@onlyshawn"...any discussion of 'profits' is meaningless without a discussion of 'profit margins'. Several people have complained of 'high profits' for oil companies, while saying nothing about profit margins. If you'll look into the actual margins, you'll find that they're MUCH lower than you think. Exploring and drilling for oil is a very costly process, and takes enormous amounts of time, sometimes *years* before the first drop of gas is sold."Profit margins are irrelevant when it comes to essential items such as gasoline. When practically everyone in the world depends on it that margin becomes a guaranteed profit. It's not like oil and gas aren't going to sell. Oil companies aren't taking huge loses because they have stockpiles of raw materials waiting to be converted into final products (as is the case in the manufacturing sector). Now, if they can bottleneck the process when it comes to refining into gasoline, why not? Building new refineries is just going to hurt their bottom line.The profit margin rational is a joke, a typical big oil talking point.
Here is a different perspective on the situation.Let's say I have the last Luke Skywalker action figure in the world and I put it on ebay. I'd make a huge amount of money from some billionaire Star Wars fan, if I had a company that sold rare action figures, people would say I was reaping ridiculous profits, and say how the parts the action figure is made of are extremely cheap. And then they would call on the government to regulate my business of selling rare action figures.This is supply and demand. There are a lot of demand for this rare action figure, but there is few (in this case 1) in supply. So how do you decide who should get it? By the ones willing to pay the most for it. When price goes up, demand for it (at the price) goes down, until the supply and demand are equal.That is the crux of it. While there may be plenty of 'cheap' oil it still has to be processed before it is sold as gasoline, and this is what the oil refineries are for. When they are unable to produce the gas to meet the demands for it, or when the demands for gas go up (it fluctuates through out the year), prices go up.There is a serious problem though, when their profits go up when the prices go up. That means they are selling lower then they should be (from a business stand point at least). What it means for us though, is that we are so dependent on gas that we end up having to pay higher prices then we would like because we have put our selves in a situation where we don't have much of a choice.
Actually, there are 2 points (that I neglected in my previous post), there is where supply meets demand, and there is where the company makes the most profit at a time (where they could supply more but don't because there is enough people who are willing to pay a lot more money for less). The point where supply meets demand does have profit, it just may not be a point where they profit the most. What pushes the price more towards supply and demand is competition, lack of competition pushes it more towards profit.Ultimately what a company wants to do is to dominate it's competition and/or removing them from the market, which then gives the company control to increase profits. In order to do this they push their prices lower, either by funding research which cheapens the cost, or losing money by selling at an artificially low price that their competition can not meet, which means their competition either goes out of business, is bought up by them, or they negotiate on price fixing. Sometimes the negotiation on price fixing is not a direct communication between the companies, but what it means is they can raise their prices just as high or higher then their competition, raising their profits but not allowing their competition to get stronger. This why they lower their prices, it is not to be kind hearted generous or for charity, it is first and foremost to dominate the market. Conversely they don't raise prices because they are trying to be mean hearted.That ultimate goal is what drives companies to lower prices and to be innovative. Take away that goal and you eliminate the effort to do that. Currently government tries to eliminate that goal through regulation and through other means (by having a government monopoly on it instead of a private monopoly). There needs to be a way to keep that goal there, but to make it difficult to maintain. This phenomenon happens in nature all the time, and yet nature manages to be balanced. Government should try and follow that, rather then to become the monopolies that hurt us.
"So, that's an extra 1,200/year. $3.28/day. Is that REALLY killing your discretionary money? C'mon, man...."Let me guess, you are one of the $5 latte in the morning, go out to lunch every day and eat out most evenings....your discretionary spending is probably something akin to $50-$100/day and you simply can't grasp what I was trying to convey? (no need to reply, see below)I'll make this easy for you: You're right, I'm wrong. I'm obviously clueless and nothing but 'trailer trash', that's why I never worked hard enough to be successful like you and it's not even worth your time to reply.
...i'm not really sure what we're discussing; somehow it's denigrated into a competition, and that's not what I meant to happen. The real issue at hand is whether or not these current gas prices are affected by supply and demand, or if they are simply products of 'corporate greed'. My point, consistently throughout this page, is that these are straight economic consequences, not examples of 'greedy big oil'. A secondary point of mine is, and you obviously don't agree with me, that the price of gas seems a lot scarier than it really is when you do the math. I'm not doubting that an increase in gas will hit lower income individuals more than higher income, but the problem with it is that everyone across the board responds as if it is going to absolutely murder them, when that simply isn't the case.I tried three times yesterday to edit my previous response...I didn't like how the "c'mon man..." sounded at the end; I was trying to be prodding, not sarcastic, and it came across as the latter...I wanted to say something along these lines (real economic issues vs. demagoguery), and point out how instrumental 'basic economics' was to my understanding of the interplay of politics and economics, and suggest picking it up. Time ran out, and I left for work. In a sense, yes, I'm saying I'm right and you're wrong (everyone thinks that about their opinions), but nowhere was I doing anything like you're accusing me of...I'm having a conversation, and trying to apply real numbers and causes to a situation. If you don't agree with the numbers ($3.something/day), or their affect on you (that it's not as bad as you think), then let's talk about that.But let's not turn this into you circumventing discussion by playing the martyr, and accusing me of saying things I wasn't.
zeroeffectMay 29, 2007
@onlyshawn"...any discussion of 'profits' is meaningless without a discussion of 'profit margins'. Several people have complained of 'high profits' for oil companies, while saying nothing about profit margins. If you'll look into the actual margins, you'll find that they're MUCH lower than you think. Exploring and drilling for oil is a very costly process, and takes enormous amounts of time, sometimes *years* before the first drop of gas is sold."Profit margins are irrelevant when it comes to essential items such as gasoline. When practically everyone in the world depends on it that margin becomes a guaranteed profit. It's not like oil and gas aren't going to sell. Oil companies aren't taking huge loses because they have stockpiles of raw materials waiting to be converted into final products (as is the case in the manufacturing sector). Now, if they can bottleneck the process when it comes to refining into gasoline, why not? Building new refineries is just going to hurt their bottom line.The profit margin rational is a joke, a typical big oil talking point.
aerogantMay 29, 2007
Here is a different perspective on the situation.Let's say I have the last Luke Skywalker action figure in the world and I put it on ebay. I'd make a huge amount of money from some billionaire Star Wars fan, if I had a company that sold rare action figures, people would say I was reaping ridiculous profits, and say how the parts the action figure is made of are extremely cheap. And then they would call on the government to regulate my business of selling rare action figures.This is supply and demand. There are a lot of demand for this rare action figure, but there is few (in this case 1) in supply. So how do you decide who should get it? By the ones willing to pay the most for it. When price goes up, demand for it (at the price) goes down, until the supply and demand are equal.That is the crux of it. While there may be plenty of 'cheap' oil it still has to be processed before it is sold as gasoline, and this is what the oil refineries are for. When they are unable to produce the gas to meet the demands for it, or when the demands for gas go up (it fluctuates through out the year), prices go up.There is a serious problem though, when their profits go up when the prices go up. That means they are selling lower then they should be (from a business stand point at least). What it means for us though, is that we are so dependent on gas that we end up having to pay higher prices then we would like because we have put our selves in a situation where we don't have much of a choice.
aerogantMay 29, 2007
Actually, there are 2 points (that I neglected in my previous post), there is where supply meets demand, and there is where the company makes the most profit at a time (where they could supply more but don't because there is enough people who are willing to pay a lot more money for less). The point where supply meets demand does have profit, it just may not be a point where they profit the most. What pushes the price more towards supply and demand is competition, lack of competition pushes it more towards profit.Ultimately what a company wants to do is to dominate it's competition and/or removing them from the market, which then gives the company control to increase profits. In order to do this they push their prices lower, either by funding research which cheapens the cost, or losing money by selling at an artificially low price that their competition can not meet, which means their competition either goes out of business, is bought up by them, or they negotiate on price fixing. Sometimes the negotiation on price fixing is not a direct communication between the companies, but what it means is they can raise their prices just as high or higher then their competition, raising their profits but not allowing their competition to get stronger. This why they lower their prices, it is not to be kind hearted generous or for charity, it is first and foremost to dominate the market. Conversely they don't raise prices because they are trying to be mean hearted.That ultimate goal is what drives companies to lower prices and to be innovative. Take away that goal and you eliminate the effort to do that. Currently government tries to eliminate that goal through regulation and through other means (by having a government monopoly on it instead of a private monopoly). There needs to be a way to keep that goal there, but to make it difficult to maintain. This phenomenon happens in nature all the time, and yet nature manages to be balanced. Government should try and follow that, rather then to become the monopolies that hurt us.
macintoshsauceMay 29, 2007
Time to buy an Electric Vehicle (EV). Oh wait... I forgot... The government and the auto industry killed the EV. :( Bloody bastards!
grtwhtMay 30, 2007
"So, that's an extra 1,200/year. $3.28/day. Is that REALLY killing your discretionary money? C'mon, man...."Let me guess, you are one of the $5 latte in the morning, go out to lunch every day and eat out most evenings....your discretionary spending is probably something akin to $50-$100/day and you simply can't grasp what I was trying to convey? (no need to reply, see below)I'll make this easy for you: You're right, I'm wrong. I'm obviously clueless and nothing but 'trailer trash', that's why I never worked hard enough to be successful like you and it's not even worth your time to reply.
onlyshawnMay 31, 2007
...i'm not really sure what we're discussing; somehow it's denigrated into a competition, and that's not what I meant to happen. The real issue at hand is whether or not these current gas prices are affected by supply and demand, or if they are simply products of 'corporate greed'. My point, consistently throughout this page, is that these are straight economic consequences, not examples of 'greedy big oil'. A secondary point of mine is, and you obviously don't agree with me, that the price of gas seems a lot scarier than it really is when you do the math. I'm not doubting that an increase in gas will hit lower income individuals more than higher income, but the problem with it is that everyone across the board responds as if it is going to absolutely murder them, when that simply isn't the case.I tried three times yesterday to edit my previous response...I didn't like how the "c'mon man..." sounded at the end; I was trying to be prodding, not sarcastic, and it came across as the latter...I wanted to say something along these lines (real economic issues vs. demagoguery), and point out how instrumental 'basic economics' was to my understanding of the interplay of politics and economics, and suggest picking it up. Time ran out, and I left for work. In a sense, yes, I'm saying I'm right and you're wrong (everyone thinks that about their opinions), but nowhere was I doing anything like you're accusing me of...I'm having a conversation, and trying to apply real numbers and causes to a situation. If you don't agree with the numbers ($3.something/day), or their affect on you (that it's not as bad as you think), then let's talk about that.But let's not turn this into you circumventing discussion by playing the martyr, and accusing me of saying things I wasn't.