I feel that they shouldn't get subsidies. I also feel like they are an unfair scapegoat for gasoline prices.

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Originally posted by Sunsnail I feel that they shouldn't get subsidies. I also feel like they are an unfair scapegoat for gasoline prices.

+8

No need for subsidies and the prices are fine. After all the market is eating them up.

There's no point in complaining about the price of gas, just addapt to a life style that is less dependant on cheap oil.

People are not choosing to pay $3.50 a gallon for gasoline. They don't have a choice but to pay $3.50. Capitalism dictates a choice for the consumer between competitors who compete for market share. Do you see energy companies competing? HELL NO. I see cartel behavior going on, even so far as to illegally drive up prices. This is not capitalism my friend...

Here is just one example, and there are many...

quote:

More gas station owners allege price fixing Shell, Chevron, Saudi Refining accused of conspiring to boost pump costs updated 4:07 p.m. ET, Wed., Aug. 22, 2007 SAN FRANCISCO - Nearly two dozen gas station owners in California sued Shell Oil Co., Chevron Corp. and Saudi Refining Inc., on Tuesday, claiming the companies conspired to fix prices for 23,000 franchise owners nationwide. The case filed in U.S. District Court in San Francisco seeks class-action status for the plaintiffs. It is similar to another lawsuit filed in 2004 by other California gas station owners that was thrown out by the U.S. Supreme Court last year. The new group of plaintiffs hopes the court will consider a slightly different argument. Like the previous case, the plaintiffs in this case say chairmen of the three oil companies met privately nearly every month starting in March 1996 for the "purpose of forming and organizing a combination." The lawsuit alleges executives destroyed documents from the meetings, and a now-defunct joint venture violated U.S. antitrust laws and caused artificially high wholesale gas prices in nearly every state from 1999 to 2001. ... The lawsuit hinges on a marketing deal that, plaintiffs say, allowed former rivals to collude on prices starting in 1998, when Shell and Texaco Inc. formed Equilon Enterprises LLC to market gasoline in western states. They formed Motiva Enterprises LLC later that year for the eastern half of the country. Houston-based Saudi Refining also joined Motiva. Equilon and Motiva began operating when inflation-adjusted crude oil prices hit their lowest levels since the Great Depression, according to San Francisco-based lawyer Joseph M. Alioto, who represented plaintiffs in both the old and new cases. Yet gas prices soared for franchise owners, forcing them to pass on the cost to consumers or cut profit margins. "These executives get together and say, 'OK, we're going to raise Texaco's price to Shell's price, then we're going to raise both of them 50 to 75 percent, and we're going to do it after we've already had all these cost savings,'" Alioto said.

http://www.msnbc.msn.com/id/20388297/

Much of the price of gas is not a result of supply and demand. A good percentage of the oil price is something called the "risk premium". It ranges 20-30% by most analyst estimations. This is a result of increased levels of violence, terrorism, and war in the Middle East and other oil producing countries like Nigeria. Another factor in the oil price is something I call the "speculator's premium" which is the rise in oil prices due to speculative buyers by financial traders. This premium is in the range of 30-40%. Also take note, that the risk and speculative premiums partially overlap at times, such as a unrest in Nigeria convincing traders to buy more oil futures contracts, thus driving up oil prices. Also take note that none of this has anything to due with the supply or demand of oil commodities themselves or OPEC. It is all wicked psychology.

http://www.msnbc.msn.com/id/4962032/
http://www.latimes.com/news/opinion...inion-rightrail

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In my opinion, OPEC's current production quota is in line with the demand of the world. It is the risk and speculation premiums being set by the oil industry with speculative traders adding their own flair. There is little, if any, competition among major oil companies, but instead cartel behavior is the precedent. The oil prices are not based on supply or demand but instead on factors outside of production/demand. This unjustified pricing is robbery to the consumer who does not have a choice but to buy fuel at the prevailing price (currently $3.60). As I explained, most of the USA does not have an adequate public transit system, and so most of the country relies on private transit.

Also, there is a stigma in many regions, especially those who don't have New York City type public transit, that using the bus (the most common form of public transit) is for poor, dirty, or "undesirable" people. I myself have this stigma because frankly, a lot of the people I see on the bus, at least in Tampa or Louisville have been people who just weirded me out. Definitely a negative for many people. This stigma has to change. But it will not change as long as we continue to spend relatively little on improving our public transit systems. Europe being the most prominent example of a successful public transit system should be our example...

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I don't think you're right.

If they were operating more like a cartel they would drive the prices even higher.

Why not hit 5$/ gallon if you are Shell? Because Esso isn't going to do the same.

The problem is that there is no excess supply. Inventories are not being filled, as soon as the stuff is pumped it is consumed. In fact I'd suggest that the companies are keeping the price artificially low if anything.

They could easily raise the prices because of the inelastic demand curve that has shown it's head in the past 5 years. The reason they don't do that is because they need to be sure that the economy is not overly hurt while also makeing sure the insentive to find alternatives is held low for as long as possible.

The last thing an oil company wants to do is encourage research into alternate fuels until all the oil they own is gone.

Face the music - Exxxxxxon raped 41 billion smackers last year, breaking many records in the history of humankind. The funny thing is that if this year they get anything less than that, shareholders will be very disappointed, and the stock will go down as a result. 41 billion smackers is just not going to cut it for Exxon this year.

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Originally posted by Magnetonium Face the music - Exxxxxxon raped 41 billion smackers last year, breaking many records in the history of humankind. The funny thing is that if this year they get anything less than that, shareholders will be very disappointed, and the stock will go down as a result. 41 billion smackers is just not going to cut it for Exxon this year.

Well, they did make less this quarter than last year's fourth quarter.

quote:

Originally posted by atbell I don't think you're right. If they were operating more like a cartel they would drive the prices even higher. Why not hit 5$/ gallon if you are Shell? Because Esso isn't going to do the same. The problem is that there is no excess supply. Inventories are not being filled, as soon as the stuff is pumped it is consumed. In fact I'd suggest that the companies are keeping the price artificially low if anything. They could easily raise the prices because of the inelastic demand curve that has shown it's head in the past 5 years. The reason they don't do that is because they need to be sure that the economy is not overly hurt while also makeing sure the insentive to find alternatives is held low for as long as possible. The last thing an oil company wants to do is encourage research into alternate fuels until all the oil they own is gone.

+1

i've been trying to tell him that for about a week. as long as we continually buy the product they can increase the price. i don't know where the breaking point is, but i suspect with our current fuel efficiency the equilibruim is around 4.50.

Don't kill the messenger... these aren't my words (I won't say who's, because an instant bias will occur. But it's a perspective that's worth taking into account regarding this issue. Read on:

"Well, we were talking a lot about the oil price yesterday, as you know. And here's a little bit of a See, I Told You So, right off of the Associated Press wire: "Even as oil prices ascended to new highs of more than $124 a barrel this week, many oil and gas industry executives say they expect the price to fall significantly by year's end, a new survey shows. Fifty-five percent of 372 petroleum industry executives surveyed by KPMG LLP said they think the price of a barrel of crude will drop below $100 by the end of the year. Twenty-one percent of respondents predicted a barrel of oil will end the year between $101 and $110, while 15 percent forecast the year-end price to be between $111 and $120 a barrel."

At some point is going to come down; trust me on this. It has to, particularly if it goes a whole lot higher, it's going to have to come down. The market just will not support this. When I was talking about this yesterday, I got a bunch of e-mail notes because I asked the question, "Have you thought about at what price a gallon of gasoline will make you either swear off of it or choose another mode of transportation?" And I got e-mails from people, "You idiot! You don't understand. It's not like we can swear off gasoline. If movie ticket prices got to 50 bucks, yeah, screw it, I'm not going. But gasoline, I have to use it no matter what the price. I've gotta make adjustments elsewhere."

That's the point. When you start making adjustments elsewhere, when you stop going to the movies, when you stop taking your summer vacation, when you don't have money to go to Sea World or Disney -- and, by the way, have you seen the record crowds at the Disney theme parks both in Orlando, and out in Los Angeles? Record crowds out there, in this battered recession-era economy, which of course is not what this. But, nevertheless, it all works together. So if the gasoline price would hit ten bucks a gallon, and using that is an arbitrary number, yeah, you'd still have to use gasoline to get to work and so forth but you're not going to do all these other fluffy things, and that will have impact on all these fluffy businesses that you're not patronizing along with a whole lot of other people. This will bring market pressure. We're not going to sit here and let the tourist industry go broke and bankrupt and shut down. It's not going to happen. Time Is Tight, Booker T. & the MGs, 1968. But the price is going to come down. It simply has to. By the way, the price hit $126 today of a barrel of oil because of Hugo Chavez.

The speculation market, the commodities market is all in a tizzy because Hugo Chavez says that he's going to back the rebels in Colombia trying to overthrow our friendly government there, and this is causing the United States to say, "Fine, you do that and we'll put sanctions on you, Hugo," and Hugo is saying, "Fine, you put sanctions on me and I'll stop selling oil to you." And so the commodities market says, "Oh, no, that's going to interrupt supply to the US." It will not interrupt the supply to the US. What will happen is Hugo will sell his oil to whoever wants it. There will be buyers even if he freezes us out, and whoever buys the stuff will in turn sell it back to us. There will not be a shortage of oil if Hugo Chavez decides to freeze us out. It will go up because there will be a middleman price to pay, but we'll not do without oil. The profit motive alone will cause these middlemen that Hugo sells to, to turn around and sell it to us, we're going to need it and we'll have to pay through the nose for it, but there will be oil. In the meantime, "OPEC may consult on whether the group needs to boost oil output before a scheduled meeting in September should crude oil prices keep rising, an OPEC source said on Friday. 'If the price keeps going up, OPEC may consult on an increase in production before it meets in September,' the source said."

The expert here said that OPEC would have to raise the production by more than 500,000 barrels a day to have any impact on the price. Wrong. I mean, in a static supply and demand market, true, but you let the speculators get hold of the news that OPEC might increase production by half a million barrels and they're going to go nuts the other way. It's going to be happy days are here again, more oil on the market. The stuff is just academic, really, it's not that complicated, other than the role the speculators have in the market."

AND REGARDING THE "Windfall Profits" ASPECT (a la Obama):

The term "profited greatly” depends on which measure one uses for that determination. The industry did make $150 billion in profit, but that came from more than $1.7 trillion in sales. Their profit margin came to a whopping 8.3%, which underperformed the entire manufacturing sector as a whole. For investors in the oil industry, and 8.3% return on investment doesn’t exactly equate to screamingly fabulous growth, especially when looking at pharmaceuticals (18.4%) and beverage makers (19.1%).
Describing an 8.3% return as “windfall” demonstrates the economic illiteracy of the Democrats. Of course, so does the notion of combating high prices through an increase of the tax burden. Where does Obama believe that tax goes? It gets paid by hiking prices at the pump, as the relatively thin margins on sales will dissipate rapidly without a price increase to balance it. Otherwise, it will come out of the pockets of investors, which means people who own stock through 401Ks and mutual funds. That means millions of Americans will have to delay retirement, as lower growth will require more years and more contributions to earn enough money to stop working.

IBD reminds us that the Carter-era policy flopped the last time we tried it:
"Besides, we’ve tried windfall profits taxes before, in the early 1980s, and they were an utter failure. As the Congressional Research Service found, revenues produced for the government were nearly 75% below what was expected. Meanwhile, domestic oil output fell 8%, while oil imports surged 16%. ….
Oh sure, Big Oil’s profits are up. But so are the taxes they pay. In 2006, that came to $90 billion — up 334% in just four years.
This is how Clinton/Obama-style populism works. It starts with ignorance and ends with serious damage to our economy.
Oil prices aren’t high because profits are up; they’re high because we don’t have enough oil. By clamping down on drilling, refusing to move forward on nuclear energy and hitting producers with punitive taxes, Congress is doing all it can to ensure we don’t have enough in the future.
Once again, industries have three ways to lower prices: produce more, lower demand, or reduce cost overhead on production and sales. The Obama and Clinton plan essentially kneecaps oil companies by refusing to lift restrictions on drilling and then making it much more costly for them to buy and sell gasoline. It’s a prescription for even more reliance on foreign oil, skyrocketing prices, and economic instability.

Personally, I could care less if the oil and gas prices are going to up more and more to even such a mark as $5 per litre. It doesnt bother me at all. Why? Well, I think people will finally start caring about their environmental responsibilities, stop wasting energy, decrease amount of pollution and greenhouse gases released into the atmosphere by conserving more, and generally becoming more responsible because the money is pinching them.

I myself 80% of the time or more use a bike or public transit to get around when I need to go somewhere. And its not just because I am a student. I dont need the car that much, because I plan things well enough to avoid unnecessary waste of fuel and time and money.

The only thing that does bother me is that the oil cartels (companies) are making the big bucks, and putting them into their deep pockets, later to use that money for political purposes to sway control, push political and economic agenda and aspirations (just look at US of A). I think Canadian government should establish Gazprom-like affiliate and use that money for people's good. Because private corporations dont give a shit and two f*cks about you. They keep making more money and more profits and its never going to be enough for them. Its time that money went for uuseful and important things like education, natives, battling crime and poverty, health care, etc. etc. etc. - thats many billions of dollars.

About the Gazprom thing... I don't know man. Having 1 nationalized monopoly like that in the US? That just doesn't sound like a good idea. Look how that's working out in Venezuela. Our govt. doesn't do anything better than the private sector does without their meddling, and having them run what they aren't specialists in running would be a bigger burden on us I think. A good example is how a few years ago, before Turkmenistan's president died, he kicked out all the doctors of all the hospitals and had government officials take the reigns... my wife's brother lives there now and feeds us the info on how much worse it became after that.

Look at what Gazprom is doing over there... doubling and tripling the cost of energy to the dependant neighboring countries like Ukraine, for not other reason than because they can... it's not like Russia is hurting for supply. The less government regulation we have on private companies in America, the better.

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Originally posted by The17sss About the Gazprom thing... I don't know man. Having 1 nationalized monopoly like that in the US? That just doesn't sound like a good idea. Look how that's working out in Venezuela. Our govt. doesn't do anything better than the private sector does without their meddling, and having them run what they aren't specialists in running would be a bigger burden on us I think. A good example is how a few years ago, before Turkmenistan's president died, he kicked out all the doctors of all the hospitals and had government officials take the reigns... my wife's brother lives there now and feeds us the info on how much worse it became after that. Look at what Gazprom is doing over there... doubling and tripling the cost of energy to the dependant neighboring countries like Ukraine, for not other reason than because they can... it's not like Russia is hurting for supply. The less government regulation we have on private companies in America, the better.

Thats a great post. I see your point. Its true that Gazprom-like scenarios work VERY differently for individual countries. It might work like a charm for Russia, but not the same for other countries. In Russia, a substantial number of private/non-government companies steal the money (remember Berezovsky?) and fuel corruption. Not quite the same in USA ...