Simple question about gas prices-

[depakid]

Could someone explain to me a plausible reason why oil company profits are soaring if in fact they are not gouging their prices or manipulating markets?

This seems to me to defy what I know about economics in general- but maybe there's something in particular I don't know about the oil and gas business that honestly accounts for it.

[KlatooBNikto]

1. Their margins are based on a percentage of the sales volume in

dollars terms.As that sales volume goes up their profits, in absolute dollars goes up.

[Wright Patman]

2. A lot of the major companies

have bought up or drilled for reserves over the years. The average price of those reserves is probably $20 at the most.

I think that's where a lot of the profit margin comes from. The difference between now and the 1970s is that the GOP controls our politics and so there will be no "windfall profits" tax. This will be termed the magic of the free market by the GOP.

And since they control the tabulation of the elections, they will never pay a price for it at the polls.

[jbond56]

3. demand also contributes

demand helps set the price per barrel. How much has the Iraq war added to demand? Lots of tanks, Humvee, planes, and support vehicles that get great gas mileage! especially when they add extra weight like armor.

That doesn't even count the demand growth in China and India.

[KharmaTrain]

4. They Buy On Futures

Supposedly all they're doing is recouping what they spent to get that oil. Supply and demand ya know :sarcasm:

In theory, the gas you put in your tank yesterday was bought on the market months ago at whatever the going price was...and that in the interim, all the price increases (transportation, messed up refineries) all are also factored in. So, according to an oil company shill, they can almost make you think they're losing money through all of this.

Now, if I look at my stock portfolio, that tells me another story. It's shown steady gains in dividends since last Summer (when oil was still under $30 a barrel) and whatever "expense" I, as a stock holder, took, obviously was recouped. :sarcasm:

Truth is we have no truth about what's going on with oil in this country. First, we're told we have too many old refineries and somehow that has created this mess in the last year...did that many new cars hit the road? Or then we're told it's the higher consumption in India & China, but wasn't all that Iraqi oil we were boycotting from the 90s and now pillage make up for that shortfall?

The answer to your question: greed.

[NMDemDist2]

5. Bush is driving up the cost by expanding the Strategic Oil Reserve

It is siphoning off millions of barrels a day and keeping the cost high, here's an article from last fall and he hasn't stopped yet......

Google it, there's lots more...

Bush's Strategic Petroleum Reserve Policy Helped Drive Oil Prices Thru the Ceiling

Since 2001, Bush has been filling the SPR, against experts' advice
and the pleas of Congressfolk. A Congressional report found that the
policy "added to the price of oil in world markets." Philip
Verleger, internationally known energy expert and economist,
estimated that the SPR fill policy had raised crude oil prices
between $5-10 per barrel by the end of 2003 (nearly 30% of the price
per barrel). A March 2003 study found that there was indeed a
relationship between SPR fill policy and oil prices and that the
addition of 25 million barrels to the SPR during late 2001 and early
2002 had added substantially to oil prices. The study predicted that
if the administration continued its policy, oil prices would continue
to climb. They did indeed, hitting an historic $50/barrel at one
point this year.
http://www.fas.org/sgp/crs/RL32358.pdf

http://carapace.weblogs.us/archives/019802.html

[global1]

6. Sorry Guys......

everyday there's a new story on gas/oil pricing. At capacity, low reserves, no refining capabilities, peak oil, world demand up, etc, etc, etc - the justification for the pricing changes from day to day. Bottom line they are jacking us around. I see where oil is down to $49/barrel today. Is * going to claim this is because he intervened?

[newportdadde]

7. We are getting gouged.

Plain and simple. If your costs go up and you must put them onto the consumer then if your doing that 1 for 1 I would expect profits to remain relatively flat to slightly better perhaps. Not a 44% jump like Exxon just reported.

[spooked911]

8. Oil supplies are tight and they are using that as an excuse for gouging

it seems to me.