Gas prices- Oil Companies - Capitalism

[revelarts]

Me and a Buddy who's a pretty standard right winger had a brief phone conversation about Gas prices etc..

after we griped and moaned a bit. I asked him what was the capitalism-profit motive- market driven- incentive for the Oil companies to lower prices anytime? If the oil companies found a trillion barrels in U.S. fields they already have title to. What would be their incentive to lower prices to $.03 a barrel? Right now they pretty much collectively set the prices so there no real competition by the time it gets to the pump.
How am I wrong here? my firend s response was "well do you think the gov't should run the oil biz?"
Of course not, but what is the proper alternative?

My only thought is that the gov't should clear the way for any alternative. clear the way in the sense of ZERO taxes and no penalties for any and all alternative energy devices or fuels. All alternative vehicles street legal etc. there got to be more.

or maybe I'm wrong, please tell me how the oil cartels are free market and good for everyone in the long run.

[BoogyMan]

This is big hairy question! :)

I personally think the government should get out of the way and let domestic production ramp up alongside alternative source development. OPEC is nobodies friend and when the US government is determined to treat energy companies as enemies of the state our access to affordable energy is just going to be a pipe dream.

[fj1200]

The oil markets are fine. Don't like high oil prices? Blame the Fed.

[revelarts]

The oil markets are fine. Don't like high oil prices? Blame the Fed.

So how exactly does the fed raise the oil prices and effect the supply of oil?

[revelarts]

This is big hairy question! :)

I personally think the government should get out of the way and let domestic production ramp up alongside alternative source development. OPEC is nobodies friend and when the US government is determined to treat energy companies as enemies of the state our access to affordable energy is just going to be a pipe dream.

I've read that OPEC and the Oil companies are not exactly enemies though, they both like the profits. But still Why should they the oil companies ramp up domestic oil production? They've got a worldwide captive market and great profits now. what's thier motive to chang?

[Kathianne]

So how exactly does the fed raise the oil prices and effect the supply of oil?

A hint here, on election day:

http://www.oilmarketer.co.uk/2010/11/02/election-federal-reserve-meeting-push-oil-prices-higher/


2/11/2010
Election, Federal Reserve meeting push oil prices higher
Story link: Election, Federal Reserve meeting push oil prices higher by Elaine Frei
Election, Federal Reserve meeting push oil prices higher

Crude oil prices were higher Tuesday as investors anticipated the outcomes of both US elections today and of the meeting of the US Federal Reserve, scheduled to end on Wednesday, as well as on a weaker US dollar.

December contracts for West Texas Intermediate crude were up 87 cents to $83.82 per barrel in afternoon trade on the New York Mercantile Exchange after being up more earlier, while Brent crude was lately 73 cents higher to $85.35 per barrel on the ICE Futures Europe exchange in London.

Investors seemed to be buying in hopes that exit polls which suggested that Republicans will gain seats in both the House of Representatives and the Senate were correct, which could mean fewer regulations in the energy industry...

[fj1200]

So how exactly does the fed raise the oil prices and effect the supply of oil?

Quantity theory of money, too much money chasing too few goods thereby creating inflation. Commodity prices are sure to rise.

[fj1200]

I've read that OPEC and the Oil companies are not exactly enemies though, they both like the profits. But still Why should they the oil companies ramp up domestic oil production? They've got a worldwide captive market and great profits now. what's thier motive to chang?

More oil means more profit. Besides, you need to look at profit margins not profit alone.

http://everydayecon.wordpress.com/2006/04/26/oil-profit-margins-vs-other-industries/

http://i61.photobucket.com/albums/h57/texasrainmaker/ProfitsOilVsOtherIndust3rdQ2005.gif

[revelarts]

More oil means more profit. Besides, you need to look at profit margins not profit alone.

http://everydayecon.wordpress.com/2006/04/26/oil-profit-margins-vs-other-industries/

http://i61.photobucket.com/albums/h57/texasrainmaker/ProfitsOilVsOtherIndust3rdQ2005.gif

---Racken Fraken Banks/Financial service.. crooks!!---


Ok, You and Kathianne make make some good points.
I'm not following your profit margin comparison chart though, why should their profits be as obscene as other, -some basically corrupt-, industries. It's apples and oranges isn't it?

ANd if they have more product available how will their profits rise unless they sell much more and the base price doesn't drop below the point where the extra sales match previous profits?

1 widget for $20 with a $ profit of $10
or
10 widgets for $20 with a $ profit of $10

Percentages are different but Actual dollar profit can be the same or more or less with more volume, right?

[fj1200]

Ok, You and Kathianne make make some good points.
I'm not following your profit margin comparison chart though, why should their profits be as obscene as other, -some basically corrupt-, industries. It's apples and oranges isn't it?

ANd if they have more product available how will their profits rise unless they sell much more and the base price doesn't drop below the point where the extra sales match previous profits?

1 widget for $20 with a $ profit of $10
or
10 widgets for $20 with a $ profit of $10

Percentages are different but Actual dollar profit can be the same or more or less with more volume, right?

Their profits look obscene because they're such large companies, profit margins are a better comparison across industries, the other industries on the list are not the point.

If a company thinks it can produce more volume more efficiently and/or take market share then they can make more money. These are independent companies making independent decisions to maximize shareholder value. OPEC aside but even they would have cartel issues to worry about.

[revelarts]

....
If a company thinks it can produce more volume more efficiently and/or take market share then they can make more money. These are independent companies making independent decisions to maximize shareholder value. OPEC aside but even they would have cartel issues to worry about.

"IF" is my point, I'm not sure they have ANY incentive to maximize domestic volume. They seem to be able to make more money under the present situation with the -IMO faux- scarcity of product, than phantom extra profits found from paying more expensive U.S. based employees to pump, produce, refine and deliver more product to the U.S. market. (Not to mention coming under the cloud of global warming regs, EPA standards, and various energy conservation protocols in the U.S..).

I really have no idea what the cost to profits break downs would be but guesstimating from a laymens views I can't see the upside to increasing U.S. production domestically from a Purely profit based stand point. I could be missing some important items though.

But it's also no secret that there is collusion among the large industrial players of various kinds, including, price fixing for mutual benefit. One oil memo even was happy for a hurricane that ruined some refineries, it boosted oil values. And sure they are individual companies, but full blown competition is not happening anymore in that industry it seems to me. Unlike what's happened in the phone industry where a new tech, cell and web and new players like vonage has changed the game somewhat at least.

[fj1200]

"IF" is my point, I'm not sure they have ANY incentive to maximize domestic volume. They seem to be able to make more money under the present situation with the -IMO faux- scarcity of product, than phantom extra profits found from paying more expensive U.S. based employees to pump, produce, refine and deliver more product to the U.S. market. (Not to mention coming under the cloud of global warming regs, EPA standards, and various energy conservation protocols in the U.S..).

I really have no idea what the cost to profits break downs would be but guesstimating from a laymens views I can't see the upside to increasing U.S. production domestically from a Purely profit based stand point. I could be missing some important items though.

But it's also no secret that there is collusion among the large industrial players of various kinds, including, price fixing for mutual benefit. One oil memo even was happy for a hurricane that ruined some refineries, it boosted oil values. And sure they are individual companies, but full blown competition is not happening anymore in that industry it seems to me. Unlike what's happened in the phone industry where a new tech, cell and web and new players like vonage has changed the game somewhat at least.

I wasn't referring to domestic production specifically, they should drill where it's cheapest. I don't know the production costs in the gulf, or elsewhere for that matter, vs. other regions.

I disagree with your conclusions re: the market but it seems to me that excess regulations/taxation are a major part of the problem.

Regarding the refineries, IIRC a few years back at least the refineries were a very low margin business suffering from overcapacity so I could understand that sort of statement. It does give fodder to the conspiratorialists though. ;)

[OldMercsRule]

Me and a Buddy who's a pretty standard right winger had a brief phone conversation about Gas prices etc..

after we griped and moaned a bit. I asked him what was the capitalism-profit motive- market driven- incentive for the Oil companies to lower prices anytime?

More oil volume (or more revenues) even if slightly lower margins means more profit. That is real basic stuff: Rev.


If the oil companies found a trillion barrels in U.S. fields they already have title to. What would be their incentive to lower prices to $.03 a barrel?

That, (or at least a large amt of oil), does exist in the US now, (see ANWR), butt: Central Corntrol backed by dim wit Democrats prevents access.


Right now they pretty much collectively set the prices so there no real competition by the time it gets to the pump.

Nope the commodity markets world wide set the price fer a universaly demanded fuel.


How am I wrong here? my firend s response was "well do you think the gov't should run the oil biz?"

Only if ya want this Country TOTALLY F**KED UP. As Modern Liberals and many dim wits seem ta want.


Of course not, but what is the proper alternative?

"Drill baby dril"


My only thought is that the gov't should clear the way for any alternative.

Yeah like the wonderful job they have done with corn eh? :laugh2:


clear the way in the sense of ZERO taxes and no penalties for any and all alternative energy devices or fuels.

How about tax subsidies fer corn based alcohol n' forcing us to ruin our engines and have MUCH worse gas milage???? GRRRRRRRRR Get the Gubment out of this bidness NOT get MORE Gubment mindin' our bidness!


All alternative vehicles street legal etc. there got to be more.

or maybe I'm wrong, please tell me how the oil cartels are free market and good for everyone in the long run.

"Oil cartels" are sovereign nations not US oil corporations: Rev.

Me overpriced $.02. JR

[revelarts]

I wasn't referring to domestic production specifically, they should drill where it's cheapest. I don't know the production costs in the gulf, or elsewhere for that matter, vs. other regions.

I disagree with your conclusions re: the market but it seems to me that excess regulations/taxation are a major part of the problem.

Regarding the refineries, IIRC a few years back at least the refineries were a very low margin business suffering from overcapacity so I could understand that sort of statement. It does give fodder to the conspiratorialists though. ;)


More oil volume (or more revenues) even if slightly lower margins means more profit. That is real basic stuff: Rev.



That, (or at least a large amt of oil), does exist in the US now, (see ANWR), butt: Central Corntrol backed by dim wit Democrats prevents access.



Nope the commodity markets world wide set the price fer a universaly demanded fuel.



Only if ya want this Country TOTALLY F**KED UP. As Modern Liberals and many dim wits seem ta want.



"Drill baby dril"



Yeah like the wonderful job they have done with corn eh? :laugh2:



How about tax subsidies fer corn based alcohol n' forcing us to ruin our engines and have MUCH worse gas milage???? GRRRRRRRRR Get the Gubment out of this bidness NOT get MORE Gubment mindin' our bidness!



"Oil cartels" are sovereign nations not US oil corporations: Rev.

Me overpriced $.02. JR

Alright guys, SO basically you both DO think that the Oil companies Do have a VERY GOOD profit incentive to drill domestically and/or significantly increase oil production and output from other sources. With the effect of lowering retail prices significantly world wide?

[fj1200]

Alright guys, SO basically you both DO think that the Oil companies Do have a VERY GOOD profit incentive to drill domestically and/or significantly increase oil production and output from other sources. With the effect of lowering retail prices significantly world wide?

I stand by my initial comment: Oil markets are fine, poor monetary policy is the major factor in high oil --> high gas prices.

I'm not so concerned about them drilling more here or anywhere although the possibility of domestic production would provide some market power over the major producers.

[BoogyMan]

I've read that OPEC and the Oil companies are not exactly enemies though, they both like the profits. But still Why should they the oil companies ramp up domestic oil production? They've got a worldwide captive market and great profits now. what's thier motive to chang?

Maybe I wasn't clear in my comment. I am saying that the government of the US treats energy companies as an enemy and as if they are a blight on the country, that is where the enemy part of this discussion came in. OPEC is definately not anyone's friend and they pretty much control the actual price of things since our own companies are not allowed to freely extract our own fossil fuel reserves. If our government would get out of the way there would be plenty of domestic supply and we could thumb our noses at OPEC and force them to deal in a competitive environment, something they are certainly not used to doing.

[OldMercsRule]

Alright guys, SO basically you both DO think that the Oil companies Do have a VERY GOOD profit incentive to drill domestically and/or significantly increase oil production and output from other sources. With the effect of lowering retail prices significantly world wide?

I will speak fer meself: Rev.

The "profit incentive" and shareholder, (owner), pressure would force domestic oil into acquisition and delivery of any fuel, (green; purple; or black), that could be sold fer a profit: PERIOD.

N' yes: MORE IS BETTER!!!!!!

That is basic capitalism, (101): PERIOD.

It is the Left, (dim wit Democrats n' modern Liberal fools), that are into Central Corntrol, (fer pure power over all of us: Rev), that interferes in basic Capitalism ta further thier goals of growin' the Gubment at all of our expense that they know they can Corntrol.

Joe Stalin is their ultimate role model, (that is why they didn't like George Bush takin' out Saddam, [who also tried ta be a modern day Uncle Joe with many MANY years of success]). Hope that is clear, (I can't state things in any simpler terms). ;)

Respectfully, JR

[revelarts]

I stand by my initial comment: Oil markets are fine, poor monetary policy is the major factor in high oil --> high gas prices.

I'm not so concerned about them drilling more here or anywhere although the possibility of domestic production would provide some market power over the major producers.

"Oil Markets are fine" sounds like
--the status quo is making the most money it can so there's no need to change- .
the rest sounds like
--and Prices would be lower if it weren't for the gov't.--

Fair enough.
I can agree with both of those statements. The 1st one is pretty close to what I said at the beginning. You characterize it as "fine" I characterize it as not a market that creates an incentive for production that would produce lower prices.
And Even in the face of inflation the retail prices have fluctuated by over a dollar in the past 5 years. That's not all the feds or inflation's fault i don't think. Do you?




I will speak fer meself: Rev.

The "profit incentive" and shareholder, (owner), pressure would force domestic oil into acquisition and delivery of any fuel, (green; purple; or black), that could be sold fer a profit: PERIOD.
N' yes: MORE IS BETTER!!!!!!
That is basic capitalism, (101): PERIOD.
It is the Left, (dim wit Democrats n' modern Liberal fools), that are into Central Corntrol, (fer pure power over all of us: Rev), that interferes in basic Capitalism ta further thier goals of growin' the Gubment at all of our expense that they know they can Corntrol.

Joe Stalin is their ultimate role model, (that is why they didn't like George Bush takin' out Saddam, [who also tried ta be a modern day Uncle Joe with many MANY years of success]). Hope that is clear, (I can't state things in any simpler terms). ;)

Respectfully, JR
We all know about the evil democrats right right fine Ok,

But , It Would and it Could?, Ok.
I'm just asking if YOU thought the current Oil market made it a GOOD idea for the Oil companies to do it? Do you think they would make MORE MONEY by increasing Output Now Or if YOU thought that, right now , they are better off continuing with things as they are, Not increasing output or aggressively drilling domestically?
Eee-bell demon-crats and all.

[OldMercsRule]

We all know about the evil democrats right right fine Ok,

I didn't use that term, nor would I when refering ta dim wit Democrats or modern Liberals: Rev. My choice of terms would be "missguided".


But , It Would and it Could?, Ok.

Hmmmmmm......... yer point????


I'm just asking if YOU thought the current Oil market made it a GOOD idea for the Oil companies to do it?

If "do it" means to increase the output of energy sales, my answer is YES.

Domestic oil companies would increase energy sales to increase their market share and profitable revenues.


Do you think they would make MORE MONEY by increasing Output Now Or if YOU thought that, right now , they are better off continuing with things as they are, Not increasing output or aggressively drilling domestically?

Current demand fer energy today is such that if a domestic oil company could increase profitable revenue from energy sales within their acceptble risk paramiters to aquire said energy resources they ABSOLUTELY WOULD.


Eee-bell demon-crats and all.

Is that "snark": Rev? JR

[revelarts]

If "do it" means to increase the output of energy sales, my answer is YES.
Domestic oil companies would increase energy sales to increase their market share and profitable revenues.
Current demand fer energy today is such that if a domestic oil company could increase profitable revenue from energy sales within their acceptble risk paramiters to aquire said energy resources they ABSOLUTELY WOULD.


Alright, understood.



Is that "snark": Rev? JR
Yes Merc, yes it was.

[fj1200]

"Oil Markets are fine" sounds like
--the status quo is making the most money it can so there's no need to change- .
the rest sounds like
--and Prices would be lower if it weren't for the gov't.--

Fair enough.
I can agree with both of those statements. The 1st one is pretty close to what I said at the beginning. You characterize it as "fine" I characterize it as not a market that creates an incentive for production that would produce lower prices.
And Even in the face of inflation the retail prices have fluctuated by over a dollar in the past 5 years. That's not all the feds or inflation's fault i don't think. Do you?

Why do you keep trying to restate what I keep saying, the oil markets are fine because they are working to the best that they can given the current amounts of regulation that are in play. I don't particularly care if they're making the most money or not, that's there job not mine. The change would be a reduction in regulation that would allow greater freedom to run their business.

You started off complaining about high prices, my position is that excess money supply is driving commodity, gold, oil, etc. prices higher not drilling restrictions. I don't see that the prices would change much if at all even with more incentive to produce.

Your retail price fluctuation is a mixture of many things, the underlying trend is for higher prices; look at gold and it's a steady climb. The oil fluctuations away from the gold trend seems to be tracking expectations of economic growth; after the financial meltdown oil prices cratered but with some semblance of global economic growth it has allowed oil prices to trend higher. Thoughts on that theory?

[OldMercsRule]

Alright, understood.

10-4


Yes Merc, yes it was.

Kool; thanks fer the admission.

Sometimes it pays ta look in the ol' mirror fer a log in yer eye when ya notice what ya think is a wee spec in another's eh? :cool:

Respectfully, JR

[revelarts]

Why do you keep trying to restate what I keep saying, the oil markets are fine because they are working to the best that they can given the current amounts of regulation that are in play. I don't particularly care if they're making the most money or not, that's there job not mine. The change would be a reduction in regulation that would allow greater freedom to run their business.

You started off complaining about high prices, my position is that excess money supply is driving commodity, gold, oil, etc. prices higher not drilling restrictions. I don't see that the prices would change much if at all even with more incentive to produce.

Your retail price fluctuation is a mixture of many things, the underlying trend is for higher prices; look at gold and it's a steady climb. The oil fluctuations away from the gold trend seems to be tracking expectations of economic growth; after the financial meltdown oil prices cratered but with some semblance of global economic growth it has allowed oil prices to trend higher. Thoughts on that theory?

I see what your saying and I don't want discount the Monetary policies, the overprinting looks like it's going to destroy the economy completely. It's tickling all commodities right now. It's frightening to think what could happen here. It won't matter how much oil they drill if it keeps going south. But over the past 10 years the price hasn't tracked exactly I don't think. and I don't think it cratered with the melt down it seemed to come out of the blue. At least i don't remember anything that really corresponded to it.


http://chart.apis.google.com/chart?chtt=Crude+oil,+avg,+spot++price+chart&chts=000000,12&chs=700x420&chf=bg,s,ffffff|c,s,ffffff&chxt=x,y&chxl=0:||2000|2001|2002|2003|2004|2005|2006|2007|2 008|2009|2010|1:||1:|14.8|18.5|47.1|75.7|104.2|132 .8&cht=lc&chd=t:19,20,21,18,20,22,21,22,24,24,24,19,20,21,19 ,19,21,20,19,19,19,16,14,14,14,15,18,19,19,18,19,2 0,21,21,18,21,23,25,23,19,20,21,22,22,20,22,22,23, 24,24,25,25,28,27,29,32,31,35,32,29,32,34,38,38,36 ,41,42,47,46,44,41,42,47,45,46,51,52,51,55,54,47,4 4,44,46,40,43,46,49,49,51,55,53,58,62,69,67,68,70, 77,82,92,99,100,86,75,55,41,31,33,32,35,38,44,52,4 9,54,51,56,58,56,58,56,60,63,57,56,56,57,57,62,64&chdl=($/bbl)&chco=000099&chls=3,1,0

And if you look at a inflation rate here it's not as extreme or following.
http://www.usinflationcalculator.com/inflation/current-inflation-rates/


But now you've got me thinking about how crappy the economy is, That the fed keeps printing money a, all the debt, and the possibility of the world dropping the dollar as the world currency.
I guess I should be thankful the the price of oil is what it is and i can still buy bread.
I'll go look for my candles now.

[fj1200]

I see what your saying and I don't want discount the Monetary policies, the overprinting looks like it's going to destroy the economy completely. It's tickling all commodities right now. It's frightening to think what could happen here. It won't matter how much oil they drill if it keeps going south. But over the past 10 years the price hasn't tracked exactly I don't think. and I don't think it cratered with the melt down it seemed to come out of the blue. At least i don't remember anything that really corresponded to it.

Did I post a graph that overlaid oil and gold? I thought I did. I think it tracked until the oil spike and then the crash, the spike was crazy and I'm not sure what to think other than just a crazy bubble (although I don't like that term) but the crash corresponded the coming of the next Great Depression. But the gas hikes were like a massive tax increase that caused household expenses to just skyrocket. The "out of the blue" for the meltdown was mark-to-market in my opinion but that's a different thread. :laugh:


But now you've got me thinking about how crappy the economy is, That the fed keeps printing money a, all the debt, and the possibility of the world dropping the dollar as the world currency.
I guess I should be thankful the the price of oil is what it is and i can still buy bread.
I'll go look for my candles now.

The best correspondence of the current economic times is back to the '70s IMO. The '70s started in the '60s when LBJ hiked taxes and jawboned the Fed into easy money; stagflation of the 70's ensued. We'll have to see how the Republicans can turn the tide of the tax hikes to keep the "stag" at bay by cutting taxes and holding spending in check. Obamacare did force Medicare taxes to extend to investment income, etc. so that's not good.

[LuvRPgrl]

Me and a Buddy who's a pretty standard right winger had a brief phone conversation about Gas prices etc..

after we griped and moaned a bit. I asked him what was the capitalism-profit motive- market driven- incentive for the Oil companies to lower prices anytime? If the oil companies found a trillion barrels in U.S. fields they already have title to. What would be their incentive to lower prices to $.03 a barrel? Right now they pretty much collectively set the prices so there no real competition by the time it gets to the pump.
How am I wrong here? my firend s response was "well do you think the gov't should run the oil biz?"
Of course not, but what is the proper alternative?

My only thought is that the gov't should clear the way for any alternative. clear the way in the sense of ZERO taxes and no penalties for any and all alternative energy devices or fuels. All alternative vehicles street legal etc. there got to be more.

or maybe I'm wrong, please tell me how the oil cartels are free market and good for everyone in the long run.

Personally, I go with open and free market, the less govt interferene in oil prices, production or anything at all.

First, when people dont have the money to spend on gas as much as they normally do, consumption goes down, prices go down.

As for their profit margins, those numbers can be cooked anyways, I dont trust them, go look at the movie industry, everytime you go see a movie, its produced by some company you never heard of because they always cook the books to make it look like they didnt make any money.

Simple, if you dont like the profits the oil companies are making, get a bike, I ride mine all the time.

[revelarts]

Personally, I go with open and free market, the less govt interferene in oil prices, production or anything at all.

First, when people dont have the money to spend on gas as much as they normally do, consumption goes down, prices go down.


I don't know if prices go down when comsumption goes down. look at the chart. there's more to it. the price of crude is a factor, the refineries online is a factor, oil speculation is a factor, inflation is a factor, overbaring gov't regs are a factor and IMO price fixing is a factor.



As for their profit margins, those numbers can be cooked anyways, I dont trust them, go look at the movie industry, everytime you go see a movie, its produced by some company you never heard of because they always cook the books to make it look like they didnt make any money.

agreed


Simple, if you dont like the profits the oil companies are making, get a bike, I ride mine all the time.
What I'd like to do is go a Gas station that's not in the Oil cartel ( I mean the big oil companies). And buy gas from someone who has the opportunity to beat their prices because of free and fair trade.

[Kathianne]

I just tried to fix the quotes of rev's. If I got them wrong, let me know. It becomes more difficult as replies to the wrong go on.

[fj1200]

I don't know if prices go down when comsumption goes down.

The elasticity of oil is low meaning that usage is not effected to a great degree, esp. short term, by changes in price. Translation - you need to buy the gas no matter the price.


And buy gas from someone who has the opportunity to beat their prices because of free and fair trade.

It seems a car running on vegetable oil is in your future.

[namvet]

http://swanenergyinc.files.wordpress.com/2010/05/swan-energy-oil-rig.jpg

OPEC shut it down. and we can't touch it

[logroller]

---Racken Fraken Banks/Financial service.. crooks!!---

:lmao:
You should subtitle everything in frontier jibberish!