Little6pack
Active Member
- Joined
- Jun 2, 2002
- Messages
- 11,676
Gas prices aren't rising because oil industry profits are up - it's the other way around. And there are a number of factors at work at the pump.
For starters, gasoline prices almost always rise as summer approaches (far from summer where I live) because demand goes up as people go on vacation and use more gas. Refiners anticipate this and starting about now, they begin building up stockpiles of gasoline. If they make enough, and can keep running at full capacity through the summer, gas prices may not rise too much from here.
But if demand gets too high and/or they can’t make enough gas, prices will go higher. Sometimes this is because a big refinery has to shut down for maintenance or fire. Last year, the string of hurricanes interrupted deliveries of crude oil to Gulf refineries, which hurt supplies.
Some parts of the country also see local spikes in prices because some states require “reformulated” gasoline in the summer months to meet clean air standards. So you can only sell a specific blend for a particular region. If supplies of that blend get low, the price goes up.
But the real villain at the pump is rising oil prices, which have roughly doubled in the past 18 months to recent highs of $55 a barrel. Oil companies didn’t set those prices (much as they’d love to be able to), the market did. Demand for oil is rising worldwide, and older oil fields are drying up. So prices are going up. And gasoline prices have risen even slower than crude oil so far this year, so they still have to “catch up” a bit.
The question we'd ask you is: why should an oil company -- or refiner, or gasoline dealer -- charge less than the market price? And, if they did, who should they give all those profits back to? Should the government set price caps on gasoline prices? If it did, why would oil companies continue to make gasoline? Without profit, what's their motivation?
Contrary to popular belief, oil companies don't always leave the table with huge winnings. When they made similar bets in the late 1990s -- and oil prices crashed to $10 -- they got clobbered. For a time, it was cheaper to find new oil on Wall Street -- by just buying up another oil company -- than it was to poke new holes in the ground. That's why so many oil companies these days have two names: ExxonMobil, ChevronTexaco, etc.
And that's also one reason oil supplies are tight today: not enough money has been invested in drilling new wells. We'd rather see oil companies making the cash they need to poke new holes in the ground. Unless they do, oil supplies will remain tight and prices will continue to move even higher.
And sure, oil company executives and investors are pocketing a nice chunk of change with their $50-oil-price windfall. But most of the money you're spending to fill up your gas tank is going to big oil producers like Saudi Arabia and Iran. The United States produces about 10 percent of the world's oil supplies (and falling). OPEC produces four times that much.
Wouldn't you rather have the money going to U.S. oil companies?
For starters, gasoline prices almost always rise as summer approaches (far from summer where I live) because demand goes up as people go on vacation and use more gas. Refiners anticipate this and starting about now, they begin building up stockpiles of gasoline. If they make enough, and can keep running at full capacity through the summer, gas prices may not rise too much from here.
But if demand gets too high and/or they can’t make enough gas, prices will go higher. Sometimes this is because a big refinery has to shut down for maintenance or fire. Last year, the string of hurricanes interrupted deliveries of crude oil to Gulf refineries, which hurt supplies.
Some parts of the country also see local spikes in prices because some states require “reformulated” gasoline in the summer months to meet clean air standards. So you can only sell a specific blend for a particular region. If supplies of that blend get low, the price goes up.
But the real villain at the pump is rising oil prices, which have roughly doubled in the past 18 months to recent highs of $55 a barrel. Oil companies didn’t set those prices (much as they’d love to be able to), the market did. Demand for oil is rising worldwide, and older oil fields are drying up. So prices are going up. And gasoline prices have risen even slower than crude oil so far this year, so they still have to “catch up” a bit.
The question we'd ask you is: why should an oil company -- or refiner, or gasoline dealer -- charge less than the market price? And, if they did, who should they give all those profits back to? Should the government set price caps on gasoline prices? If it did, why would oil companies continue to make gasoline? Without profit, what's their motivation?
Contrary to popular belief, oil companies don't always leave the table with huge winnings. When they made similar bets in the late 1990s -- and oil prices crashed to $10 -- they got clobbered. For a time, it was cheaper to find new oil on Wall Street -- by just buying up another oil company -- than it was to poke new holes in the ground. That's why so many oil companies these days have two names: ExxonMobil, ChevronTexaco, etc.
And that's also one reason oil supplies are tight today: not enough money has been invested in drilling new wells. We'd rather see oil companies making the cash they need to poke new holes in the ground. Unless they do, oil supplies will remain tight and prices will continue to move even higher.
And sure, oil company executives and investors are pocketing a nice chunk of change with their $50-oil-price windfall. But most of the money you're spending to fill up your gas tank is going to big oil producers like Saudi Arabia and Iran. The United States produces about 10 percent of the world's oil supplies (and falling). OPEC produces four times that much.
Wouldn't you rather have the money going to U.S. oil companies?
I say it's time to start charging them a little more for their boxes of fruit loops.
