Oil Companies Cutting Production to Keep Prices High

[ritehook]

As I'd said before here, the Big Five oil companies are a de facto monopoly, on the ground. (Distribution and retailing.)

Now, their refineries are cutting production to keep the price of gasoline high. You'd think they'd want to sell as much as they can. But if they produce to much prices will fall.

When you are a monopoly, you can get away with things like that. Hope next year President Obama can bullrush them.

[pavyracer]

Good for them. Maybe we realize now it's better to drive less and buy automobiles with better gas mileage.

[Bet Shooter]

It is very easy to see. Exxon posts record earnings every quarter, but always blames some other factor for the price of oil. If outside influence was the reason for oil rising with nothing to do with them, then why are their earnings increasing every quarter? They are not gouging us? Come on.

[ritehook]

This monopoly has shortcircuited price wars, like we used to see in the '60s and 70s.

As Judy Dugan of Consumer Watch has noted: "In a truly competitive market, you might see some of these providers try to improve their market share by reducing prices. But this is not happening. They are all better off by restricting production to keep prices up."

And from Mark Cooper of the Consumer Federation of America: "We let them accumulate market power through the wave of mergers, and we've been paying the price in the last five years. If there is a small number of players in the market they learn from each other's behavior."

[ritehook]

There is no question that the Big 5 are a de facto monopoly.
The antitrust laws are not invoked because the controlled control the alleged controllers. (IE, Big Oil has Congress securely in its pockets)

I think most of those who defend the Big 5 have oil stocks in their portfolio ----- self-interest. Understandable. I have a small stake thru a mutual fund.

But what good does it do us if the economy and country go down? Unless you're in the Buffet, Icahn, Pickens category, you'll suffer like everyone else when we descend to Second and eventually Third World status.

[ritehook]

Big Oil wants to drill offshore and into the Alaskan permafrost.

It may that we will have to do that, and also to build new refineries.

But if we do, if it's done in the name of the nation, the nation should have control, at least veto power.

Like, setting up a semi-private oil company - like the US Postal Service - that allows profits and pay execs well, but that will always keep on eye on natonal interests.

If drilling is to take place offshore or in Alaska, the oil gained from that must be sold ONLY to the U.S. - nothing for export.

If prices are to rise, a board of governors responsible to the core interestss of the nation must approve.

Right, it sounds silly in the milieu we are in today, where the "corporate state" rules all aspects of our lives. And has nothing to do, by the way, with antiquated ideas of "capitalism."

But necessity historically has been the "mother of invention."

And of intervention.

[JBC77]

Well I invite you to share annual production numbers year over year with us in terms of barrels per day. It's not the oil companies at fault and even if it was last time I checked capitalism is still legal in American. So now you want Big Brother sticking there nose in the private sector where it doesn't belong.

It's left wing wacko environmentalists who won't let us explore or drill a drop of oil domestically. That leaves us in the hands of the true monopoly....the A-Rab owned and operated OPEC. Ask you boy Hugo about that.

Heres another revelation for you: global warming is a hoax. Again spewed out by the wacky environmentalists with the help of the media. Now millions of TV watching sheep actually believe the planet is spiraling out of control.

I got news for you, just because Al Gore makes a movie, doesn't mean it's true....

[Deuce]

Your conspiracy theories are whore shit son.

[JBC77]

Hi....my name is Nancy Pelosi. "How dare you big bad oil companies make money, what do you think your in this for...profit? How dare you!"

Hi....my name is Nancy Pelosi. "I have another brilliant idea. Lets sue OPEC for not raising production. Yeah, that will teach em'!!!"

You have to love the brilliance and rationale with which the liberal democratic mind operates....it's like that of an infant.

[capitalist pig]

Drilling in Alaska and off the Florida coast arent going to lower oil prices, if you started today with all the permits and plans in hand it would still be 4-5 years before one barrel of oil made it to a refinery.Forget the fact that it takes 7 years to build another refinery, which big oil isnt interested in doing, you really cant blame them. Big oil knows that gasoline is a product of the past, and they arent going to sink $ into refineries that wont be needed in 20 years.

High oil is going to be a fact of life till an alternative fuel is readily available, its time to accept this fact and move on with life.Ive been invested in Exxon going on 25 years now, but im not buying new shares and havent in about 7-8 years. Now is the time to invest in the next wave of power sources, not complain about high oil prices. Because if you dont invest now, then you will be right where you are now, when the next wave of alternative energy stocks make the big $, JMO.

later

[JBC77]

Deuce....with all due respect, an individual with your capacity and mental skills could not begin to understand the forces that drive commodities markets if they walked up and smacked you in the face. There is a reason why you make 30k a year and work in a cubicle with no windows.....son.

[ritehook]

Again, refineries are cutting production.

It makes sense to them. Why increase production when you can make just as much by lowering volume and the costs associated with it?

If you, jbc, equate the Big Five with the popular view of "capitalism," free enterprise open to all with no or minimum regulation, then you also must believe that NFL operates like Pop Warner.

A century ago Teddy Roosevelt, a huge booster of free enterprise, pushed through the AntiTrust Laws, to break up that enemy of free enterpise known as "trusts," or monopoly.

As far as Big Oil is concered, all in vain.

[ritehook]

Hi....my name is Nancy Pelosi. "How dare you big bad oil companies make money, what do you think your in this for...profit? How dare you!"

Hi....my name is Nancy Pelosi. "I have another brilliant idea. Lets sue OPEC for not raising production. Yeah, that will teach em'!!!"

You have to love the brilliance and rationale with which the liberal democratic mind operates....it's like that of an infant.

Agreed. Leading Democrats are just posturing. Like hauling the oil execs before Congress for a public scolding, to make the citizens of the moronocracy feel good.

So the Dem Party is also controlled by Big Oil. What else is new?

[ritehook]

Drilling in Alaska and off the Florida coast arent going to lower oil prices, if you started today with all the permits and plans in hand it would still be 4-5 years before one barrel of oil made it to a refinery.Forget the fact that it takes 7 years to build another refinery, which big oil isnt interested in doing, you really cant blame them. Big oil knows that gasoline is a product of the past, and they arent going to sink $ into refineries that wont be needed in 20 years.

High oil is going to be a fact of life till an alternative fuel is readily available, its time to accept this fact and move on with life.Ive been invested in Exxon going on 25 years now, but im not buying new shares and havent in about 7-8 years. Now is the time to invest in the next wave of power sources, not complain about high oil prices. Because if you dont invest now, then you will be right where you are now, when the next wave of alternative energy stocks make the big $, JMO.

later

I think what you're leaving out is that Big Oil regardless is not going to be left out in the cold when new power sources emerge.

Look how some of their service stations are now "refueling" the hybrids.

Regardless of what kind of alternative energy emerges, Big Oil, with their political hooks deep into the tender and greedy flesh of Washington, will not be out in the cold. Now may not be the time to buy oil stocks - tho the futures speculators keep on keeping on - but it's not a time to sell either.

[ritehook]

Some - like the pathetic freak currently sitting in the Oval Office - can criticize Chavez, but his citizens pay only about thirty sense a gallon.

He puts the interests of his nation uppermost. Be his policies right or wrong, he is not acting in a "private" manner, unlike the bozos we keep elevating to the office of chief exec.

In fact, Chavez also subsidizes a lot of poor folk in America, who can't afford to pay ripoff prices for winter heating oil.
Only backward "thinkers" still evoke that old bullsh1t about "socialism."

Propaganda? Sure. Too bad the screw ups in DC don't have the same kind of propaganda show.

[capitalist pig]

I think what you're leaving out is that Big Oil regardless is not going to be left out in the cold when new power sources emerge.

Look how some of their service stations are now "refueling" the hybrids.

Regardless of what kind of alternative energy emerges, Big Oil, with their political hooks deep into the tender and greedy flesh of Washington, will not be out in the cold. Now may not be the time to buy oil stocks - tho the futures speculators keep on keeping on - but it's not a time to sell either.

Very true big oil is working hard to be on the front line of alternative fuels, but there are others out there that are leading as far as alternative fuels go.Take a look at CPST as an example, very speculative, but Ive gotten a triple on it so far.

Ive been selling XOM shares for the last several years now, but you have to consider I bought my 1st 1000 shares for $8 a share 25 years ago, and with splits and dividends my cost basis is a couple bucks a share. Personally I think oil stocks are over priced, but thats just my opinion.

later

[ritehook]

Last time I posted something on this topic, coupla months ago, someone (jbc I think, wow, he must be heavily invested in Big 5. Which one, j, Exxon/Mobil?) said that big oil was "vertically integrated" and not illegal.

Big Oil is indeed vertically integrated. And that in itself is not illegal. But collusion, whether outright or by a "gentleman's agreement" is illegal.

Big Steel in it's heyday, the Carnegie operation a hundred years ago, was vertically integrated. Owned the mines, the refineries, even some of the railroads used to transport the steel.

But Canegie, while powerful, did not have a monopoly. Businensses could still buy steel from other vendors.

Nowadays, Apple is more or less vertically integrated. They buy up suppliers who make componentss they need.

But I still have a lot of choices other than a Mac when I want a computer. Even if I want to escape from Gates, I see one company (Asus) is integrating some open source software into their product.

VI does not sanctify monopoly. There are laws agaisnst what the Big Five are doing. The laws are not enforced because the elected reps in the moronocracy are whores.

[ritehook]

For those who believe that Big Oil is "free enterprise." (Which some still erroneously equate with Capitalism.)

Well, if you have a hundred grand and he knowledge and dedication to run a donut shop, you can open up in your home town and be successful. Even going up against Dunkin and others.

But if you have intimate knowledge of the oil business and a hundred million bucks, or even a few billion, try to start up an oil company.

As the online acronym goes: LMFAO

[TexansFan]

Those of us who play the market and understand economics and business finances know what the numbers mean. Actually, you can go to any decent financial website and learn the basics through their tutorials and articles, but regardless… One of the important numbers we look at is profit margin. This is different from profit, which is what the democrats and their angry supporters are using as their ammo against these companies. According to Investopedia.com, profit margin is defined as:
“A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings… Profit margin is displayed as a percentage; a 20% profit margin, for example, means the company has a net income of $0.20 for each dollar of sales.”
So let’s look at some oil company profit margins:

• Exxon Mobile: 11.65%
• Chevron: 9.49%
• BP: 8.09%
• Total SA: 8.87%

So let’s see here. For BP, one of the “worst offenders” according to the democrats, actually makes 8.09 cents on every dollar they make. Exxon, the highest on the list, makes only 11.65 cents on the dollar. So where’s the great evil conspiracy for the oil companies to make money off the consumer? Maybe if expenses stayed the same and the companies started to make a 50% profit margin, we could start asking questions. But that’s not the case, is it? In fact, the only reason the oil companies make billions in profit is because they make billions in sales. They make their money on volume, not on high profit margins. So why do the dems keep claiming that the companies are making too much in profit? Why don’t the go after some of the companies that DO make a great deal of money off of profits? Look at a couple of companies that are very representative of industries with high profit margins:

• Diana Shipping (dry bulk): 54.28%
• US Bank (banking): 36.26%

So, by the rules set forth by the democrats, they should be going after shipping and banking companies for price gouging and making too much profit… But they don’t. It’s not as if high shipping prices or banking issues don’t affect prices for goods. Instead they chose to go after the oil companies because it makes them feel good and PC to do it since oil companies are supposedly evil corporations that are destroying the planet and gouging the consumers.
So, with all of this being said… Let me just finish with this. One of these days I want to hear a great big “pop” as people pull their heads from their asses and start paying a little bit more attention to all of the facts instead of running with these knee-jerk reactions to issues that aren’t really issues at all. If we can’t be smarter than the politicians who are trying to steer this country into the ground, then who will be? I may not like spending $3/gallon at the pump, but going after the oil companies or local gas stations when gas prices rise is pure ignorance at its worst!



Most people who complain about oil companies making too much money really don't know what in the hell there talking about. Ever look at the profit that a company like Microsoft makes? How about pharmaceutical companies? The bottom line is the Democrats are using high gas prices to get elected.

[pavyracer]

If oil companies close business tomorrow, their corporate executives will have to go on welfare. How can you live with a 400 million dollar bonus on retirement these days

You need at least a billion dollars to make it to medicare.

[TexansFan]

If oil companies close business tomorrow, their corporate executives will have to go on welfare. How can you live with a 400 million dollar bonus on retirement these days

You need at least a billion dollars to make it to medicare.

What? Are you trying to say that only oil execs make too much money? You really need to do more research on the subject.

[mathdotcom]

I see none of you have ever studied the economics of monopoly/oligopoly/collusion.

Please answer this question:
1) If they are colluding by restricting output to keep prices high, why didn't they start doing this in the 90s?

[pavyracer]

I see none of you have ever studied the economics of monopoly/oligopoly/collusion.

Please answer this question:
1) If they are colluding by restricting output to keep prices high, why didn't they start doing this in the 90s?

Demand in emerging markets is what drives the price up. In the 90's there was no middle class in China and India. Because of their thriving economies now (they do not spend their hard earned money on weapons, military, and world domination like we do) this middle class is buying automobiles that increase demand worldwide. In the 90's the Chinese and Indians did not drive cars and now their middle classes is more than the entire population of the US.

[mathdotcom]

Exactly, pavy.

Looking at profits is not a measure of whether or not a company is stiffing you. Their costs of production have remained the same, they are not able to extract significantly more oil, so the price is going up and up and they're making more $$$

[lys3rg0]

[pico]

There is no question that the Big 5 are a de facto monopoly.The antitrust laws are not invoked because the controlled control the alleged controllers. (IE, Big Oil has Congress securely in its pockets)

I think most of those who defend the Big 5 have oil stocks in their portfolio ----- self-interest. Understandable. I have a small stake thru a mutual fund.

But what good does it do us if the economy and country go down? Unless you're in the Buffet, Icahn, Pickens category, you'll suffer like everyone else when we descend to Second and eventually Third World status.

oligopoly or cartel is the correct term.

[ritehook]

oligopoly or cartel is the correct term.

Correct.

Which is why I wrote "de facto monopoly," not de jure.

[ritehook]

Before dropping this thread into deep space and getting back to this forum's primary purpose of being an group email for younger members, let me dispose of a few of the comebacks.

texasfan: Percentage of profit has nothing to do with it.

ABC Company nets an aftertax profit of 50%.

XYZ Companny nets one of 1%.

Wow, ABC is the way to go. Right?

Wrong. ABC has sales of only a million a year. XYZ has sales of billions and billions of year.

Gimme the 1% of XYZ. And screw those smalltimers at ABC.

Hard to figure what kind of point you were trying to make! Other than that you took Advanced Economic Theory 101 at Univ of Texas.

mathdotcom: Big Oil has been actively colluding for at least a generation.

And excuse like "rising demand" gives them some credible leverage to escalate prices. The reality of a fractured international dollar provides some reality. Some, not all . . .

Now, let me ask you a question, or two or three: (1)Why is that anyone who drives a lot, esp in early morning, has more than once seen one of the Big 5 tankers filling the tanks at the service stations of a putative "competitor?" All the time, bro, all the time.

(2)Why do we no longer see any "gas wars," that were prevalent in the US until the mid-70s, early 80s?

If you're too young to recall these, it's where you'll drive through a town or section of a city, and the stations will have signs out, advertising how cheap their gas was. It was two, three, and sometimes a dozen stations practicing true free enterprise, with the intent of driving a few out of business.

And the consumer benefitted. The Seven Sisters put an end to that 25 years ago. It was too competitive - can't have any of that old-fashinoned free enterprise screwing up the profits.

(3) Why has Exxon-Mobil and the other Big 5 posted record profits in the last year or so?A

Not just record profits for oil companies. Record profits for any US companies anywhere, anytime, inflation-adjusted, in the entire corporate history of this country?

I appreciate the fact that those who invested in oil years ago want to justify this harsh "cartel," - yes, congrats on your foresight and wisdom.

But just enjoy your profits; you demean yourselves with the Orwellian lapdance you do to justify it!