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(ABC)   U.S. Energy Secretary sees "no evidence" of gas company profiteering at pumps. So let us speak no more of this   (abcnews.go.com) divider line 209
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7294 clicks; posted to Main » on 30 Apr 2006 at 5:16 PM (8 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2006-04-30 05:51:44 PM
Profiteering: To make excessive profits on goods in short supply.

Oil isn't in short supply, so no, they're not profiteering. Jacking up prices to see how much people will pay is something entirely different.
 
2006-04-30 05:53:17 PM
Major Thomb

Maybe if you're making soylent green out of them. Otherwise they're not raw materials.


Thus why I specified production costs.

Raw materials + labor = Production Costs. If high raw material price results in more profit, why wouldn't higher labor prices?
 
2006-04-30 05:53:53 PM
SpectroBoy

And oil companies don't set the price of a barrell of crude. The international market does.

I think you were being facetious there, but let me add that domestic producers are still producing oil at $24/barrel or so. In other words, their margins are huge due to factors completely out of their control.

Even dead soldiers will not persuade Americans that their addiction to oil sucks, but $5/gallon gas will.

Bring it on!
 
2006-04-30 05:54:01 PM
Hotpenguin,
You cant compare gasoline to Bud Light. I do not need to fill up on beer before work in the a.m.
 
2006-04-30 05:54:22 PM
let me be the nth to say "Well no shiat".
That's politics, and if you haven't figured it out by now you probably never will. So keep on watchin Fox News people!
 
2006-04-30 05:54:42 PM
Methinks I've found the technicality that makes this true. Gas company has already sold fuel to distrubitors, who, in turn sold to the retailer. Thus, there is no connection between gas company and pumps.

/Mr. Dick, I'm available for additional spin sessions at a nominal fee.
 
2006-04-30 05:55:19 PM
Dr.Zoidberg: let me be the nth to say "Well no shiat".
That's politics, and if you haven't figured it out by now you probably never will. So keep on watchin Fox News people!



Umm posted in wrong thread... nothing to see here, move along.
 
2006-04-30 05:55:43 PM
And I can't spell 'distrubitors'
 
2006-04-30 05:56:23 PM
The way I see it, we have two options.

#1. Lower the price of gas, thereby enabling us to use the extra money to boost commerce. As it stands now, if prices continue to rise, people will have less disposable income, and a recession would be fairly inevitable, I would think. This option is not very likely. (Granted, I'm not an economist, this is just my best educated guess)

#2. Raise incomes to compensate for rising oil prices. This option is not very likely.

So, yeah, we're pretty much screwed I would think. I look back and laugh at those people who protested the Iraq war with their "No blood for oil" signs. Obviously, if we had gone into this over oil, the price of gasoline wouldn't have risen as it has.

When we invade Iran, the price of nuclear power is going through the roof...
 
2006-04-30 05:58:00 PM
Kuoxasar:
I seem to recall a Fark article or news item somewhere about Bodman being in the pocket of the oil interest... was that true?

You are correct sir.

Sam Bodman was virtually unknown to energy industry insiders and to Washington energy policy specialists prior to his nomination. So why did he get the nod?

Sam Bodman was recommended for the position by outgoing Commerce Secretary Donald Evans. Evans, of course, is a Texas oil man and one of George Bush's closest friends.
 
2006-04-30 05:58:25 PM
The Bush administration sees no direct evidence of profiteering by big U.S. oil companies and is doing all it can to tame near-record prices, U.S. Energy Secretary Sam Bodman said on Sunday.

WHEW! Well I am glad to hear that. Does this mean that I can ignore the sound of "WHO'S YOUR DADDY??? WHO'S YOUR DADDY???" that comes out of the gas pump everytime I fill up?
 
2006-04-30 05:59:22 PM
Telos

So... economics question: Is it common for a companies profits to go UP when the price of it's raw materials goes up?

If so, then why are companies always trying to find cheaper labor? If higher production costs (raw materials or labor) mean higher profits, as per the oil industry, then shouldn't companies want the most expensive workers they can find?

I'm confused... something just doesn't seem to add up in there...


Given that demand for fuel is relatively inelastic, profits could move whatever way fuel companies feel like, almost wholly dependent on how they approach game-theory. In this case, it seems like, while not necessarily collusive, there is no attempt to undercut the competition, instead everyone just kind of feels out about how much consumers are willing to shell out at any given point in time. Someone here in NYC tried 4 bucks a gallon a couple weeks ago, didn't work, so it stayed 3.50ish for now. In the short-run though, it's almost creepy in a keynesian sort of way, the demand really is nearly perfectly inelastic... if all the gas stations charged 10 bucks a gallon tommorow morning, nearly everyone would pay it, simply because they lack the ability to make immediate shifts in which energy infrastructure they are dependent on. I guess the biggest thing to remember here is that because of the high cost of entry and multiple mergers in the last decade, oil today is more of an oligopoly than a competitive market, thus allowing for the current scenario to unfold as it does.

Oil companies don't work in the same kind of economic realm you are thinking of. They aren't usually seeking particularly cheap labor, in fact, most roughnecks get paid fairly well in a month on, month-off basis. They do seem to be playing that "most expensive worker" game at the executive level though, Jabba-the-Raymond's retirement compensation package is something on the order of half a billion dollars. Aside from that, it's not always about increasing costs, for many companies, if you can get cheap labor, not insure them, and f*ck over the workers, that means you can pay more in dividends to people who don't believe in ethical investing, or businesses with good worker relations being more profitable in the long-run. As for me, I think the least we could do is stop subsidizing the oil companies with our tax money. I don't see any particular reason for companies posting billions of dollars in profits to get hundreds of millions of dollars back from the people they are already gouging.
 
2006-04-30 05:59:34 PM
Shostie: Obviously, if we had gone into this over oil, the price of gasoline wouldn't have risen as it has.

---

It would if you went in for oil, but farked it up really bad.
 
2006-04-30 06:01:17 PM
Telos: Thus why I specified production costs.

Raw materials + labor = Production Costs. If high raw material price results in more profit, why wouldn't higher labor prices?


You can't combine those two. A higher value product reduces the precentage cost of overhead. Labor, in this case, is overhead and not part of the product. If you were talking about a service business, then you could include labor as a raw material.
 
2006-04-30 06:04:13 PM
Has anyone looked into making a coal fired internal compustion engine?

I'll leave it to the engineering students to determine how the coal would be ground into dust as fine as talcum powder and delivered to the cylinders and ignited.

And if the coal should be powdered before fueling or ground by the engine.
 
2006-04-30 06:05:10 PM
Shostie: Obviously, if we had gone into this over oil, the price of gasoline wouldn't have risen as it has.

I get the feeling there's no hope until we fix the educational system.
 
2006-04-30 06:05:14 PM
whitegirlfour20 :
You cant compare gasoline to Bud Light. I do not need to fill up on beer before work in the a.m.


Speak for yourself.
 
2006-04-30 06:05:25 PM

I suspect profits go up in the short term as prices decrease. When futures prices skyrocket, pump prices follow suit within hours. So the cost basis appears to be "cost of replacing inventory." However, when wholesale prices plummet, it takes days to weeks to see even the slightest dent at the pump, and more weeks for the full decrease to work its way through. If futures prices spike back up, forget about getting the full benefit of then recent wholesale price drops.


Typically, pump prices are 60-70 cents higher than the futures (post-refining) market. Subtract 40 cents for taxes, that leaves 20-30 cents for distribution/retail.


Futures prices have dropped from 2.20 to 2.07 in the last two weeks. With pump prices still at 2.90 to 3.09, they're now getting 43-62 cents for distribution/retail. So either distribution, retail, or both, are now raking it in.

 
2006-04-30 06:06:51 PM
Shostie

The way I see it, we have two options.

#1. Lower the price of gas, thereby enabling us to use the extra money to boost commerce. As it stands now, if prices continue to rise, people will have less disposable income, and a recession would be fairly inevitable, I would think. This option is not very likely. (Granted, I'm not an economist, this is just my best educated guess)

#2. Raise incomes to compensate for rising oil prices. This option is not very likely.

So, yeah, we're pretty much screwed I would think. I look back and laugh at those people who protested the Iraq war with their "No blood for oil" signs. Obviously, if we had gone into this over oil, the price of gasoline wouldn't have risen as it has.

When we invade Iran, the price of nuclear power is going through the roof...


We can't lower the price of oil, this isn't Venezuela, we don't have price caps on anything that I can think of. (We had a price cap for a time on milk, but that's pretty much the only thing in my lifetime).

#2 will happen anyways because of natural inflationary adjustment. The only problem with that is that the lower-class and destitute tend to lag behind in inflationary adjustment percentage-wise... especially those on minimum wage.

While I don't believe that we went to war for oil, the idea that this administration would have been competent in its execution of the war had it been for oil is simply baffling. They are trying to fight a war on the cheap, not realizing that just like buying a cheap used car, you end up paying more and more until you finally give up on it.

We aren't going to invade Iran, and even if we did, electricity prices would likely only continue going up at the same rate they are... I would expect more of a jump in oil prices, and oil produced electricity than in nuclear produced electricity prices as the infrastructure maintenence costs, labor costs, and materials costs would remain largely unaffected.
 
2006-04-30 06:09:12 PM
it will be corrected in 2025. once we have the proper enzymes.
 
2006-04-30 06:09:43 PM
Whitegirlfour20,

Can't? I just did? Why not? I'll do it again.

Plenty of people in the world, even in the US, manage withoug driving to work every day. Now just because where you chose to live, requires you to drive to where you chose to work doesn't give you some constitutional right to cheap gas.

I'm a commuter too, and yes the increase is a pain. I just think people are funny in that they'll pay ridculus prices for some things, but start hollering and wailing when something they need gets expensive. I don't see any less cars on the road in the morning, and Chevy and Ford are still selling trucks and SUVs so things can't be that bad, right?
 
2006-04-30 06:15:15 PM
the american government is just full of liars, liars, and more liars.

i'm just hoping onto a tiny bit of hope that everything changes for the better in '08!
 
2006-04-30 06:17:10 PM
whitegirlfour20: You cant compare gasoline to Bud Light. I do not need to fill up on beer before work in the a.m.

Edward I Longshanks: Speak for yourself.

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!

Alba gu brath!!!!!!
 
2006-04-30 06:17:11 PM
etobian

I suspect profits go up in the short term as prices decrease. When futures prices skyrocket, pump prices follow suit within hours. So the cost basis appears to be "cost of replacing inventory." However, when wholesale prices plummet, it takes days to weeks to see even the slightest dent at the pump, and more weeks for the full decrease to work its way through. If futures prices spike back up, forget about getting the full benefit of then recent wholesale price drops.


Typically, pump prices are 60-70 cents higher than the futures (post-refining) market. Subtract 40 cents for taxes, that leaves 20-30 cents for distribution/retail.


Futures prices have dropped from 2.20 to 2.07 in the last two weeks. With pump prices still at 2.90 to 3.09, they're now getting 43-62 cents for distribution/retail. So either distribution, retail, or both, are now raking it in.


Given the relative inelasticity of demand for fuel, your first statement is simply wrong. Most people will buy the same amount of fuel regardless of the price, lowering the price would simply lower the profit.

It usually takes a day or two in most states after futures prices skyrocket before pump prices go up. Many states regulate the difference that retailers can charge w/ respect to what they pay their refiner or shipper for it.

When futures prices fall, refineries and shippers do not tend to lower their prices for 4-6 weeks. It's a kind of crappy (for the consumers) form of hedging, since the overall trend will always be upwards, but for a refiner or shipper. Most end retailers of gasoline make between one and two cents per gallon of gasoline, the income comes in large part from soft-drinks and cigarettes, especially at retailers with cups of soda and not just cans. Recently in GA, a gas retailer was sued for selling his gas below the cost he paid for it... he was trying to draw people in to make more money on the retailing of other goods, but other area retailers revolted (I believe it was a JP or a Petro). Anyhoos, this gas crunch has run a decent number of gas retailers out of business, they used to be making 5-7 cents per gallon, but almost nobody can afford to have that kind of margin any more, which is why if you live in any city of reasonable size, you've probably seen at least a couple gas stations go out of business, despite the amount of money you fork over there.
 
2006-04-30 06:17:19 PM
Got some bad news for you Farkers.

Just had it on CNN...they said it would take AT LEAST three years for the prices to start coming down.

Guess we'd better tighten our belts, huh?
 
2006-04-30 06:20:10 PM
jayessell: Has anyone looked into making a coal fired internal compustion engine?

I'll leave it to the engineering students to determine how the coal would be ground into dust as fine as talcum powder and delivered to the cylinders and ignited.

And if the coal should be powdered before fueling or ground by the engine.


That would be an interesting project but I'm pretty sure it would be really dirty. You'll never get the surface area you can get from a liquid, and you'd need a longer burn to consume it all.
 
2006-04-30 06:21:33 PM
Guess people in Windsor, Sarnia, Niagara Falls, or any other Canadian city close to the US border won't find it worth it to come over here for gas anymore....
 
2006-04-30 06:24:26 PM
Face the facts guys, EVERYONE is making money on this except us.
 
2006-04-30 06:25:11 PM
firefly212: Given the relative inelasticity of demand for fuel, your first statement is simply wrong. Most people will buy the same amount of fuel regardless of the price, lowering the price would simply lower the profit.

We found after Katrina and mid $3 prices that isn't necessarily true. People can reduce their consumption significantly with a financial motivation. I do wonder if it has some side effects with people staying home rather than heading out to spend money on nights and weekends.
 
2006-04-30 06:26:16 PM
While I don't believe that we went to war for oil,

Sorry.

I got friends who helped design the pipeline we put in Afghanastan, the one the Taliban were hosted here by Bush, objecting to because they wouldn't see anything in revenue, entertaining a design that China had on the board; Bechtel wouldn't care, they'll build anything for anyone.

So you made me laugh.
 
2006-04-30 06:26:49 PM
your mother: Face the facts guys, EVERYONE is making money on this except us.


I'm making money on this and so is anyone else that has a 401K or other investment accounts. Those fund managers aren't ignoring the energy sector.
 
2006-04-30 06:29:07 PM
I'm making money on this and so is anyone else that has a 401K or other investment accounts.

So you just recently broke even? I mean compared to if you would've just withdrawn eveything after Bush's election, taken the tax hit, and stuck it in a money market.
 
2006-04-30 06:29:36 PM
another reason i love my bike
(even with freezing ass boston winter to peddle around in)
 
2006-04-30 06:40:11 PM
Major Thomb

We found after Katrina and mid $3 prices that isn't necessarily true. People can reduce their consumption significantly with a financial motivation. I do wonder if it has some side effects with people staying home rather than heading out to spend money on nights and weekends.


Reducing usage for a couple days (real impact studies I've seen indicate 3-4 days) doesn't indicate a shift in lifestyle, and given the small surge following, likely was more inidicative of short-run deferrment than actual reduction in consumption.
 
2006-04-30 06:43:23 PM
skylabdown wrote
There are no other forces or influences in play here.. like, I dunno.. SUPPLY AND DEMAND?


You keep saying that gas prices are puely the result of supply and demand, so do you think that there has been a shortage of supply or an increase in demand?

The total amount of gas being consumed in the US hasn't dramatically changed in the past few years, but the profit margins of the oil companies have.

I think that it's pretty obvious that the oil companies are colluding to force up the price of gas, because they are less worried about the possability of Anti-trust action by the federal government because Katrina gave them an excuse and they have a lapdog in the White House.

If they really had no fear of the Justice Dept stepping in and breaking up companies to create real competition, then they probably would have raised gas prices to $10 per gallon. However, control of the White House isn't enough to make them completely safe and they know if they raised prices too far Congress would step in (yes I know Republicans control congress too, but I don't think that most Republicans are owned by big oil the way Bush & Co are)

I doubt that prices will stay this high for too long though. They'll need to bring prices back down again eventually or people really will start buying more gas efficient vehicles, and they don't want that.
 
2006-04-30 06:48:31 PM
firefly212


nice post. well said.
 
2006-04-30 06:51:14 PM
Threk: I think that it's pretty obvious that the oil companies are colluding to force up the price of gas, because they are less worried about the possability of Anti-trust action by the federal government because Katrina gave them an excuse and they have a lapdog in the White House.

Woa...non sequitur. That conclusion requires some kind of mind control beam to influence the millions of buyers and sellers on the commodities market.
 
2006-04-30 06:52:53 PM
Shadowspawn: So you just recently broke even? I mean compared to if you would've just withdrawn eveything after Bush's election, taken the tax hit, and stuck it in a money market.

Don't invest much do you?
 
2006-04-30 06:53:45 PM
BTW,my 24" cruiser costs me about 100 dollars a year, asuming it doesn't get stolen.......
and 5 bucks a week fer a bus pass.


/suck it
//had a car
/// lemmings run fast
//// as quickly as you can
/////bye now....
 
2006-04-30 06:56:08 PM
firefly212: Reducing usage for a couple days (real impact studies I've seen indicate 3-4 days) doesn't indicate a shift in lifestyle, and given the small surge following, likely was more inidicative of short-run deferrment than actual reduction in consumption.


I don't remember any reports of a surge after just a week. I do remember reports of reserves being higher than expected after several weeks producing a downward bump in the futures.
 
2006-04-30 06:59:21 PM
Oil man runs for prez (bush)
Big stock/investment firms his 4 biggest contributors.

Oil prices go up due to futures market.

Could mean nothing but feels ironic.
 
2006-04-30 07:00:28 PM
Riotcow

Exactly. Couldnt have said it better.
 
2006-04-30 07:02:40 PM
FlippityFlap: BTW,my 24" cruiser costs me about 100 dollars a year, asuming it doesn't get stolen.......
and 5 bucks a week fer a bus pass.



I read that as BWM 24" cruiser. I was trying to figure out which motorcycle that was and which part was 24".
 
2006-04-30 07:03:43 PM
Threk:

The total amount of gas being consumed in the US hasn't dramatically changed in the past few years

I could be wrong, but I'm pretty sure the oil companies sell to other countries. I hear there's a country in Asia with over a billion people. I bet they could use a lot of oil.
 
2006-04-30 07:04:56 PM
"The obediant cow goes moooooo"
 
2006-04-30 07:05:14 PM
skylabdown: You want lower gas prices? Drive less

that will make no difference, because as we've seen time and time again, prices are not tied into demand. they are tied into fear mongering and opportunistic investors
 
2006-04-30 07:05:58 PM
Alexandra: Got some bad news for you Farkers.

Just had it on CNN...they said it would take AT LEAST three years for the prices to start coming down.

Guess we'd better tighten our belts, huh?



You can pretty much ignore TV news speculators or anyone that says they can predict prices three years out for that matter. No one really has a clue what will happen even next month. People pretty much are adjust their position day by day which is why you get some nutty prices swings based on media hype. Like most of the 90s and technology.
 
2006-04-30 07:07:01 PM
skylabdown: What the hell does it matter if folks think Exxon's CEO got "too big" of a retirement package? What the hell? Are they experts in multi-national company retirement plans? Do they have even the SLIGHTEST clue how the oil industry works?

it matters because they continue to get tax breaks, incentives, loans, land grants, and other forms of corporate welfare, FROM YOUR TAX DOLLARS.

Do you have the slightest clue how the oil industry works? supply and demand is one of the most famous overused and incorrectly understood comments out there.
 
2006-04-30 07:07:13 PM
"Trust but verify?"

Oh. I get it. Like we've been doing for this ENTIRE ADMINISTRATION?

/back to my nap
 
2006-04-30 07:09:10 PM
oh and one more thing... U.S. Energy Secretary Sam Bodman, 1983-1987 President and COO of Fidelity Investments.

things that make you go hmmmmmmmmmmmm
 
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