Obama's energy solution - inflate your tires.

Do you really think the oil companies want to sell their product for less money (less profit)?

If they can sell in higher volume at a lower price it can end up being more profitable. Look at Wal-mart, relatively cheap prices but they sell in high volume so they make huge profits. It's the same for oil companies, these are random numbers but if the oil companies are able to sell 70 million barrels of oil a day at $140/barrel vs. 100 million barrels at $100/barrel which is more profitable? The 100 million at $100/barrel.

You argue well, but the oil companies--though for forty years exploited Mideast oil to the hilt and kept prices way down--are in it for profits and the 18-26 cent a gallon was made up by the huge volume of gas-guzzlers and households conversion from coal to oil. The result, however, of cheap Arab oil was at the expense of the US wildcatters. The '70s crisis revitalized to some extent the incentive to drill domestically--hence, offshore and Alaska. OPEC, nevertheless, toyed with us and crushed domestic incentives as drilling again became unprofitable. Now that OPEC has other markets--India and China--the price per barrel will remain high and domestic oil will again become profitable and consequently in the oil industry's interest to keep prices high, not reduce them.

This is the argument I used above for the good old days, except the volume will no longer be there unless you wish to continue filling the highways with Humvees, trucks and SUVs. Moreover, the oil industry would prefer to pump less at a higher price as the cost of productivity is essential.

Every little bit helps--not to mention it's safer.  

You are only thinking about the US in your argument. The volume that I am talking about is worldwide. India and China are in the midst of a major industrial revolution which requires lots of oil. They will pick up any slack that a lack of SUVs, trucks, and humvees leave behind and then some.

Essentially we experienced this summer where people's ceiling on gas and oil prices are: $4/gallon of gas. That is where people really started to take stock of how much they drive and started cutting back. So what the oil companies are going to want to do is keep gas just below $4/gallon, like around $3.50. At that level people will be pissed but willing to pay it. That's business for you, you find what people are willing to pay and you charge as close to that amount as you can get away with.

It’s not the same for oil companies. Wal-mart purchase its products from the manufactory sector which can constantly replenish the product. Therefore, Wal-mart can buy in bulk and sell for less. Crude oil is not manufactured nor replenished. There is just so much oil to go around. In fact, there are approximately 1,200,000,000,000 trillion barrels of oil reserves world wide. Even you could understand that the profits would be greater at $140 a barrel (1.2 trillion x 140 = 168 trillion dollars and 1.2 trillion x 100 = 120 trillion dollars).

Just playing devil's advocate here but what if the American oil companies can only sell oil for the next 30 years, well before the full amount of oil is gone? If you could sell more oil, at a slightly lower price, for the next 30 years and make more money for that 30 years wouldn't you? The bottom line is that any oil exec can see that the times, they are-a chanin', and alternative, renewable energy is the wave of the future. That being said the American oil companies are going to be on a much shorter time frame than OPEC which can easily last for quite some time selling to India and China for many many years to come. America will eventually become energy independent and be off of oil as a major source of energy so the American oil companies are going to want to get as much profit as they can now rather than hoping that oil remains the only major energy source until it runs out.

No, that was argued back in the 70s - the inelasticity of Oil. We found that it is indeed elastic. The only difference in WalMart and the oil companies is where they get their products. It is the same. Crude is replenished (just not as fast as it is consumed), but it is made feasible to extract (where it was not before) due to higher prices and the advance of technology. In the market, that is the same as being replenished. It cannot last forever, but forever is a long time - not 10-20 years.

Well, actually at the world’s present rate of consumption, which is approximately 83 million barrels/day, we could run out in about 40 years. But as I said before, consumption is increasing every year.

And this may explain why oil is hovering around $4 dollars a gallon and the oil companies are making record profits--to invest in alternative energy. Right?

Actually, there are huge incentives to drill here in the US.  Yes, the petroleum industry is enjoying record earnings, but since the cost of doing business is also high, they still only made around 10% profit.

All the rediculous conspiracy theories about the petroleum industry are the real ruse here.  Why is it so hard to believe that oil companies make their money by producing petroleum products?

 

Bet you we dont. Bet we dont run out (even with increasing usage) for the next 100. I will put it in a trust fund too, as I know a sucker bet when I see one.

That is only if we don’t drill for more oil. if we drill and get more oil then we will have longer to burn it. Oil is created by microbes, just like the microbes that changed the atmosphere from nitrogen sulfur carbon oxygen to nitrogen oxygen, sulfur and carbon. There are billions of tons of oil still under the surface waiting to be tapped. All we have to do is tap it.



They would make the same amount in profits if the oil was a dollar a barrel by selling volume which they have been doing for decades. The record profits are made by volume sales since the profits are fixed they can’t make more money when the price goes up or less money when the price goes down.



Dr. did you read that old ESA report on hydrocarbons on Titan? Funny how Titan is the only other world in the solar system with liquid on its surface and it is all methane and ethane. Wonder when we can start drilling there?

When it becomes economically feasible - in about 75 years.

Doc is the supreme optimist.

Now that really makes a lot of sense. So tell me this--why is gas hovering around $4 dollars/gallon since, according to you, it wouldn’t affect their profit?

Maybe they are not controlling the price as has been advanced by others? And that those controlling the price are not market savy like Oil companies and would rather milk the golden goose till it's dead instead of thinking long term?

If not the oil companies, who are those controlling the price of oil?

2 things. ONe is the LAW of supply and demand. For those who have studied economics, they will know that very few things in Economics is concrete, and even fewer - like this one - are LAWS - i.e. no longer subject to debate. Quite simply, the demand has sky rocketed, the supply has stagnated. prices had to go up.

Now why has the supply stagnated? Here we have 2 causes. One is Opec. They like the price, and so they are resistant to increase supply when they see supply as being finite, and the way to make a lot of money is to sell every drop at a very high price (they are correct, except they fail to see competitors - alternative energy - entering the market - their ostrich syndrome).

The second is the failure of other nations, specifically the much touted "first world" to open up new fields. And then they question becomes why?

The answer can be found in the halls of congress yesterday. I will leave you to check out what happened in congress yesterday to see who the other villans are.

The effect is that those who want alternatives (and I think democrats do - they just are too duplicitous to admit it) are rejoicing. They are getting their wish. Oil companies see their monopoly disappearing - and are scrambling to get into other markets while they have the cash flow to do it (See ALtria, GE, and Exxon Mobile non core investments for wise strategies).

Coming out and saying "I like HIgh gas prices" is a very unpopular stand, and yet Obama has indicated it, and others have stated it. It fits their agenda. I respect them for their honesty. And then there are those that say the opposite, while silently jumping for joy at the high prices (see previous for reason). And they are basically pond scum. See Reid nsd Pelosi.

IN the end, the Oil companies may be getting a small kick, but they see the end coming because they cannot control the prices. The democrats get to lie, and get a scapegoat, and get to hide! So who is really benefitting? After all, they are going to tax that profit away from the oil companies.

And the winner is? The democrats. The have partial control of prices by preventing drilling in known good fields. And Opec because at least they are honest in their greed if very short sighted.

Don’t you think the oil companies like the prices? And don’t you think the oil companies are doing the same thing--resistant to increase supply?

By the way, please explain to Paladin77 that the way to make a lot of money is to sell every drop at a very high price, he doesn’t appear to understand.

That would be true if there was no alternative (and today, August 3, 2008 there is none), but as we know, that will not always be the case. Oil companies - the ones that do not diversify, will go the way of the buggy whip manufacturers. That was the second shoe dropping.



IN retail, we use to have a joke. We would sell below cost and make it up in volume. SO of course there is a floor. But the reason that WalMart does not jack up its prices when it has an effective monopoly is that they do not want competitors entering the market. So it is with oil companies. They know the price is too high (in 20 years, it may be normal, but not in 2008). SO they want a high price, but they cannot set it as if Exxon tried, BP would out sell them. Now they could collude, but in the last 30+ years, after countless investigations (from a congress that likes to investigate not when there is evidence of a crime, but just the hint of it), none was ever found. For now, Oil distribution is a competitive market that obeys the supply and demand law. They can no more arbitrarily jack up the price than McDonalds can on burgers. They will sell at a high price when the market allows them to. But note the verb - allow. They do not control, they react.

Once supply exceeds demand, you will see them competing to sell all their wares while others are stuck with theirs. How? Lower prices. They are reacting, not dictating. Everyone would love to make a million dollars an hour. Mot never will, because they do not control the market.

Because you keep ignoring the point that the oil companies profits are fixed by congress. they make 9.9 cents per gallon profit. In order to buy more oil to sell they charge enough per gallon to pay for that oil and refining costs. That is the cost of doing business. They might earn a billion dollars but the profit is less than earnings. The oil industry or I should say the gasoline industry has always been set up on volume sales rather than the price. The only way to make more money is to sell more gasoline. American oil companies are restricted by federal law how much they can earn as profit. Sure they can fudge a few million here and there but not much. Because if the regulators drop in and do an audit they could lose their business all together.

Exxon had record earnings the last quarter, Wall Street was unimpressed because they did not hit what was expected as far as profit and their stock took a dive. Remember that stock holders own the oil companies. The stock is only valuable when they show sustained profits in order to pay high dividends. Low profits means low dividends meaning the stock is not worth as much. My mother owned Atlantic Richfield and when she died it was passed on to me. a thousand dollars every three months give or take is what I get from them. So I get 4 grand a year in dividends.

Don’t be fooled by the numbers they throw at you in the media. Once the money is earned, then it has to be paid out. First on the list is the money needed to buy more oil to turn into gas. Next they have to pay salaries from the fat cat executives to the lowly guy on the rig drilling oil to the trucker shipping the stuff all over the country. More gets spent on R&D and R&R and new acquisitions such as land leases or rent on land leases, and what is left over are taxes and dividends. The companies pay taxes and what is left is divided up between the stock holders and sent out in quarterly checks. Now if the price of a barrel of oil goes up there is less profit. When the price of oil goes down there is more profit. To stop the greedy oil companies from getting rich the congress enacted the windfall profits tax. What that means is that the difference in the price of a barrel of oil when it goes down is given to the federal government instead of the stock holder.

The reason why gas is at about 4 dollars a gallon is because people are betting on the futures market that the price will go up on a barrel of oil and the price is fixed by the betters also known as speculators. When they think they have gotten all that they can they will start betting the price will go down and the price of oil will go down. The oil companies don’t set this price the speculators do. The press and the liberals want you to focus their anger at the oil companies so they hype their earnings not their profits. Most people don’t know the difference so earnings and profits are the same to them.



You don’t seem to comprehend what was written by the good Dr.
You have bought into the lie that big oil makes more money on higher prices. You fail to understand that the winners are the owners of the land where the oil is pulled out of. The speculators set the price paid to the owners of the oil. In this case little of it is pumped out of American soil so the American oil companies have to buy it from, Canada, Mexico, Venezuela, and OPEC at the set price. You yourself said 70% of oil Americans use comes from other countries.

The conservatives want the oil to be drilled in America so the American oil companies can make some money and as they do the price of oil will drop because more of what we were buying from other nations we will be getting domestically. This will increase the world supply and the speculators will bet the price will go down and set the price of oil lower. Proof of this was when the President dropped the presidential ban on off shore drilling. Within minutes the price of oil dropped ten dollars. When the Congress announced it was opposed to doing the same thing the price went back up.

I'd like very much to sell you the Brooklyn Bridge.