Thread: oil profits

I have heard frequent mention of the huge profits that oil companies make. Ususally these complaints also include the concept that the profits are bad. Despite the fact that the government takes in more in oil taxes than the oil companies earn in profits.

What I want to know is: do the oil companies really make obscene profits and if they do why is that bad?

I found a couple of articles which I will post links to. They are long but seem to be well written and informative. I reccomend reading them before posting.

The articles seem to confirm that the companies are making record profits now but go on to say that this is a temporary situation caused by unique recent events and that the dwindling supply of oil will quickly reduce profits.

What say you? please back up what you say. Oh, and let's talk about Iraqi oil contracts in a different thread.


First link"
Oil Profits and the "Gassy" Political Classes

2nd link:
http://www.realclearpolitics.com/articles/2007/04/how_inflation_and_profits_play.html

OK, I will admit to not reading both articles. In fact, I only read about a third of the first article but it was sooo boring and redundant that I thought I might fall asleep. I did give the rest a quick skim but the entire article just seemed to try to justify oil profit by repeating what most of my textbooks told me about economics my senior year in high school.
Yes, all businesses are out there to make profit and yes, profit depends on supply & demand (including future supply & demand). Those articles just seem to be making the subject more complicated by stripping it down to the basics of economics.
With that said, what we should be looking at are the current inventories of oil and the price per barrel. Since, most of us, when talking about economics have some kind of knowledge about how it works.
Within the past two weeks inventories of oil have been growing nicely and the price per barrel has been going down. However, none of this is being reflected at all in the price that the consumers are paying at the pump. This is why some people are a little angered over oil profits; because they see absolutely no savings passed on to the consumer. Therefore, they are only using the "deman" aspect of economics to jack up the prices and just saying, "Heck with the fact that we have a growing supply right now and getting it for cheaper, we want MORE profit." That's what annoys me when I go to the pump and pay $3.80 per gallon (for 91 octane, mind you but still).

Originally Posted by Jbird

OK, I will admit to not reading both articles. In fact, I only read about a third of the first article but it was sooo boring and redundant that I thought I might fall asleep. I did give the rest a quick skim but the entire article just seemed to try to justify oil profit by repeating what most of my textbooks told me about economics my senior year in high school.
Yes, all businesses are out there to make profit and yes, profit depends on supply & demand (including future supply & demand). Those articles just seem to be making the subject more complicated by stripping it down to the basics of economics.
With that said, what we should be looking at are the current inventories of oil and the price per barrel. Since, most of us, when talking about economics have some kind of knowledge about how it works.
Within the past two weeks inventories of oil have been growing nicely and the price per barrel has been going down. However, none of this is being reflected at all in the price that the consumers are paying at the pump. This is why some people are a little angered over oil profits; because they see absolutely no savings passed on to the consumer. Therefore, they are only using the "deman" aspect of economics to jack up the prices and just saying, "Heck with the fact that we have a growing supply right now and getting it for cheaper, we want MORE profit." That's what annoys me when I go to the pump and pay $3.80 per gallon (for 91 octane, mind you but still).

If consumers were diligent and went to the cheapest petrol/gas station then prices would depress fairly quickly. If consumers are overcharged it's their own fault for not being interested enough to shop around

It's the function of any corporation to turn a profit and the prices are supposed to reflect supply and demand. However in the case of oil there is some responsibility owed to the public. Oil (in it's refined form) is a nessesity. We must have it to continue working and producing. So the question becomes what is fair? How much profit is OK for a corporation to make when providing a 'make or break' commodity? The world can live without coffee. The world can go without pork bellies. The world cannot function without oil. There must be a compromise.

Originally Posted by commiekiller

If consumers were diligent and went to the cheapest petrol/gas station then prices would depress fairly quickly. If consumers are overcharged it's their own fault for not being interested enough to shop around

Keeping your eye on all the prices and only choosing which is cheapest yet not on the way to where you are going is pretty unefficient and inconvenient. If you have the time to do that then kudos but I know I don't.

Originally Posted by lakeman

I have heard frequent mention of the huge profits that oil companies make. Ususally these complaints also include the concept that the profits are bad. Despite the fact that the government takes in more in oil taxes than the oil companies earn in profits.

What I want to know is: do the oil companies really make obscene profits and if they do why is that bad?

I found a couple of articles which I will post links to. They are long but seem to be well written and informative. I reccomend reading them before posting.

The articles seem to confirm that the companies are making record profits now but go on to say that this is a temporary situation caused by unique recent events and that the dwindling supply of oil will quickly reduce profits.

What say you? please back up what you say. Oh, and let's talk about Iraqi oil contracts in a different thread.


First link"
Oil Profits and the "Gassy" Political Classes

2nd link:
http://www.realclearpolitics.com/articles/2007/04/how_inflation_and_profits_play.html

The oil companies have been making a healthy profit since day 1. They are now raping the American people based on lies, mispresentations and "false speculation". They're getting away with it because our politicians are in their pockets and obscene profits override their loyalty and responsibility to their constituents. Our economy isn't set up for these kinds of increases in a basic necessary commodity. The type that control gas prices are also the same ones that control wages and you won't see them adjusting pay scales to keep up with these increases. (except for the rich investors)
I would love to see it return back to the 60's when government regulated gas prices.

Originally Posted by Jbird

Keeping your eye on all the prices and only choosing which is cheapest yet not on the way to where you are going is pretty unefficient and inconvenient. If you have the time to do that then kudos but I know I don't.

Not to mention, you're wasting a lot of gas driving around the city searching for the cheapest gas of the day. Kind of invalidating the point of it.

Originally Posted by commiekiller

If consumers were diligent and went to the cheapest petrol/gas station then prices would depress fairly quickly. If consumers are overcharged it's their own fault for not being interested enough to shop around

There was a news story regarding the issue of "shopping around". They found that generally people used more gas then money they saved. Stupid option.okebrain:

Originally Posted by Sgt. Bilko

I would love to see it return back to the 60's when government regulated gas prices.

Oh god no. Regualtion in general sucks.

Originally Posted by Zarathustra

Oh god no. Regualtion in general sucks.

Not when our politicians sponsor and support "globalization" and outsourcing. They're trying to level the playing field, so that Americans will start working for 4 bucks an hour.