? - If oil is a truly "competitive" industry

[Phoebe Loosinhouse]

How come all the gas prices at all the gas stations so closely dovetail? Also, the prices are rising NOW -the gasoline being pumped this second has already been paid for and refined and was already generating ungodly profits without any immediate increase.

Is true that the oil industry is still being subsidized with generous tax treatment by the government? Why, if Exxon had profits of 56 BILLION ? (I pulled that figure from a post by another poster and have NOT independently verified it)

Do we need a NATIONAL oil company to protect American consumers and American industry? The oil companies are making so much money they literally don't know what to do with it. Meanwhile other American industries are being flushed down the toilet (like the airlines and trucking) because of the rapacity of this single industry. Why do we hand out oil leases on government land for almost no money whatsoever to companies who can well afford to pay a fair price? Why? Why? Why?!

[lectrobyte]

1. I think Exxon's profits were $36 billion last year. Still huge.

[FormerDittoHead]

2. Here's your argument...

If it were an efficient market then competition for more business in the market would drive prices down to the point where profits were minimized across businesses. (unlike some markets, people *will* go out of their way to pay a dime less for their gas - the demand is VERY 'elastic' to price.)

OK, remember: profit is the amount people are paying for the oil ABOVE what it costs to get, process and deliver (ie: the actual cost).

So if the market were truly 'efficient', *profit* WOULDN'T change regardless of costs, assuming that the costs were passed along to all companies and those costs were SIMPLY passed on to the consumers.

There are two other factors, however, and they should be noted:

1) Inventory. As the price of oil goes up, the value of inventory on hand goes up, and that's profit. The ones with the largest inventories will enjoy the greatest profits for doing nothing. For what it's worth.

2) Economies of scale. The larger the company, the lower the per gallon processing costs are, so selling at the same prices, they would enjoy a greater degree profits than smaller companies. This hurts competition and unchecked results in monopolies, esp for price sensitive markets.

Unfortunately, as you've observed, the market is NOT efficient. Capitalism, unchecked and without regulation, becomes less and less efficient and the forces of supply, demand and competition go away.

[Poppyseedman]

3. You have a fundamental misunderstanding

OPEC generally sets the price of what the spot oil market is by how much it produces. The oil companies are in a way a middle man. A profitable one at that, but they don't control the price of a barrel of oil. These guys do.

OPEC), a consortium of 11 countries: Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.


Together, these 11 nations are responsible for 40 percent of the world's oil production and hold two-thirds of the world's oil reserves,

OPEC last increased its production in June 2005, when it raised to 28 million barrels per day with an increase of 500,000 barrels per day "should oil prices remain at current levels or continue to rise further." In September 2005, it made all of its member countries' "spare output" available, an estimated 2 million barrels per day

Even if the oil companies were no profits, the price would still be high.


http://money.howstuffworks.com/gas-price1.htm

http://tonto.eia.doe.gov/oog/info/twip/twip.asp

http://www.edmunds.com/advice/specialreports/articles/105901/article.html

[Wickerman]

4. I don't know much about oil or economics on this scale

but I am paranoid enough to suspect that corps as large as Exxon-Mobil might be a bit more than "middle-men" when it comes to OPEC setting oil prices. Yeah, I'm talking collusion. There is simply too much money being made for them not to be arm in arm.

[Ksec]

5. No. Its a monopoly

A few megacorporations control the bulk of the business .

Of course theyre gouging us and wall street is at blame here also. They use every little thing they can use to crank up prices.

[kysrsoze]

Gas production should be nationalized, or at the very least, regulated.

[RB TexLa]

6. Same reason a share of google at 2PM yesterday cost about the same to

buy through JPMorgan, Morgan Stanley, BONY, or Merrill. Some of the fees might be a little more or less depending on your contract with them or what they charge but the cost is about the same.

[BuyingThyme]

7. The oil being pumped out of Alaska, Texas, et cetera

is being pumped at the same cost as when our gas prices were 99 cents per gallon.

Thus, the extra two dollars is PURE PROFIT (on top of the hefty profit they were already making).

The concept of competition does not even come into the equation. The domestic oil is sold at the Saudi price. They don't dare compete. That's the way the Bushes want it.

[RB TexLa]

8. I bought shares of AMR (American Airlines) for $4.00 three years

ago. I should not be able to sell it for $22.46 (yesterday's market close) because the majority of sellers of AMR for yesterday paid say an average of $18.00 for their shares? Are you saying I should have to sell my shares at less than the market price because of what I paid for them?

[BuyingThyme]

10. How can you have a "market price" when the price is not based

on competition? You are so far from reality that it's outrageous.

[RB TexLa]

11. I am not away from reality at all n/t

[KyuzoGator]

9. In "competitive" industries, companies fight hard for profits.

Nowhere else can you raise your prices higher and higher and still have record profits. It's just nonsense.

[Inland]

12. Well, identical pump prices doesn't mean anything.

Close competition explains the identity of prices at various gas stations as anything. Two stations on the same intersection know exactly what the other is selling for, and they know what the stations down the road were pricing this morning. So they price themselves competitively.

[TahitiNut]

13. Haven' you noticed the new companies, new refineries, and ...

... additional production capacity that's been created with the increased profits? After all, that's the "guarantee" of a "free market" - when demand exceeds supply, prices go up and that attracts new companies and increased production capacity. That's the entire ethical rationale for the supply/demand theory in a free market, right?

No, I haven't seen it either. That's because it's not there. In fact, the number of suppliers in the market has declined over the years and no new refineries have been built for about thirty years!

Let's nver forget that Enron, along crony companies, manipulated the supply/demand ratio and fucked Californians out of over $20 billion - and then Arnold Gropenator 'settled' for nothing. Nice to have a crony tool in the best government money can buy, huh?

The energy industry should be nationalized. Immediately. "Owners" can be compensated for the book vaue of the assets. That's it. Nothing more. Nationalize 'em.

Won't happen, of course. And the "brave" and "free" Americans will continue to feed the beasts, counting on being just a little quicker and 'smarter' than the guy next door. It's every man (coWard) for himself, guys.

[Phoebe Loosinhouse]

14. What you said! nt.