The Gasoline Blues

[Tim McG]

Simple math tells you that, Aggie.

As to the cost of steel, prices do and have gone up, but to the tune of Billions of dollars in profits? Those businesses are closing and laying off people, Aggie. Their profits have greatly diminished. Just ask the people at GM or Ford what they have done to curb costs.

Does the oil industry do this? Hell no. They have a commodity which they know we need to have in order to keep our jobs and survive. They also know they can charge whatever price they want to and nobody can or will stop them. $5.00 bucks a gallon says I'm right on this one, Aggie.

You like charts? I have one for you:

Source: Energy Information Administration

Show me where this says the oil industry is hurting relative to the cost of doing business.

Your chart shows that prices for gasoline have gone up. Alert the press!

The demand for gasoline hasn't gone down enough to hurt the oil companies. They keep producing gas because the demand is there. So they don't have to lay off people like GM or Ford.

Aggie...they don't layoff people because they keep inflating the price of gasoline to pay them [hellooooo].

The demmand hasn't gone down but the cost of doing business has greatly increased. That should cut profit, not increase it.

$125 Billion dollars in profits, my friend. Free and clear, profits. That is, after their employees have been paid and all other expenses have been taken care of.

Nobody does business like this...especially failing or floundering businesses.

I think Exxon Mobil for 2007 had somewhere around a 9 or 10% margin. That is on over $400 billion in revenue.

Your argument that they're taking more profits is wrong, the percentage has stayed about the same.

If costs go up, the business has to pass those increases on to the consumer and that is what has happened here.

The oil industry has the luxury of passing on those costs because demand is not going to drop off anytime soon.

It's not just oil...

Checked the price of wheat lately? You think oil has gone up, wheat prices have more than trippled.

How about corn? Up 80% this last year.

Now I see where a turkey farm is doing layoffs because the price of corn has become too high.

What happened?

The turkey grower knows people are not going to pay $25 a lb. for turkey so he needs to reduce operating costs and maybe suspend production until the corn market adjusts.

The percentage has stayed the same but the price oil companies charge has increased 100% in retail cost to us since last year alone.

Farm products go up and down due to weather/drought or pest infestation or the cost of fetilizer....and the cost of putting deisel fuel in their farm equipment in order to do business. Corn, in specific, is also being used for the creating of alternative fuels, sugars as well as feed. Any dip in production due to the items I mentioned will cause the price to soar.

These guys can't charge enormous amounts of money to cover for that like the oil companies can for gasoline. They are forced to cutback, layoff or let the land go unused.

The difference is, we cannot do without oil....but I'm fairly certain we could do without the occasional turkey.

[Aggie87]

Well, I have to disagree , Jim.

As I have stated before, companies whose cost of doing business outstrips their ability to keep the same profit margin as before, cut costs by laying off employees, downsizing company operations, hike insurance premiums and, yes, pass some of that on to the consumer via price increases. In a worst case senario, they shut the business down completely.

But I cannot think of one instance where any companiy has turned enormous profits when the cost of doing business has doubled or tripled.

Oil companies are one instance right now. They're simply passing on their increased cost of raw material to you the consumer, while maintaining their same profit margin - not increasing it.

If GM or Ford or Microsoft or [insert company name] did this, they would be out of business insde of a year. Oil companies do this as a matter of course because they can.

GM or Ford can't do this because people would simply not buy new cars, but hang on to their old ones for alot longer. The demand would go down. The oil industry is different because the demand doesn't go down. They CAN pass along their increased cost (due to the increased cost of their raw material) of doing business to us and we pay it. They don't HAVE to lay off anyone or decrease their profit margin from 8.5% to 6% or something (note - a reduction from 8.5% to 6% profit on a 4.00 gallon of gas would only decrease the pump price by 10 cents, so you're still payin the exorbitant price as I mentioned earlier, regardless of profit margin).

As I asked before, at what point can we expect a given company to absorb the cost of doing business? The answer with Big Oil is obvious: They are going to milk this thing for all they can get...just like the speculators are. That is why a gallon of gas costs so much. How else do we explain the record profits at a time with the nonrefined product costs so much? That 8.5% argument is only a smoke screen for the real issue: The oil companies have a commodity they know we need and they will charge anything they want because of that.

That is greed, Jim. Pure and simple.

You're so far off base here it's silly. Take away ALL of their profit and you still pay $3.66 instead of $4.00. WITH NO PROFIT TO THE COMPANIES. Their profit is clearly not the biggest chunk of what you pay at the pump.

[Tim McG]

Well, I have to disagree , Jim.

As I have stated before, companies whose cost of doing business outstrips their ability to keep the same profit margin as before, cut costs by laying off employees, downsizing company operations, hike insurance premiums and, yes, pass some of that on to the consumer via price increases. In a worst case senario, they shut the business down completely.

But I cannot think of one instance where any companiy has turned enormous profits when the cost of doing business has doubled or tripled.

Oil companies are one instance right now. They're simply passing on their increased cost of raw material to you the consumer, while maintaining their same profit margin - not increasing it.

If GM or Ford or Microsoft or [insert company name] did this, they would be out of business insde of a year. Oil companies do this as a matter of course because they can.

GM or Ford can't do this because people would simply not buy new cars, but hang on to their old ones for alot longer. The demand would go down. The oil industry is different because the demand doesn't go down. They CAN pass along their increased cost (due to the increased cost of their raw material) of doing business to us and we pay it. They don't HAVE to lay off anyone or decrease their profit margin from 8.5% to 6% or something (note - a reduction from 8.5% to 6% profit on a 4.00 gallon of gas would only decrease the pump price by 10 cents, so you're still payin the exorbitant price as I mentioned earlier, regardless of profit margin).

As I asked before, at what point can we expect a given company to absorb the cost of doing business? The answer with Big Oil is obvious: They are going to milk this thing for all they can get...just like the speculators are. That is why a gallon of gas costs so much. How else do we explain the record profits at a time with the nonrefined product costs so much? That 8.5% argument is only a smoke screen for the real issue: The oil companies have a commodity they know we need and they will charge anything they want because of that.

That is greed, Jim. Pure and simple.

You're so far off base here it's silly. Take away ALL of their profit and you still pay $3.66 instead of $4.00. WITH NO PROFIT TO THE COMPANIES. Their profit is clearly not the biggest chunk of what you pay at the pump.

Aggie...these guys are protecting a profit margin and making untold billions of dollars in the process. Any legitimate company, one which cares about Americans and American business will temper that with the reality of finding other ways to curb costs without damaging the economy and the people's ability to live within their means. A company motivated by profit and profit only, does not reinvest those obscene profits back into the company thereby avoiding constant price increases. They simply do not care.

Again, these price increases are coming in advance of the crude oil not yet ready for consumption. Again, that means we are paying for that increase TWICE. Again, that contributes to the over all billions of dollars they are getting.

$4.00 bucks...where are you seeing that? It hasn't been that low since mid-spring in California. Currently, [edit] $4.73 a gallon. That would be more than a full dollar more that your $3.66 price.

Again, 8.5% per gallon is very little money. I don't know about you but my truck needs more than a gallon to get me through the week. That 10 cents adds up to one helluva lot of money saved over a year's time, Aggie. Bank on it. Additionally, that 10 cents creates one helluva lot of profit for the oil companies times $1.25 Trillion dollars worth of business in the space of only four months.

Again....it is not the profit margin, Aggie...it's the cost per gallon.

Edited July 2, 2008 by GoodSpeak

[Aggie87]

Again....it is not the profit margin, Aggie...it's the cost per gallon.

Which is controlled by the cost of a barrel of crude oil coming into this country moreso than anything else. NOT oil companies profit margins.

Your whole argument about profits has been irrelevant.

edit - cost per gallon of gas here was $3.94 this morning. Up from $3.89 the past few days. Your prices for EVERYTHING are higher in California.

edit 2 - that 10 cents per gallon doesn't add up to THAT much. If you fill up weekly with 15 gallons of gas, that's $1.50. Multiplied by 52 weeks, that's $78. PER YEAR. Bank on that.

Edited July 2, 2008 by Aggie87

[Jim Alfredson]

Ok, so 8.5% of $4.56 is $0.36. So if the oil companies suddenly decided they didn't want to make any profits at all and instead "help the American consumer", instead of paying $4.56 a gallon, you'd pay $4.20.

Whoopie.

Frankly, I'm over getting pissed off about it. Now we are being forced to make a change. Shit, if we had stuck with the fuel efficiency standards that Ford/Carter put into place back in the 1970s, we would've been off foreign oil by the late 80s.

There is no reason why cars shouldn't be getting at least 40mpg, if not 50, 60, or even 70. The technology has been here for a long time.

[catesta]

Goodspeak, you're not a professor of economics or business are you?

[connoisseur series500]

So these speculators are refining their own oil?

Without a place to sell the stuff they wouldn't make a dime. The two are irrevocably linked, my friend.

Speculators sell futures over the commodities exchange. There is no connection between the oil companies and individuals who go long on oil futures. They don't take physical delivery of the oil, but they help set the price of oil on the market. If there is a connection between the oil companies and the speculators, or if they are working together as you suggest, then it would be a violation of Federal laws. It would be called market manipulation. People have to be very careful about that.

Speculators aren't completely to blame for rising oil prices but they have definitely contributed to the quick runup of prices.

BTW, commodities are notoriously fickle, and oil companies went through their hard times too. I imagine they feel that their windfall profits help to offset the slow times, of which they experienced several before this spike up on oil. I'm not necessarily defending them but I don't see a point in singling them out for abuse. I hope they will be using some of these windfall profits to increase exploration.

[connoisseur series500]

Goodspeak, you're not a professor of economics or business are you?

Nobel prize winner, actually.

[Jazzmoose]

Let me know when we get back to the whining instead of the arguing, guys!

[connoisseur series500]

Let me know when we get back to the whining instead of the arguing, guys!

Agg's fault!

[Aggie87]

Let me know when we get back to the whining instead of the arguing, guys!

Agg's fault!

Sorry, back at it then!

[Free For All]

my truck

No wonder he'$ pi$$ed about ga$ price$!

[connoisseur series500]

my truck

No wonder he'$ pi$$ed about ga$ price$!

Plus, you still sail a boat, Goodie?

[Tim McG]

my truck

No wonder he'$ pi$$ed about ga$ price$!

Plus, you still sail a boat, Goodie?

Nope....never have.

That was a picture of me on somebody else's boat in the San Francisco Harbor.

[Tim McG]

BTW...I was wrong about the price of gas being $4.56 a gallon.

It's $4.73 a gallon.

My bad.

[catesta]

my truck

No wonder he'$ pi$$ed about ga$ price$!

Plus, you still sail a boat, Goodie?

It's not a sail boat.

[Tim McG]

Again....it is not the profit margin, Aggie...it's the cost per gallon.

Which is controlled by the cost of a barrel of crude oil coming into this country moreso than anything else. NOT oil companies profit margins.

Your whole argument about profits has been irrelevant.

edit - cost per gallon of gas here was $3.94 this morning. Up from $3.89 the past few days. Your prices for EVERYTHING are higher in California.

edit 2 - that 10 cents per gallon doesn't add up to THAT much. If you fill up weekly with 15 gallons of gas, that's $1.50. Multiplied by 52 weeks, that's $78. PER YEAR. Bank on that.

OK.

Prices are higher...and?

California is also the most populous state in the Union, too. That means huge profits for the oil companies.

And that $78 bucks buys me a tank and a 1/4 of gas. Now unless you figure that I'm the only one driving in California....that adds up to huge amounts of money saved for us Californians.

BTW....my wife drives a car and so does my son. Now we're talking about $230-250 dollars saved per year. That's pretty damn relevant to me, Aggie.

[Tim McG]

my truck

No wonder he'$ pi$$ed about ga$ price$!

Plus, you still sail a boat, Goodie?

It's not a sail boat.

Maybe he meant "sale" boat

[Tim McG]

Ok, so 8.5% of $4.56 is $0.36. So if the oil companies suddenly decided they didn't want to make any profits at all and instead "help the American consumer", instead of paying $4.56 a gallon, you'd pay $4.20.

Whoopie.

Frankly, I'm over getting pissed off about it. Now we are being forced to make a change. Shit, if we had stuck with the fuel efficiency standards that Ford/Carter put into place back in the 1970s, we would've been off foreign oil by the late 80s.

There is no reason why cars shouldn't be getting at least 40mpg, if not 50, 60, or even 70. The technology has been here for a long time.

Agreed.

But as to your pricing example, the point I have been making all along is that they do not need to charge as much per gallon AND if they took those huge profits and reinvested them into the business from time to time, they could reduce the cash outgo by using that money to balance out the increased cost of oil.

See what people aren't getting is this isn't a consumable in the sense a box of corn flakes is or a new pair of shoes. It is a commodity we cannot do without. That is a marked difference in necessity relative to doing what is in the best interest of the American people.

Pardon my love of country, but these guys made their billions off of us, with tax subsidies no less and with little regulation. They have a duty to help out their county in times of crises. Not to be the money grubbing profiteers that they are.

Edited July 2, 2008 by GoodSpeak

[Tim McG]

my truck

No wonder he'$ pi$$ed about ga$ price$!

It's a Toyota.

I get 25-27 MPG.

[Aggie87]

But as to your pricing example, the point I have been making all along is that they do not need to charge as much per gallon AND if they took those huge profits and reinvested them into the business from time to time, they could reduce the cash outgo by using that money to balance out the increased cost of oil.

That makes no sense. You don't think they already use some of their profit and reinvest it in their business? HELLO! That's going on already.

See what people aren't getting is this isn't a consumable in the sense a box of corn flakes is or a new pair of shoes. It is a commodity we cannot do without. That is a marked difference in necessity relative to doing what is in the best interest of the American people.

Everybody in this thread gets that - not sure who you're referring to. The difference is the demand for gasoline hasn't gone down as prices have gone up, as they would for corn flakes and nice shoes.

Pardon my love of country, but these guys made their billions off of us, with tax subsidies no less and with little regulation. They have a duty to help out their county in times of crises. Not to be the money grubbing profiteers that they are.

Can you show me where it says that in their business plan? Or a contract they signed with the U.S. government? Where it's their DUTY?

Even if they did everything within their power to "help out the country in times of crises" right now (by eliminating all profit from their business), your California gas price would only go down from $4.56 to $4.20. So the major problem of high gasoline price still exists, and now you've created companies that can't sustain their business or attract shareholders any longer, ultimately putting people out of jobs while still paying high prices at the pumps.

...

[Tim McG]

So these speculators are refining their own oil?

Without a place to sell the stuff they wouldn't make a dime. The two are irrevocably linked, my friend.

Speculators sell futures over the commodities exchange. There is no connection between the oil companies and individuals who go long on oil futures. They don't take physical delivery of the oil, but they help set the price of oil on the market. If there is a connection between the oil companies and the speculators, or if they are working together as you suggest, then it would be a violation of Federal laws. It would be called market manipulation. People have to be very careful about that.

Speculators aren't completely to blame for rising oil prices but they have definitely contributed to the quick runup of prices.

BTW, commodities are notoriously fickle, and oil companies went through their hard times too. I imagine they feel that their windfall profits help to offset the slow times, of which they experienced several before this spike up on oil. I'm not necessarily defending them but I don't see a point in singling them out for abuse. I hope they will be using some of these windfall profits to increase exploration.

TBH, I think you misunderstand.

I'm not saying they are working together or that speculators are on the oil company payroll [though I wouldn't be surprised...remember the insider trading scandal of a few years back and today's mortgage investment/loan scandal; it is possible].

What I am saying is they would not speculate on anything that wasn't needed, being bought or could be resold at unchecked prices. That is how they are undeniably linked.

Why speculate on something nobody has a use for later?

[Tim McG]

But as to your pricing example, the point I have been making all along is that they do not need to charge as much per gallon AND if they took those huge profits and reinvested them into the business from time to time, they could reduce the cash outgo by using that money to balance out the increased cost of oil.

That makes no sense. You don't think they already use some of their profit and reinvest it in their business? HELLO! That's going on already.

See what people aren't getting is this isn't a consumable in the sense a box of corn flakes is or a new pair of shoes. It is a commodity we cannot do without. That is a marked difference in necessity relative to doing what is in the best interest of the American people.

Everybody in this thread gets that - not sure who you're referring to. The difference is the demand for gasoline hasn't gone down as prices have gone up, as they would for corn flakes and nice shoes.

Pardon my love of country, but these guys made their billions off of us, with tax subsidies no less and with little regulation. They have a duty to help out their county in times of crises. Not to be the money grubbing profiteers that they are.

Can you show me where it says that in their business plan? Or a contract they signed with the U.S. government? Where it's their DUTY?

Even if they did everything within their power to "help out the country in times of crises" right now (by eliminating all profit from their business), your California gas price would only go down from $4.56 to $4.20. So the major problem of high gasoline price still exists, and now you've created companies that can't sustain their business or attract shareholders any longer, ultimately putting people out of jobs while still paying high prices at the pumps.

...

At $125 billion dollars in free and clear profit, they aren't investing very much now, are they.

Again, if your sole motvation is profit, your company is no better than a leach. A cancer on society. I would compare that to another time of myopia in the days after the 9/11 attacks; when stockholders rushed the market and it took a huge drop. It hurt our economy and in a time of crisis.

Selfish people we got, Aggie. Now how about giving back to the country which made it possible for them to make their billions, eh?

BTW...you apparently missed my edit: Gas is $4.73 a gallon so a 50 cent drop would be most welcome. You are correct in pointing that out, Aggie. Thank you!

Edited July 3, 2008 by GoodSpeak

[connoisseur series500]

I'm not saying they are working together or that speculators are on the oil company payroll [though I wouldn't be surprised...remember the insider trading scandal of a few years back and today's mortgage investment/loan scandal; it is possible].

What I am saying is they would not speculate on anything that wasn't needed, being bought or could be resold at unchecked prices. That is how they are undeniably linked.

Why speculate on something nobody has a use for later?

Speculators trade whatever is moving good. The more "action" in an investment, the more speculators get attracted to it. Speculators are therefore exaggerating the price on oil right now. I don't see what this has to do with the oil companies. Nobody likes overvolatile prices. I doubt the oil companies do either. It makes it harder to budget and come up with reasonable quarterly goals. Screws up planning, basically.

There is a role that speculators play, btw. They help create a more efficient pricing mechanism and provide market liquidity. Nevertheless, prices overshoot, and that's what has been happening.

[Chuck Nessa]

There is a role that speculators play, btw. They help create a more efficient pricing mechanism and provide market liquidity.

This is really the problem. A huge problem.