No.

The Exxon and Shell station might get their gas from the SAME Distributer based on the best wholesale price! The exception being from trademarked blends of gas like Techron (c). "The retail chain may be a Shell-owned convenience store, supplied by a Shell affiliated distributor, but he (distributor) may buy his oil from Murphy Oil Refining. So while the buyer thinks he is getting Shell gasoline, what he is getting is gasoline from a Shell Distributor, but produced by Murphy Oil Refining."

Gas stations make their money from the quikie mart attached to it, not from the gas anyway. Really cheap gas stations attached to places like Costco are usually loosing money, as a loss leader for the store.

Also consider that much of the huge profits being generated by Oil Producers are the result of oil production from 5-8 years ago based on the price of $10-20bbl a barrel oil selling at now market rate of $70bbl. So in a few years when production costs catch up could be very lean or very rich years for the producers.

What people, and news people forget is there are 5 levels players in this game:

Oil Countries/Regimes/Geographical Oil Fields
Oil Producers
Refiners
Distributers
Resellers

Now also consider the price of oil we talk about is for Light Sweet crude. Heavy Sour is about $15bbl cheaper but there is no refinery in the US that can handle the stuff. Also worldwide production of Light Sweet crude has been in decline for amost a decade.

Unfortunately the way to lower prices is to consume less, and the market will adjust. Less demand = more supply (sorta since it is a finite resource)= lower price.

$4.30 a gallon is the price at which people the general population will search out alternative methods of transportation (trains, public transport, walking, biking, car-pooling, moving).

 

My daughter does Otakon annually, but it is pretty much local for her. This is the year she finally gets a vendor table! Ah capitalism!

 

You know. I've been thinking about this and I don't think it'll work. Even if we conserve more in the US, there is so much international demand coming online. Japan is coming out of its slump. China is growing rapidly. So I've thought of another way. Let's all use more gas or at least keep more of it on hand. In the 70s, one of the major reasons for gas prices soaring was because of the fear so people all started keeping a 2/3 tank instead of a 1/3 tank of gas. This ended up causing a shortage and perpetuated itself in the crisis. Let's all do the same, driving up demand for oil to a point that Japan and China crash from stifling oil prices. Either that or we'll lose and we'll go into recession. Either way, oil prices will go down from less demand. It'll be a game of Russian roulette... Everybody go and buy a Hummer, Ford GT, something that just sucks in fuel by the tankload.

I'm curious. How did you get $4.30?

 

You seemed to say that price gouging in a crisis was unacceptable. If all profit is OK, why is crisis gouging bad?

snippage...

What you seem to be suggesting here is actually a sophisticated form of boycotting. It is one thing to suggest we all stop buying gas for a day, given that most of us can't do without it for very long. It is quite easier for us to decide not to buy the gas of a certain company. Exxon-Mobil is the largest and therefore most logical target.

What happens if, say, 30% of Americans decide not to buy their gas for a month? It would certainly have a serious effect on their profits. Might it also affect their prices? I am not sure.

Competition is a simpler answer, but it is not so simple, either. Gas stations make next to nothing on gas, and really can't be a lot more competitive than they are already, so you need to venture further up the foodchain if you want to have an effect. The next level is the refiner, and there just ain't many players on that level. How do you get real competition when there just ain't that many competitors?

I'd start by breaking up the oil companies, but antitrust law enforcement is my answer to all of the world's problems.

 

The ever increasing energy demands of China and India, combined with China finally developing at least a little environmental awareness which leads them to be less willing to get their energy from burning dirty coal or even peat and therefore wanting even more relatively clean energy sources, are a lot of what are pushing oil prices up.

But I hope you noticed, your argument refutes what your energy economics prof taught you. He said oil companies have gone 30 years without building a single new refinery in the US out of fear that oil prices would drop back to $10/bbl again. The emergence of China and India as major energy consumers should pretty much insure we never see that price level again.

 

One of the various oil/gas/economics reports. Some economist came up with it. I will have to search back in my bookmarks for the exact source.

 

Now here is our oil/gas demand/price problem in the numbers, notice that little negative number in Q1-2006.



Source: OPEC http://www.opec.org/home/Monthly%20O...6/mr042006.htm

 

A lot of people have posted opinions and interesting info here. I suggest reading http://www.slate.com/id/2140695/ which has a very SIMPLE explanation of high prices.

To summarize a bit, I now support a windfall tax because it is "truely" a windfall. Why is that? ...

Free enterpise/capitalism is based on competition. YOU produce widgets faster, cheaper, better than the competitors then it makes for a better widget and drives the little guys out of the business. It happens EVERYDAY in American and is the foundation of how business is run. It has NOTHING to do with ethics ...

Oil, on the other hand, is NOT produced. The oil is free ... its just sitting there and needs to be extracted (per the article). Oil companies extract, ship, refine, distribute, market, etc.

The price of oil was about $45 a year ago. $70 today. Although techonology always gets, there is simply NO WAY the cost of refining, distribution, marketing costs $25/barrel more today than a year ago.

So why is the price so high. Simple ... instability in the Gulf. We produce 1/3 of the oil we need and import 2/3s. There is NO WAY the oil in the ground is suddenly worth so much more money.

Therefore, its all pure profit, a windfall for which the oil companies did NOTHING for competition, nothing to make better widgets ... it just fell in their laps.

I am all for a huge windfall tax is "that" excessive profit is NOT how America was built.

 

Price gouging is taking an advantage of a disaster or an event that the victoms had no control over. I would supposed it is unethical but that would not bother me. Rather, its NOT the American way ... see my post above about competition ... THAT is the American way. Build a better widget, cheaper, faster and make all the profit you can putting the other guy out of business. But price gouging is NOT doing that ... Its not the ethics, rather its the business philosophy.

As to the rest after the snippet, After reading the referenced article, I would not boycott anything since it wont work. Tax the hell out of them and put the money back into the Treasury to pay for other stuff. The Oil Companies did not EARN the money. Rather, it fell in their lap.

 

Then maybe our future generations won't have to pay for the Afghan and Iraq war.

Check this out!! What a bunch of bull. Found this in the news today.
Read the rest at the link below.

They (GOP) want to give you back $100 of the taxes you paid this year to take the edge off those painfully high prices at the pump.

http://www.bristolpress.com/site/new...id=10486&rfi=6

Tell you what Mr. Bush. Take the $100 and you know what to do with it.
Geeezz... that would fill my gas guzzling pickup just once and last me only two weeks.

 

That is exactly what they were talking about. Use the windfall tax to pay for the war since we ALL pay for it via taxes.

As to the rest of you post, be careful, thats verges on being political and may get the thread locked

 

I was just going to post exactly that.

 

Oil companies run on the margin per $, so they make about a dime per dollar of pump prices. If demand or speculation drives up the cost of crude (Which is only free if you think it takes no capital to get it out of the ground) so that pump prices go up, the amount of profit per gallon goes up. Since we're hooked on oil, when the prices go up, we buy the same amount (thereabouts). This drives the "record" profits of the oil companies. In dollar volume. But not in percentang of sales. Pharmacuticles make about twice what oil companes do, in terms of profits per $ sold.....

Sure it burns. If you want it to burn less, use less gas and oil!

Matt

ps, yeah to high gas prices! Nothing else seems to change habits here in the US! $4+ here we come!

 

That is not exactly what Kinsley was saying. The oil is "free" in the sense the oil companies do not "make" it. Its just there to be pumped out (with associated costs). There simply is no justification other than instability in the area to justify a $25 barrel increase in price (clearly from OPEC).

Since their profits are greater, they did nothing for the economy. They didn't make "better gas" or certainly not "cheaper" gas but rather the profits fell in their lap with no work on their part. Hence, the windfall tax makes sense since they did not earn it ... it might not be price gouging in the traditional sense but its not like they invented "the hula hoop" and made a bundle on something new.

BTW, $4 isnt going to do it. After all, if your paying 3.25 for premium now, whats another 75 cents? Nothing will change for the masses. $7 might but there is no way Congress will allow that.

 

That notion that oil or any other natural resource is free is a non-starter.

Opec may have the most oil, but Canada is the biggest individual supplier to the US. We're getting screwed by our northern neighbors!

And so what if the gas is the same today as when gas was $2.50 a gal. More people want it! Isn't the supply and demand what sets the price point? If it's not worth more than $3 a gallon, you don't have to buy it.

Here's food for though... Why would any industry add capacity when it takes a lot of money to do it, and it will do nothing but reduce prices? Then they have to service more debt, and make less profits!

Matt

Yeah for high gas prices! $4, here we come!

 

Oil is commodity, whatever the market will bear. I seriously doubt the cost has risen $25/barrel because of demand ... Sorry, I'm not buying that argument. ... In normal markets it is supply and demand ... here its political/instability, etc.

You good at data points ... where it the data showing demand has increased 55% in one year .... 25/45? Just no way.

You mean refining capacity? That is a reasonable argument. Good question.

 

If demand is pretty much constant, independant of price, very small decreases in supply (or fear of decreases in supply) will have a huge change in price. This is an inelastic demand curve. Since there is a lot of speculation in oil prices, there doesn't even need to be an actual change in supply, just a percieved future change in supply. Evertime the rehtoric with Iran heats up, prices rise. Rehtoric cools, prices drop. When Chavez of Venezuala shafts Bush, up they go! When there's more fighting in Nigeria, up they go! Less fighting, back down they go.

There is nothing that says that a 10% change in supply has to result in a 10% change in price.

Look at medicin. It's been ramping in costs at way past inflation for quite a while. And we keep buying, because we want our "percieved" health.

Next market to behave like this? Drinking water....

Matt

 

Agreed 100% on BOTH points.

I never understood why when a company predict it will make 22 cents/share (for example) and the numbers come up at 21 cents for the quarter the stock goes down, in fact the whole market. Whats with that?

Hell, this ain't no fun ... We agree

We need our own "philosophical differences" thread

 

We could pray for lower gas prices?!?

WASHINGTON, April 26 (UPI) -- A U.S. Christian group has grown tired of escalating gasoline prices and is set to stage a national prayer rally to lower the numbers at the pumps...

http://www.upi.com/NewsTrack/view.ph...6-114223-5447r

 

Not true. Oil company profits are up much more than are prices. The margin may be about the same at the pump, but not at earlier points in the supply chain.

 

As an industry, the net margin on sales is nothing to scream about.

Here's something to think about... For the consumer market, companies try to target a factor of 3 times the direct costs (cost of parts, plust the labor (with overhead) to put it together). So a $1 increase in cost of parts would be a $3 increase in sales price...

In the OEM world, where one manufactures for other manufacturers, you hope to make a 2x increase.....

In the Semi industry, the sub-tier suppliers get squeezed even more, where you add on about 80 cents per dollar in direct costs.....

Oil industry is even less....

Matt

 

So the margin is different, so what? Grocery stores have even lower margins. Pharmaceuticals have extremely high margins. What has any of this to do with the price of premium in Poughkeepsie?

 

Graham, 48, a London building contractor, pointed at the price on the pump -- the equivalent of $6.62 a gallon, which means it costs him $125 to fill his tank

http://www.detnews.com/apps/pbcs.dll...604300399/1148

 

People are up in arms about price and profits about a product that is considered as necessary as food and air. This is because of the way we have structured our lives around driving and trucking.

Which again leads us into the problem of supply and demand. We have a product that is in high demand, with supply problems. Then there is the issue that Oil is Fungible, it can be sold anywhere to anyone at any price on the wholesale world market. So if we put financial barriers to the oil industries, they can just as easily sell it somewhere else, for more profit, like China!!!!!

China has a brand new SPR (strategic petroleum reserve) they want to fill, and 1.6 billion Chinese who want the right to drive an SUV and have 4,000 sq foot homes! Not to mention they are building the largest deep water navy in the world, or that they have a large assortment of nuclear capabilities....

Now try reading this:
How China Is Winning the Oil Race
http://www.thestreet.com/_tsclsii/co.../10281893.html


Oh and do not forget these dates:

December 2006
The date that Matt Simmons (big oil investor and former energy consultant to George Bush) has predicted the permenant decline of worldwide oil production.
The year 2014
The year the Chinese have predicted the permanent decline of worldwise oil production
The year 2040
The year the US DOE has predicted permanent decline of worldwide oil production.

 

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