Thread: Please EXPLAIN to me how the Oil Companies can be making these ENORMOUS profits!

Originally Posted by catnap1972

Actually the price on EVERYTHING is going up. It's possible some companies might be eating the increases instead of passing them along (or risk being put under by the competition who will eat the increase). You used to be able to find motor oil for .59 a quart for the lower-end branded stuff (Exxon, Mobil, store brand, etc.), but nowadays the cheapest quart of oil I can usually find is 1.50 (and up).


As for petrochemical products (plastics), they might not be increasing the prices but they're certainly using lesser amounts of it to make the same products (often resulting in a flimsier product). Wondering why the plastic bags at the supermarket often fall apart/split even before you get them home? Now you know why.

We've been paying almost 3 dollars for a quart of oil for YEARS. This is NOT a recent increase in prices and it has nothing to do w/ what is going on currently. Perhaps where you live the competition is more fierce(sp), so companies had to sell it cheap.

And I'm sorry, but my walmart bags have always fell apart. You may be right that they are using lesser amounts, but they've always been crappy. lol

Bump!!!

Black Gold
Posted in Energy Policy on April 25th, 2006 — John Farmer
The hot topic of the day is gasoline prices. Everyone is feeling the pinch as prices encroach upon the three buck a gallon marker. The Dems are screaming that the Bush’s Big Oil buddies are taking us to the cleaners and the Reps are screaming back at the wacko environmental restrictions. The fact is this is an election year so even the Reps are pointing fingers over at Big Oil a little now. Both Dems and Reps want you to believe that it is those evil Big Oil profiteers that are to blame. Why? Because it is an election year and there is enough blame to go around to both Dems and Reps. People are screaming for the government to do something, not realizing that the reason we are approaching the three buck marker is because the government did do something. If you want to make matters worse, then just insist that the government do something else.

First I would ask you to look at exactly what goes into the price of a gallon of gasoline. At the writing of this, crude oil is going for about 73 bucks a barrel. You can get around 42 gallons of gasoline out of a barrel of crude so you are looking at a current pump price of around $1.74 just for the crude. At the rate referenced in the link about (55%), that gives a retail price of around $3.16. We are not quite there yet, but give it time. So, why is crude so expensive? Well, we are still limited to the same old supplies (primarily the Middle East) and there is a great deal more demand for the same supply. As everyone who shops at Wal-Mart knows, China is manufacturing a lot of stuff right now and needs the energy. That is an over-simplification but you get my point.

For decades now, it has become almost impossible to explore and develop new supplies in the United States because of extreme environmental policies. So, environmental types, thank you very much and it is time to pay up for all of us. A lot of this the Dems can take some blame for. Now, does everyone remember that wonderful “Energy Policy” our brilliant legislatures enacted last year? It was mostly a “pork bill” with lots of special interest pay-offs, one of which was the ethanol industry. And if you have been paying attention, I’ve done a series of posts already as to why that is and why it is a bad idea. Well, it seems that the refineries have to refit for ethanol instead of MTBE (another environmental fiasco courtesy of the government “doing something”). And seeing as how no new refineries are being built in recent years, we are having to make do the best we can. So, thank you Reps and Dems for the wonderful “Energy Bill” of 2005!

In reality, of the price of a gallon of gasoline, only 7 to 8% goes to Big Oil profits. That is a relatively low return in any venture. If the government adds another “profit tax” (remember your lesson on this topic) in addition to the ~20% it already gets from the sale of a gallon of gasoline, corporate taxes, and other little regulatory costs. All that can result is higher prices and I never saw a tax that created one drop of oil. So no, we should be demanding that the government STOP doing something and let Big Oil develop supplies and facilities for refining the stuff.

By the way, Big Oil is actually a number of major oil companies who are competing for each others market share and want to sell gasoline cheaper than the other guy. And let me fill you in on a little secret. The global economy is going to grow. Demand for petroleum is going to continue to increase against a finite resource (supply). Fuel prices are only going to get worse in the long run. If we don’t start getting serious at developing the next generation of energy resources now, then we are going to have some tough times ahead. The ray of sunshine is that people are beginning to realize this. The long term solutions reside in the private commerce sector. The government did not develop the automobile or train. Innovation based on a need and demand from the public did. The government can help foster such innovation, but in the end the only solution is one the public is willing to spend money to aquire from someone willing to invest capital in producing. In other words, like the hybrid car, if people do not want to buy the thing, then there is no sense building it.

Background:

Actually a barrel (42 U.S. gallons) of crude oil can yeild slightly more than 44 gallons of petroleum product (depending on product mix). Estimates (depending on refinement process and product mix) vary between 20 and 37 gallons of gasoline produced from one barrel of crude oil. I based my estimate above on a very conservative 42 gallons number to arrive at $1.74 for the crude oil contribution of fuel prices at the pump. This however is being very generous. The assumption is that the remaining cost of the crude is recovered in the sale of other products extracted from the same barrel of oil.

LINK

THANKS so much for posting this! I have read this and reread this and for the life of me I still don't see how the big oil companies are making billions of dollars in profits, more than they have ever made in their history. If they are passing the increase in the price of crude oil per barrel onto us so they can continue to produce the gasoline we guzzle, then why aren't their profits just at the same levels as before prices more than doubled, instead of going up, up, up?

I am NOT trying to be contrary here, not at all, but everything seems to be doubletalk explanations for the ENORMOUS increases in big oil profits while we are paying over $3.50 a gallon here in SoCal.

DARN, I am even MORE confused! I better go make dinner. Maybe some nourishment will help my brain work better!