Yet another gas/oil thread

Discussion in 'Economics' started by jonbig04, Apr 29, 2008.

  1. If the spike in crude (consequently higher pas prices) is due some kind of supply issue...why are the oil companies raking in record profits?? I'm just saying....
  2. spersky


    Because their cost/ barrel to produce has not really gone up. What do you expect them to do just sell it at a discount on the world market? Why should they? Dont blame the oil companies for selling a product at a current market price. Blame the idiotic government for destoying the U.S. Dollar.
  3. ok but shouldnt they be paying more for the oil they get?
  4. spersky


    No they get it from the ground. Their costs is the same.
  5. hmmm

    Im not understanding this.

    if they get it from the ground and their costs are the same then why is it priced higher at the pump??
  6. Actually production costs are way up (exploration, drilling, transportation), but the price of energy has gone up faster than the increase in costs and consequently Exxon Mobil and other oil companies are able to generate record profits. Keep in mind that they do not set the price of their product--it is determined in the futures markets with speculators playing a key role.

  7. I see. So you're telling me some idiot on the NYMEX sees an explosion in the middle east, concludes oil will go up b.c of lack of supply and therefor invests in it which pushes up the price per barrel and that effects how much it costs us to fill up?
  8. They're not idiots, they're speculators who are trying to capitalize on market fluctuations...they want to be on whatever side of the market will make them money, it just so happens that for the past several years that direction has been up for energy. Most likely if anyone who traded oil heard about an explosion in the Middle East they would respond by going long just as a grain trader who heard about a bumper crop or a meat trader who heard about a record slaughter might go short--the path of least resistance.
  9. Have you ever had Econ 101?
    #10     Apr 30, 2008