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.
One of the reasons oil companies shut down some refineries is because oil supplies were depleted in inland areas and there was no longer enough oil to supply land-locked refineries in inland areas. You'll notice that most of our refineries are now on the three coasts or near the Houston ship channel, so the refineries can receive shipments of imported oil. Shell Oil just shut down a refinery in Bakersfield, CA last year because they no longer have enough San Joaquin Valley oil to run the refinery at a profit. Shell tried to sell the refinery, but last I heard nobody wanted to buy it because it loses money. The oil industry is constantly changing. It's not like semiconductors where they have abundant raw materials and they can build their factories anywhere and keep them running forever.
Good nite brother Freeper
You operate a gas station.
You own a refined commodity. It turns over rapidly in your business. Every gallon you sell must be replaced by a new gallon or your customers go away. The commodity you own increases in value on world markets. Are you going to give yours away at the pre-increased prices knowing that you have to replace it at much higher prices or are you going to mark your inventory to market knowing quite well that you can sell it easily? If you sell it at the price you bought it for you have to replace it at much higher prices.
You aren't a fool. The gas you have is worth more than it was when you bought it but you still have to replace it and the cost has gone up.
Even worse, your gas sales have very little to do with your profit. You make your money from the convenience store. So you aren't an expert on gas or oil futures you just want to attract as much business as you can and you simply keep your prices competitive. But to keep customers coming you have to have gas to sell. THAT is what they stop for. So you have to have enough money in gas sales to replace the inventory. The gasoline on world markets goes to the highest bidder. You'd better get yours - so your company has a futures trader in the pits making sure you do.
How does he do it? He buys, even at higher prices, and you pass those prices on to your customer even though it isn't a big profit to you. You just want the traffic.
OIL IS A COMMODITY FOLKS. It isn't a car.
OK, I'll ask it this way: What can the oil companies do about it, even if they want to? Again, say they choose to sell oil at $30 per barrel. What then? Well, people buy it, and then they turn around and sell it at the prevailing price; today that's about $72. And it does exactly NOTHING for the consumer; it only lines the pockets of traders instead of oil companies. Seriously, it's just basic market economics. And it's a beautiful thing - another name for it is freedom.
Try applying what you are saying to homes, cars and gold. Demand is what the buyer is willing to pay.
Hey, I know you are a very important person with very little time on hand to chat with little people, but would you kindly translate me in a "bubba" lingo as to what the hell are you talking about?
Are you in Europe? How did you get tomorrow's date as your sign-up date?
Yeah, Sowell is great. I had a class in college that used one of his books as a text - "Knowledge and Decisions". It was fantastic, and people in the class (if they weren't stupid and paid any attention at all) had the opportunity to learn how to *think* about how markets work, and about how tampering with them doesn't.
You are right that the market for gas in the United States is not completely free. That's why we're only paying $3 a gallon and not the $5 or $6 that Europeans pay.
BUT, the world-wide market is indeed an almost perfectly competitive market and oil will flow to wherever the retruns are greatest.
The CEO gets a bonus of almost a half a billion dollars...
The one person who oversaw tremendous growth for that company. That is what they get paid to do. Sounds like he did a very good job. The investors and stockholders and the Board of Directors for Exon disagree with you that "no one is worth that much money"
Exon has one hundred thousand employees. There are probably millions of non Exon retirees and 401K investors that have Exon stock that are probably quite happy with the return they have gotten from purchasing that stock.
The Exon stock earnings has more than likely made up for the poor performance of money markets, CD and savings that have given very little return over the last 4 years. Do you want them to eat dog food or something? ;?)
Punish Exon and the other oil companies, you punish the employees, the retirees, the 401K investor.
And reading your posts, you would jump at the chance because it seems you want a communist system where no one is allowed to rise too high above the others.
Each according to their abilities, each according to their means.
I almost forgot to say....welcome to FR.
No, I won't translate squat for you. Get off your ignorant backside and learn it for yourself. I gave you the terms, so go. If you don't have the human worth to do it then there is no use talking to you.
-Could it be because that unlike gasoline, none of us has to buy water if we chose not to???
Actually I'd say that it is because people do not have to buy a vehicle tank full (let's say a 15-25 gallon tank) of bottled water at 10.50 per gallon every week, but many do buy a tankful of gas every week.
That is the thing most people who bring up such examples .....just a few days ago someone was saying that a gallon of 'cheap wine' was expensive at 30 bucks a gallon and gas 'cheap' at 3 buckaroos. Once again the person had forgoten that people do not buy 26 gallons of cheap wine at 30 bucks a gallon every week (a total cost of 780 bucks a week), but people do tend to fill up their gas tanks. While gas is cheaper on a per gallon basis than ketchup, you will find it hard to find people who buy car tank sized ketchup every week. Thus the example is moot. Sounds good, but packs no substance.
Oil (and gasoline) is going higher and there is nothing you can do about that fact. Supply is outstripping demand due to China and India & worldwide production has peaked.
What you can do is start investing in alternative energy (coal, uranium, canadian oil sands, etc) so that your investment gains will more than offset any extra costs you experience at the pump.
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