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Originally Posted by Garth
I guess what I'm trying to say is that supply and demand doesn't work if there is a guarantee of demand. Because they know we will never be able to go without it, they can charge whatever they want and we will have to buy it.
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Please do not tell me that you believe Obama's rhetoric about price gouging. Look, let me explain something to you.
Crude oil is a little over $120 a barrel right now. A barrel contains 55 gallons of crude oil. So around $2.00 of the gas price is just for the oil company to purchase the raw materials. The other $1.50 pays for shipping it across the world, refining it in a highly complicated process, shipping the refined products around the country to their destination, trucking the oil to the gas stations, paying for the gas stations running costs, and then the small oil company profits.
Exxon pulled around 8% profit margins in 2007, I guess it is around 10% now. That is very reasonable, Microsoft pulls close to 30%. That means if you pay $3.50 a gallon for gas, they make $0.28 per gallon off us for every gallon they sell.
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The only thing that maintains the prices were they are is competition. However there is very little to keep all of the oil companies from deciding to raise their prices together. If they did that we would simply pay it. And when I see a Shell station and a Chevron station raise their prices in exact step with each other, makes it very hard not to think that.
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They raise their prices because the market price went up.
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As for profit margins, I understand the concept. All I'm saying is that they could take a bit of a profit cut for our economy. If they are currently making 10% profits, couldn't they cut the prices by 5% and settle for only $5 Billion in total profits?
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If they intentionally cut profits by 5% they would end up loosing so much money that their share holders could sue.
If you want to complain to someone about gas prices you need to do it to the countries that produce it. They set the market price because they know demand will never go down. So to drive up the price they slow production. Supply goes down, demand stays high, price goes up.