Very few read the article. Supplies are increasing while demand is decreasing so it's not supply and demand, at least in the short term. These are contract prices that we're talking about, before any taxes, so that's not it. It's not the wellhead price but the futures price driving the market so it's not the oil company's profit. I know that markets can never be wrong or misdirected or manipulated, that's why the housing and stock markets went boom to bust, even as all the market worshippers were urging to buy.
Why gas prices are rising
- Thread starter HKuser
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LightningJoe
New member
It can be all those things. And the price of gasoline was definitely too low several years ago, i.e. the market was wrong. $3.50/gallon is a better price. I know this because people are paying it and the oil companies are making record profits despite the fact that the commodity they're buying is 3X as expensive as it was recently.
I did. The analysis presented had some problems that were touched on early in the thread.
I believe he actually contends that reserves have increased. Certainly, reserves are only one supply issue. Your last clause above is also important. People in a furures market will be concerned not only with the current balance of supply and likely demand, but what it will be as indians and the chinese increase their demand.
People can be wrong, but anunimpeded market efficiently transmits peoples' valuation of the objects of their transactions. In that sense, a free market is always correct, i.e. a correct reflection of peoples' opinions.
Bank stock is currently undervalued. Smart people are buying bargains.
Well, this thread stayed amazingly near a central topic - must be a record...
Just some scattered comments from me...
Tax the hell out of those evil oil corporations - that'll teach em!
OK so go do it - then who do you blame when the NEW price for their product is marked up to cover the taxes? Wanna know who is to blame then - go look in the mirror...
Wages + product cost + taxes + profit = PRICE
Raise the tax and bingo...
For those who have never actually been in a business (90+ percent of the posters on this thread, most likely) - wanna know why manufacturing is fleeing the country? Well wages are just a small part of it... Go out and start a new business... I mean one that actually manufactures something (it'll be a hoot to watch)
Lemme give you a real example: OSHA came into my medical office and did an inspection... <Long, long story, very short> She found a gallon of salad vinegar in the cleaning closet that the janitor used for cleaning the windows... She said I was going to be fined a thousand dollars a day for every day that ACID had been on the premises without an approved steel cabinet, a full body shower (we already had a eye shower), Posted instruction for handling and mixing acids, and an MSDS posted on the wall...
WHen I pointed out <politely> that the ACID came off the food shelf at the local supermarket and why aren't they being fined, she sniffed and said in a aggrieved tone, "They don't let me inspect stores!"
I casually said the federal court woudl find this issue very interesting... She stomped out... Shortly after that i got a letter stating I had been found to be in full compliance except they didn't like the soap dispensors in the bathrooms...
Now this is just the tiniest example of the death by ten thousand paper cuts that will happen when you try to open a manufacturing plant... THat is the bigger reason to leave the country than the wages issue...
Dr. O
Just some scattered comments from me...
Tax the hell out of those evil oil corporations - that'll teach em!
OK so go do it - then who do you blame when the NEW price for their product is marked up to cover the taxes? Wanna know who is to blame then - go look in the mirror...
Wages + product cost + taxes + profit = PRICE
Raise the tax and bingo...
For those who have never actually been in a business (90+ percent of the posters on this thread, most likely) - wanna know why manufacturing is fleeing the country? Well wages are just a small part of it... Go out and start a new business... I mean one that actually manufactures something (it'll be a hoot to watch)
Lemme give you a real example: OSHA came into my medical office and did an inspection... <Long, long story, very short> She found a gallon of salad vinegar in the cleaning closet that the janitor used for cleaning the windows... She said I was going to be fined a thousand dollars a day for every day that ACID had been on the premises without an approved steel cabinet, a full body shower (we already had a eye shower), Posted instruction for handling and mixing acids, and an MSDS posted on the wall...
WHen I pointed out <politely> that the ACID came off the food shelf at the local supermarket and why aren't they being fined, she sniffed and said in a aggrieved tone, "They don't let me inspect stores!"
I casually said the federal court woudl find this issue very interesting... She stomped out... Shortly after that i got a letter stating I had been found to be in full compliance except they didn't like the soap dispensors in the bathrooms...
Now this is just the tiniest example of the death by ten thousand paper cuts that will happen when you try to open a manufacturing plant... THat is the bigger reason to leave the country than the wages issue...
Dr. O
great story k8do!
I was an engineer for a small kit plane company. The company had moved out to Arkansas from CA. I had moved out from NY when they moved to CA. They left CA due to the insane amount of gov't hassles.
We wanted to build a paint booth in part of one hanger to paint aircraft parts. I won the unenviable task of going to the town to get whatever permission I needed. When I went to the town and told them what we wanted to do they asked what I wanted...
Me: "We would like permission to build the paint booth."
Town: "Do you own the land and building?"
Me: "Yes."
Town: "Then why are you asking us?"
I as dumbfounded. Of course we were way off in the middle of nowhere. The whole workforce had to relocate because of a lack of population with skill in the area. That was well over a decade ago so that has probably changed. I couldn't imagine getting anything done in NY...
I was an engineer for a small kit plane company. The company had moved out to Arkansas from CA. I had moved out from NY when they moved to CA. They left CA due to the insane amount of gov't hassles.
We wanted to build a paint booth in part of one hanger to paint aircraft parts. I won the unenviable task of going to the town to get whatever permission I needed. When I went to the town and told them what we wanted to do they asked what I wanted...
Me: "We would like permission to build the paint booth."
Town: "Do you own the land and building?"
Me: "Yes."
Town: "Then why are you asking us?"
I as dumbfounded. Of course we were way off in the middle of nowhere. The whole workforce had to relocate because of a lack of population with skill in the area. That was well over a decade ago so that has probably changed. I couldn't imagine getting anything done in NY...
The New Hampshire Public Employee Retirement System's third-largest holding by market value as of June 30, 2006 was $40 million worth of Exxon-Mobil stock. It has since appreciated by 50% to the tune of $20 million, and provided $1.6 million in cash dividends to the fund.
Evidently the grandstanding politicians would prefer that state employee pensions bankrupt taxpayers rather than see oil companies earning decent profit margins.
CalPERS, as of its June 30, 2007 annual report, owned 11.5 million shares of Chevron ($969 million at $84.24, now $88.66) 28.8 million shares of Exxon-Mobil ($2.4 billion at $83.88, now $89.25 - $200 million in equity appreciation and and $16.1 million in cash dividends in the past year), and so on.
Looting the oil companies means looting the retirements of millions of people across the country.
Evidently the grandstanding politicians would prefer that state employee pensions bankrupt taxpayers rather than see oil companies earning decent profit margins.
CalPERS, as of its June 30, 2007 annual report, owned 11.5 million shares of Chevron ($969 million at $84.24, now $88.66) 28.8 million shares of Exxon-Mobil ($2.4 billion at $83.88, now $89.25 - $200 million in equity appreciation and and $16.1 million in cash dividends in the past year), and so on.
Looting the oil companies means looting the retirements of millions of people across the country.
BoringAccountant
New member
First, let me say I have not researched this thought yet, just throwing it out there in case any of you have thought about it and have an answer...
If oil companies make a ton of money, which they do, it is fair to assume they are in the highest tax bracket for a corp. If 10 years, 5 years, 3 years, etc. how ever long you want to go back in the past decade or so you will see that oil companies did fairly well for themselves and gas was a commodity, traded on the marketplace and was at a 'reasonable' price. Flash forward to the past 2 years or so...gas has gone higher and higher and the oil companies keep making and posting RECORD profits. If all else being equal, taxes increase proportionately to the increase in sales, how could they post RECORD profits without somehow adding to their gross profit at the expense of the consumer? Price gouging, I don't think so, but I think they are using the people's fears as a means to raise more revenue. Perfectly legal and I am just pointing it out, I have no solution to fix it.
Goes back to the widget scenario for you ECON students...if it takes $8 to produce and you sell it for $10, you have a $2 profit...if the cost to produce goes up to $12, you would have to sell it for $14 to get the same profit...not $15 to get the same gross profit percentage.
If oil companies make a ton of money, which they do, it is fair to assume they are in the highest tax bracket for a corp. If 10 years, 5 years, 3 years, etc. how ever long you want to go back in the past decade or so you will see that oil companies did fairly well for themselves and gas was a commodity, traded on the marketplace and was at a 'reasonable' price. Flash forward to the past 2 years or so...gas has gone higher and higher and the oil companies keep making and posting RECORD profits. If all else being equal, taxes increase proportionately to the increase in sales, how could they post RECORD profits without somehow adding to their gross profit at the expense of the consumer? Price gouging, I don't think so, but I think they are using the people's fears as a means to raise more revenue. Perfectly legal and I am just pointing it out, I have no solution to fix it.
Goes back to the widget scenario for you ECON students...if it takes $8 to produce and you sell it for $10, you have a $2 profit...if the cost to produce goes up to $12, you would have to sell it for $14 to get the same profit...not $15 to get the same gross profit percentage.
Boring - two mega-corporations, Exxon and Mobil, merged to form Exxon-Mobil, necessitating the creation of the "super-mega" category, since the new company was vastly bigger than anything in the "mega" category.
The reason they are making RECORD profits is because their global business volume is mind-bendingly huge - their 2007 revenue was about $400 billion, more than the entire economic output of Saudi Arabia or Taiwan.
They paid more in total taxes worldwide ($105 billion) than the entire GDP of the bottom 67 nations combined. About as much total taxes as the entire economic output of the nation of Peru or Chile. Their overall income tax rate in the US was about 41%.
Talk about "gouging."
What's important is their profit margin, not the dollars. And their margin was 11.4% for 2007 - spending about $8.97 in order to make $10.
Also, your example presumes that they're selling exactly the same number of units at the $2 profit, rather than selling vastly more units to the billions of China and India ...
... for a smaller profit
The reason they are making RECORD profits is because their global business volume is mind-bendingly huge - their 2007 revenue was about $400 billion, more than the entire economic output of Saudi Arabia or Taiwan.
They paid more in total taxes worldwide ($105 billion) than the entire GDP of the bottom 67 nations combined. About as much total taxes as the entire economic output of the nation of Peru or Chile. Their overall income tax rate in the US was about 41%.
Talk about "gouging."
What's important is their profit margin, not the dollars. And their margin was 11.4% for 2007 - spending about $8.97 in order to make $10.
Also, your example presumes that they're selling exactly the same number of units at the $2 profit, rather than selling vastly more units to the billions of China and India ...
... for a smaller profit
BoringAccountant
New member
mvpel,
I understand and agree with you. I have little knowledge of the industry and the understanding of some of the key players.
I would speculate that when you sell so much to the other nations of this world in their currency (China) and then translate it back into ours, the valuation differences would account for a large amount of income, but I haven't looked at their 10k so thats just speculation.
With regard to the amount of taxes paid, that is staggering, or rather mind-blowing. This one really got me...
I sometimes wonder why the average citizen or person cannot see the dog and pony show that Congress throws on every now and then to show that they do work or that they 'care'...i.e. steroids in baseball, discussing gas prices and profits with oil execs, etc.
I would be curious, maybe you know, how has their U.S. sales market fluctuated in recent years? Less demand here, or rather a smaller increase in the demand than prior years?
I understand and agree with you. I have little knowledge of the industry and the understanding of some of the key players.
I would speculate that when you sell so much to the other nations of this world in their currency (China) and then translate it back into ours, the valuation differences would account for a large amount of income, but I haven't looked at their 10k so thats just speculation.
With regard to the amount of taxes paid, that is staggering, or rather mind-blowing. This one really got me...
that's insane
I sometimes wonder why the average citizen or person cannot see the dog and pony show that Congress throws on every now and then to show that they do work or that they 'care'...i.e. steroids in baseball, discussing gas prices and profits with oil execs, etc.
I would be curious, maybe you know, how has their U.S. sales market fluctuated in recent years? Less demand here, or rather a smaller increase in the demand than prior years?
WASHINGTON (Reuters) - Record-high gasoline prices will reduce U.S. demand for the fuel this summer by 85,000 barrels per day compared with last summer, the first drop in summer motor fuel consumption since 1991, the government's top energy forecaster said on Monday.
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"We see a slowdown in gasoline demand," Guy Caruso, head of the federal Energy Information Administration, told reporters. "We are for the first in a long time actually looking at a lower demand for gasoline this summer than last summer."
Summer gasoline consumption is forecast to decline 0.9 percent, less than 1991's summer drop of 1.1 percent, but certainly opposite of the 1.5 percent growth the U.S. normally sees in gasoline demand, according to an EIA official
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"We see a slowdown in gasoline demand," Guy Caruso, head of the federal Energy Information Administration, told reporters. "We are for the first in a long time actually looking at a lower demand for gasoline this summer than last summer."
Summer gasoline consumption is forecast to decline 0.9 percent, less than 1991's summer drop of 1.1 percent, but certainly opposite of the 1.5 percent growth the U.S. normally sees in gasoline demand, according to an EIA official