governments for each gallon of gas sold was 46 cents. In New York that figure is 63 cents. At the same time gasoline retailers were making about 12 cents on the sale of a gallon of gas. Right now the government take is approaching an average of 50 cents a gallon. Retailers are making about 14 cents. so ... who is making the obscene profit?
The local gasoline retailer invests in the community, buys a plot of ground, builds a gas station, hires the employees, pays the local taxes, deals with the local regulatory agencies, and makes a big screaming 14 cents on each gallon sold. Meanwhile, the government steps in without having invested one dime in that facility and takes about 50 cents per gallon. Some obscene profits, right?
As for profit margins ... the amount of money earned for each dollar of sales ... oil companies are nowhere near the top of the list. In 2005 pharmaceutical companies made about 17.6 cents for every dollar of revenue. That, for those of you educated in government schools, that works out to a 17.6% profit margin for the drug makers. How about your local bank? They made about 19.1 cents for every dollar of revenue. Almost a 20% profit! Not too shabby. And what about your household goods and cosmetics? Those companies earned 11 cents on the dollar. A lot of competition there. Now, the oil companies. What did they make? In 2005 the average was 8.5 cents per dollar of revenue. That works out to an 8.5% profit margin.
Maybe President Bush could have said something yesterday about MTBE. Congress recently refused to protect the MTBE makers from liability from frivolous lawsuits. MTBE is a component in gasoline ... and the makers are bailing. MTBE is to be replaced by ethanol .. .but the ethanol producers just can't keep up! This affects supply, and reduced supply in the face of increased demand means what? Higher gas prices? Could we get the ethanol we need from overseas? Why yes! We could! But the Bush administration has a 54 cent-per-gallon import duty on imported ethanol! There's your price gouging! Drop that import duty and I wonder what would happen to gas prices.
It's enough of a problem when Americans suffer from a tragic level of ignorance on issues of basic economics due to generations of state-run education. It's even more tragic when politicians pander to that ignorance for political gain."
And I'll add, it's even more tragic when Freepers, who should know better, join the whiners.
No, I am not asking for birthright gasoline pricing. What I am asking is why all of a sudden dramatic jump in the gasoline prices for no apparent reason? The war in Iraq (major oil supplier)is not even mentioned!
Self regulating system...hmmmm let me think about that!
"Your chart is skewed. Refining costs are nowhere near 22%"
Not my chart. The Department of Energy's chart.
Well said comrade!
Here's a shovel. Go get "your" oil. Just pour it into the tank. Hmm? WTF! Car doesn't run on oil! Now WHAT am I going to do?
I know!! I'll use government force to make a bunch of people build a refinery for me so I can have gas that will make my car run.
Prices will drop once they become so high that people actually start using less. Oil is almost a pure commodity and its price is determined virtually 100% by market forces. It does not matter where the oil comes from or who is producing it, supply and demand sets the price. With demand outstripping supply as it is now, the WORST thing that could happen is for prices to be artificially reduced or capped. Demand would soar causing massive shortages (a la the Carter administration).
From a pure economic standpoint, if demand is outstripping supply, that means that prices are not high enough.
If I could tell you that we would be rich!
Your statement "The increase in oil price is many times what the increase in oil demand has been." is the most ignorant and absurd statement on this subject I have yet seen. You have NO idea what "demand" actually is or how it is measured. Read my No. 125 and follow my suggestion there.
Educate yourself and come back when you can make some sense.
Then, by all means educate me! I am reading!
Great!
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