On Sat, 07 Apr 2007 16:28:16 -0400, <jon@dakota-truck.net> wrote:
>
> The oil companies make the same amount on a gallon of gas whether
> it is $1 per gallon or $4 per gallon, because the majority of the
> variability of the gas price is directly tied to the price of crude
> oil, not the amount of profit that the company decides to take from
> each gallon of gas. If the oil companies were to suddenly decide to
> operate as non-profit charities and charge only enough to meet the
> costs of production such that they would merely break even, and have
> no profit, if the price of gas were $3/gallon, the new price would be
> $2.90/gallon. The oil companies are simply not making enough profit
> per unit to affect the gas prices in any significant way. Compare
> this to the price of crude oil. If gas is at $3/gallon with
> $70/barrel crude, and the price were to drop to $50/barrel, gas would
> drop to about $2.60/gallon, or were it to go to $30/barrel,
> $2.15/gallon. (Get rid of those stupid state and federal taxes, and
> these prices drop to as low as $2.30 for $70/barrel crude, $1.90 for
> $50/barrel crude and $1.45 for $30/barrel crude.) There are other
> factors which influence the price of fuel beyond the raw crude oil
> price, most notably, good old fashioned supply and demand, but oil
> companies "setting" high profits for themselves is certainly not one
> of these factors.
You make a very good point here. However, I think this applies to the gas
stations that sell gasoline. Exxon doesn't just sell gasoline. The pull
oil out of the ground. That's where they make their money. On the crude.
You also don't get all gasoline out of one barrel of oil. You get many
petro products.
> The bottom line is that the oil companies have no incentive to keep
> gas prices high, and in fact, have disincentives to do so, not only
> from a publicity standpoint but from an economic one as well. In
> fact, the oil and gas industry has been audited by the US Government
> an average of 1.5 times per year for the past couple of decades, and
> no evidence of any sort of price gouging, price fixing, etc. has ever
> been found.
>
I partially agree with this. The oil companies will charge as much as they
can for their product. It's hard for one company to charge $3.00 per
gallon of gasoline when crude oil prices are 25$ a barrel because the
competition will under cut them. But when the world market of oil goes up
in price due to events such as political instability and the perceived
danger of hurricanes, they make huge profits on the oil they pump out of
the ground. When you are the guy getting it out of the ground, you never
lose when the price of oil goes up. It's the guy at the gas station
selling you the gas that has that tight margin.
-- -droo2003 Dodge Dakota Club Cab V8 4X4 Manual Transmission Bridgestone Dueler A/T Revo's Can-Back Soft Topper Rhinoliner Alpine CD Head Unit w/ XM Alpine 6 3/4" Speakers Sony 8" Subwoofer Q-Logic Custom Fit Enclosure
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