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View Diary: Following up on Nancy's Fighting Words ... (152 comments)

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  •  Whatever... (0+ / 0-)

    Oil prices dropped to ridiculously low levels in the 80s and 90s and oil companies got killed. Do I think that oil companies are all sweetness and light? Of course not.

    And just because the production cost is much lower than the price doesn't make it gouging. Remember, it's not oil producers that set oil prices: it's consumers.

    Lets say my local gas station (the only one in town) can only supply 3/4 of its gas since they aren't getting regular deliveries. So, they say, they will auction off the gas they do get, and whoever pays the most will get it.

    Is this gouging? No it's just the way the market works. Some number of people aren't going to get their gas no matter how you slice it since the supply is restricted, and the only way you can moderate that is with the price.

    •  Sorry (0+ / 0-)

      but it's way more complicated than your analogy.  Sometimes the market works and sometimes it works against itself.  The question is, what's happening?  

      My question:  Why so fast?  Why so fast a rise in the last two years?  

      He not busy being born is busy dying.

      by jarrrettg on Wed Apr 26, 2006 at 11:05:37 AM PDT

      [ Parent ]

    •  Not really (1+ / 0-)
      Recommended by:
      greenearth

      In this scenario, SUPPLY sets price, combined with demand.  If demand stays the same or goes up, but the SUPPLY goes down (say for instance, when crucial production infrastructure is destoyed in oh, I dunno, Iraq) then VIOLA, prices go up.  Notice that consumers do NOT directly affect this scenario- their demands stay the same.

      When supply goes down, prices go up.  Simple economics.  Production has been reduced, prices have gone up.

      The REAL question is this:  How has big oil conspired to reduce production IN ORDER to drive up prices?  Think "White House Iraq Planning Group" for the answer to that one.

      The greatest tyrannies are always perpetrated in the name of the noblest causes. --Thomas Paine

      by Citizen J on Wed Apr 26, 2006 at 11:08:42 AM PDT

      [ Parent ]

      •  Maybe... (0+ / 0-)

        The REAL question is this:  How has big oil conspired to reduce production IN ORDER to drive up prices?  Think "White House Iraq Planning Group" for the answer to that one.

        Yeah maybe, and in that case they've done us a huge service, ignoring all the death and misery they've caused. (Note that this is in no way a defense of those fuckers, I'm just making a point here).

        Higher oil prices are absolutely necessary if we're going to survive as a civilization because the alternative is cheap oil right up to the crash, which is getting more imminent all the time. If the neocons have managed to sabotage world oil production such that it stays at a lower level for longer, thus conserving global supplies and forcing conservation through demand destruction, that's a good thing for us in the long run.

        •  I agree (1+ / 0-)
          Recommended by:
          Sparhawk

          Americans must come to realize what the TRUE costs of oil are, NOT the artificially low ones that we've been led to expect.  Funny how the "Free Market" Rethugs don't want Free Market forces to apply to petroleum.  If Big Oil had to secure their OWN supply lines, for instance, rather than depending on the American Military to secure pipes, ships, etc oil products would be a hell of a lot higher.

          Once the true costs of oil really become known, you won't be able to stop the rush to alternatives- it'll be the proverbial green tsunami.

          The greatest tyrannies are always perpetrated in the name of the noblest causes. --Thomas Paine

          by Citizen J on Wed Apr 26, 2006 at 02:16:50 PM PDT

          [ Parent ]

      •  Only problem is (1+ / 0-)
        Recommended by:
        greenearth

        that global production has gone up.

        http://www.eia.doe.gov/...

        download table 4.4

        You will see that world oil production in thousands of barrels a day:

        2002     76,935
        2003     79,650
        2004     83,044
        2005     84,079

        •  Therein lies the rub (1+ / 0-)
          Recommended by:
          greenearth

          So if production actually went UP and their costs stayed the same, but we're paying more... wait a second here.  1 TRILLION in profit between all 6 American oil companies last year.....

          Nope, I'm not worried, we've got Dear Leader to protec' us from the bad people.  Oil Companies are GOOD "people", so nothing to worry 'bout here, nope.

          The greatest tyrannies are always perpetrated in the name of the noblest causes. --Thomas Paine

          by Citizen J on Wed Apr 26, 2006 at 02:21:53 PM PDT

          [ Parent ]

    •  ALL gouging is market-based. (3+ / 0-)
      Recommended by:
      HarveyMilk, greenearth, OneCrankyDom

      What do you think gouging is, anyway? There's a heatwave. Overuse of AC causes a blackout. Suddenly, ice costs $5 a pound. Why? Because demand has outstripped supply, and the "market" drives up the price. But guess what? The convenience store owner who is emptying his freezer and making a killing is almost certainly violating laws against gouging.

      The point about oil (and gasoline) is that it isn't a functioning free market in any sense of the word. Gigantic transnational organizations (called corporations) which operate under all sorts of special legal protections, tax exemptions etc., control the supply. When the supply is relatively plentiful compared to demand, oil company profits are "fair" -- and to the extent that they aren't, we subsidize the industry to make them fair.

      But when the supply is restricted compared to domain, there is no such reverse effect -- the oil suppliers can make extraordinary profits, because the oil costs them very little compared to what they can charge for it.

      By the way, the idea that the oil companies "got killed" in the 80s and 90s is absurd. They didn't make absurd amounts of money, the way some Silicon Valley entrepreneurs and venture capitalists did, but the oil companies prospered just fine.

      I am further of the opinion that the President must be impeached and removed from office!

      by UntimelyRippd on Wed Apr 26, 2006 at 11:34:44 AM PDT

      [ Parent ]

      •  Grr (2+ / 0-)
        Recommended by:
        artifex, Boss Tweed

        The point about oil (and gasoline) is that it isn't a functioning free market in any sense of the word. Gigantic transnational organizations (called corporations) which operate under all sorts of special legal protections, tax exemptions etc., control the supply. When the supply is relatively plentiful compared to demand, oil company profits are "fair" -- and to the extent that they aren't, we subsidize the industry to make them fair.

        But when the supply is restricted compared to domain, there is no such reverse effect -- the oil suppliers can make extraordinary profits, because the oil costs them very little compared to what they can charge for it.

        Ah, the "oil cartel" conspiracy theory, the final stop of people who don't know anything about oil production. You should go stop by http://www.theoildrum.com , they have loads of the science behind oil production and pricing.

        Every single move of the price of oil in the last 50 years has been directly explicable by supply and demand characteristics, and not in terms of how much shadowy manipulation oil companies have done. Remember the oil shocks of the 1970s? Were oil companies responsible for those? No, they weren't, it was geopolitics, just like it's geopolitics (and fundamental supply considerations now). Over a period of time, oil companies generally make a similar profit per invested capital as other industries.

        Blaming oil companies for this is just plain wrong: oil companies don't control the price of oil since any dropoff in supply just causes the price to rise and create an incentive to sell more oil.

        What we have to do here is stop pissing and moaning about people who saw the US's suicidal trend toward oil addiction and took advantage of it using perfectly legal methods. Our present economic woes are due almost solely to bad decisions made by the American people and their leaders. Period.

        •  Explain (1+ / 0-)
          Recommended by:
          greenearth

          This still doesn't explain record (obscene) profits of oil companies.

          Yes, I'm familiar with supply and demand.  Price gouging cannot occur with a commodity that is not in demand.  

          But why did ExxonMobil turn in a $38 billion profit last year?

        •  uh ... SUPPLY and demand ... (0+ / 0-)

          ... bit rude to suggest that i know "nothing" about oil production. "oil cartel" conspiracy? OPEC is not exactly a secret brotherhood.

          here's what i know:

          a. the cost of producing oil for the market puts a floor on the price of oil,
          b. the supply of oil (as well as refined gasoline) is constrained by large-scale institutional factors. one is the relative success or failure of OPEC and other sources to limit (or force, for that matter) output. another is the ability of infrastructure to pump, store, and deliver the oil from under the ground to the refinery. for gasoline (and other refined products), a crucial limiting factor is refinery capacity. note that both of the latter two factors are controlled almost entirely by the oil companies. they decide how much to invest in infrastructure, exploration, and so on. a third is the ability of speculators to leverage financial power in order to withhold petroleum from the market.
          c. the oil/gasoline companies are among those functioning as speculators in the oil market. how do i know? because if they weren't, then they wouldn't see such a dramatic increase in profits when oil prices rise -- their "suppliers", such as the Saudis, would simply charge more for the oil until Exxon's margins were more "normal".

          every summer, gasoline prices rise. we are typically told that one reason for this is that refineries cannot switch quickly enough from winter blends to summer blends. hmmm. that sure works out pretty well for Exxon, doesn't it? so now, sitting on a kabillion dollars in windfall profits, do you suppose Exxon is going to invest in new refinery capacity, so that next year it will be able to ramp up production of summer blends in order to meet the demand without a price spike? uh ... why exactly would they want to do that?

          i question your claim that "over time, oil companies generally make a similar profit per invested capital as other industries". the nefarious accounting of the oil companies is comparable to the nefarious accounting of many other large industries, especially those with significant political clout -- somehow, no matter how much money they make, they don't ever seem to make any money.

          Were the oil companies responsible for the oil shocks? I don't know. Neither do you. Middle East politics has been a very murky business, ever since it turned out that the Arab nations owned a gigantic chunk of the most important industrial resource on the planet. Conspiracy theories always seem wacky and paranoid, but it's also pretty wacky to believe that a half-dozen corporations whose economic footprint dwarfed that of almost every other nation in the world were just standing around, watching and reacting as idealized market participants to the machinations of OPEC.

          yeah, Americans are paying for their dimwitted Pollyannaish outlook -- sold to them by their leaders. their leaders. from, uh, where? oh, yeah. i remember. their leaders from the oil companies. but that's a different complaint. you're right, in some sense Americans are getting what they deserve. but that doesn't mean the oil companies are getting what they deserve. because what they mostly deserve is to be nationalized. they quite clearly don't operate in the best interest of the citizenry, raising the obvious question as to why we permit them to exist.

          maybe you don't have an objection to unethical people using "perfectly legal" (legal largely because they've pretty much owned our government for about 130 years), but I do. legal is not the same as moral, or ethical, or right. the perfectly legal methods have included hijacking the US military to act as enforcers of access to oil fields and rearranging US tax laws to ensure that the vast majority of their income will be immune from taxation. the Iraq war is happening for exactly ONE reason: because there is oil there. it has cost us $200 billion and counting. that is a cost of production that the oil companies don't have to pay. that is DUMB.

          I am further of the opinion that the President must be impeached and removed from office!

          by UntimelyRippd on Wed Apr 26, 2006 at 02:38:30 PM PDT

          [ Parent ]

          •  I'm too tired to argue this entire post... (1+ / 0-)
            Recommended by:
            UntimelyRippd

            Just suffice to say that I agree with a large chunk of it. I apologize for my "rudeness", I read cluelessness in these forums every day.

            Lets just agree to disagree on some of the stuff here and just jointly agree that the entire reason why oil companies are able to do what you claim they are doing is bad choices by Americans. If Americans made better and more educated choices, everything you're saying would be impossible.

    •  'Whatever'? (0+ / 0-)

      That's about a hundred-billion dollar "whatever". Well done.

      I am further of the opinion that the President must be impeached and removed from office!

      by UntimelyRippd on Wed Apr 26, 2006 at 11:36:19 AM PDT

      [ Parent ]

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