WHY are gas prices so high?

[FuzzyDunlop]

There are plenty of topics here with people complaining about prices, but does anybody know WHY the price is so high? I mean, didnt we attack Iraq to get cheaper oil? Wasnt that one of the underlying main ideas back in '03? I heard today thru the wind that even the Canadian government is asking, "WTF is going on?"
Save the "I spent this much $$ at the pump today..." posts for other threads please.
I want answers.

 

[Nitemare]

asshole oil speculators

 

[Jeff7]

We need a new forum:
"GAS PRICES OMGZ!!!!!"


Yeah, some of the rhetoric to justify the invasion was that Iraq would be swimming in its own oil revenue by now. Oops, we forgot that everyone over there hates each other, and that, sadly enough, it seems that the only thing keeping them in order was a horrid dictator.

I do think that we went there to create some kind of stronghold or ally in a region with a resource that we are very dependent upon. If their only export was cottage cheese, few Americans would even know the name "Iraq." There would have been a little skirmish over there back in 1991, involving Iraq's nearly unimpeded invasion of Kuwait, to gain access to rich dairy farming land. It might have made it to the news as a little snippet on CNN's headline scroller on the bottom of the screen. The dairy industry would have been a little irritated, but we'd have sent over no troops, and no one here would really care. And we certainly wouldn't be back there right now.

We're like a dangerous addict, doing whatever it takes, including kill, to ensure that we can get our next fix.

 

[Kelemvor]

So they can make more money. 20 billion profit every quarter just isn't enough for any one company....

 

[zinfamous]

finite resource with high demand

an organized cartel that determines the price of their commodity--largely based on political reasons.
the token reason for increasing prices over the last 30 years or so has been "instability in the Middled East"

funny, b/c what we consider "instability," those who've lived in the Middle East over the last several generations consider "normalcy"

 

[rivan]

Originally posted by: Nitemare
asshole oil speculators

It's this high because it can be. Simple as that.

Because the oil companies saw OPEC almost directly control prices for long enough they decided to do some of it themselves. And because there are people out there with enough money to buy up large enough quantities to artificially create a shortage of supply.


All of which is ONLY possible because:

The nation's not in the position to significantly modify demand. Period. This is at the root of the problem. We need viable alternatives before it will change.

 

[Aharami]

explain to me how only supply and demand economics justifies these oil prices when there is a surplus of oil inventory right now. We need more refineries to turn the oil into gas and more restrictions on oil speculations

 

[Queasy]

1) Oil Speculation
2) Unrest in Middle East (as always)
3) Chavez nationalizing oil industry in Venezuela and saber-rattling (#2 and #3 cause #1)
4) Ethanol Mandate
5) Decrease in value of the dollar
6) Dozens of different blends across the US which creates artificial supply constraints
7) A jump in demand from India and China
8) We've been reducing how much oil we produce at home for decades now

All of it adds up.

 

[waffleironhead]

Its called supply and demand.

The oil companies demand the money and we can do nothing but supply it.

 

[IceBergSLiM]

Corporate profits for good ole boys

I thought this was obvious...didn't you watch congress questioning some of the top dogs last week?

 

[JulesMaximus]

Gas is over $4/gallon at some places around here.

 

[Special K]

Can someone explain to me exactly how oil futures drive up the price of oil? I thought futures were basically just bets on whether the price of a commodity would go up or down.

 

[IceBergSLiM]

Originally posted by: Special K
Can someone explain to me exactly how oil futures drive up the price of oil? I thought futures were basically just bets on whether the price of a commodity would go up or down.

Didn't you know? They have to charge your more TODAY for what the price MIGHT BE....Tommorow.

 

[FuzzyDunlop]

Originally posted by: IcebergSlim

Originally posted by: Special K
Can someone explain to me exactly how oil futures drive up the price of oil? I thought futures were basically just bets on whether the price of a commodity would go up or down.

Didn't you know? They have to charge your more TODAY for what the price MIGHT BE....Tommorow.

Isnt that similar to what enron was able to do?

 

[FuzzyDunlop]

Originally posted by: IcebergSlim
Corporate profits for good ole boys

I thought this was obvious...didn't you watch congress questioning some of the top dogs last week?

Does anyone have clips from Youtube or anywhere else that can be posted here. I am curious to what they had to say.

 

[spidey07]

Government regulation and the horrendous amount of taxes they collect.

Oil company profits are well within normal ranges for any company.

That and supply/demand.

 

[ElFenix]

Originally posted by: Special K
Can someone explain to me exactly how oil futures drive up the price of oil? I thought futures were basically just bets on whether the price of a commodity would go up or down.

the oil barrel prices you see reported on the nightly news is the price for a barrel of oil delivered several months from now (i think it's 90 days) at ardmore, oklahoma (a big transshipment point). people bid those up because they think in 90 days they'll be able to turn around and sell it for even more.

 

[yllus]

Oil firms are caught in a squeeze play

Exxon's production dropped 2.4 per cent last year, a fate shared with its biggest investor-owned peers. (Shell's production slumped 4 per cent.) On the exploration side, Exxon failed to replace 24 per cent of its production with new reserves, its worst "reserve ratio" showing in three years. With reserves increasingly difficult to find, drawing Exxon and its rivals into more costly, remote and politically volatile regions, Exxon has seen its failure rate of exploratory wells searching for commercially viable pools of oil or natural gas rise to 46 per cent, up from 36 per cent in 2006.

Exxon's production cost per barrel soared 18 per cent last year, following a 13 per cent rise the year before. The company in March committed to a 20 per cent increase in spending on exploration and refinery upgrades, to more than $25 billion, or an industry record of $68 million per day. But that hike will do little more than cover the spiralling cost of everything from drilling rigs to engineers.

...

Last year, Exxon spent more money buying back its stock ? $36 billion ? than on reinvesting in the business. Since replacing his similarly unsentimental predecessor, Lee Raymond, in January of last year, Tillerson, 55, has raised capital spending just 18 per cent against a 75 per cent jump in expenditures on share buybacks.

That gambit increases earnings per share, but obviously doesn't add a drop of oil or gas to the firm's reserves in order to sustain the business. Yet Shell and Chevron Corp. also are furiously buying back their stock, at a rate that will see Exxon and Chevron retire all of their stock by about 2024. It comes down to this: buying back the company's stock is a far more certain bet on increasing investor returns than operating a new deep-water drilling program.

Oil companies no longer have a strong economic incentive to explore new oilfields. The results are evident.

 

[Queasy]

Originally posted by: spidey07
Government regulation and the horrendous amount of taxes they collect.

Link

While Exxon made $40 billion in 2007, a 60% increase from 2004, it paid $100 billion in taxes and royalties.

 

[JS80]

Originally posted by: FuzzyDunlop

Originally posted by: IcebergSlim

Originally posted by: Special K
Can someone explain to me exactly how oil futures drive up the price of oil? I thought futures were basically just bets on whether the price of a commodity would go up or down.

Didn't you know? They have to charge your more TODAY for what the price MIGHT BE....Tommorow.

Isnt that similar to what enron was able to do?

Yea except they were doing that with weather predictions and unused internet broadband. Plus they were hiding all their losses in energy trading to off balance sheet accounts.

 

[ElFenix]

Originally posted by: Queasy

Originally posted by: spidey07
Government regulation and the horrendous amount of taxes they collect.

Link

While Exxon made $40 billion in 2007, a 60% increase from 2004, it paid $100 billion in taxes and royalties.

i wonder what the figure is without royalties?

 

[Queasy]

Originally posted by: ElFenix

Originally posted by: Queasy

Originally posted by: spidey07
Government regulation and the horrendous amount of taxes they collect.

Link

While Exxon made $40 billion in 2007, a 60% increase from 2004, it paid $100 billion in taxes and royalties.

i wonder what the figure is without royalties?

I think it is around $30-$40 billion just for tax. Keep in mind though, that they pay royalties to the US gov't so it is basically another form of tax.

edit: $30 billion in taxes.

I'm pretty sure that Exxon's tax payment in 2007 of $30 billion (that's $30,000,000,000) is a record, exceeding the $28 billion it paid last year.

By the way, Exxon pays taxes at a rate of 41% on its taxable income!

[Update: The $40.6 billion and $39.5 billion figures are after-tax profits. For 2006, Exxon's EBT (earnings before tax) was $67.4 billion, it paid $27.9 billion in taxes (41.4% tax rate), and its NIAT (net income after tax), or profit, was $39.5 billion.]

Over the last three years, Exxon Mobil has paid an average of $27 billion annually in taxes. That's $27,000,000,000 per year, a number so large it's hard to comprehend. Here's one way to put Exxon's taxes into perspective.

According to IRS data for 2004, the most recent year available:

Total number of tax returns: 130 million

Number of Tax Returns for the Bottom 50%: 65 million

Adjusted Gross Income for the Bottom 50%: $922 billion

Total Income Tax Paid by the Bottom 50%: $27.4 billion

Conclusion: In other words, just one corporation (Exxon Mobil) pays as much in taxes ($27 billion) annually as the entire bottom 50% of individual taxpayers, which is 65,000,000 people! Further, the tax rate for the bottom 50% is only 3% of adjusted gross income ($27.4 billion / $922 billion), and the tax rate for Exxon was 41% in 2006 ($67.4 billion in taxable income, $27.9 billion in taxes).

 

[alkemyst]

Originally posted by: Aharami
explain to me how only supply and demand economics justifies these oil prices when there is a surplus of oil inventory right now. We need more refineries to turn the oil into gas and more restrictions on oil speculations

They caught on to the diamond market.

 

[manlymatt83]

Originally posted by: Queasy
1) Oil Speculation
2) Unrest in Middle East (as always)
3) Chavez nationalizing oil industry in Venezuela and saber-rattling (#2 and #3 cause #1)
4) Ethanol Mandate
5) Decrease in value of the dollar
6) Dozens of different blends across the US which creates artificial supply constraints
7) A jump in demand from India and China
8) We've been reducing how much oil we produce at home for decades now

All of it adds up.

How is it that we produce oil at home?

 

[Nitemare]

Originally posted by: yllus
Oil firms are caught in a squeeze play

Exxon's production dropped 2.4 per cent last year, a fate shared with its biggest investor-owned peers. (Shell's production slumped 4 per cent.) On the exploration side, Exxon failed to replace 24 per cent of its production with new reserves, its worst "reserve ratio" showing in three years. With reserves increasingly difficult to find, drawing Exxon and its rivals into more costly, remote and politically volatile regions, Exxon has seen its failure rate of exploratory wells searching for commercially viable pools of oil or natural gas rise to 46 per cent, up from 36 per cent in 2006.

Exxon's production cost per barrel soared 18 per cent last year, following a 13 per cent rise the year before. The company in March committed to a 20 per cent increase in spending on exploration and refinery upgrades, to more than $25 billion, or an industry record of $68 million per day. But that hike will do little more than cover the spiralling cost of everything from drilling rigs to engineers.

...

Last year, Exxon spent more money buying back its stock ? $36 billion ? than on reinvesting in the business. Since replacing his similarly unsentimental predecessor, Lee Raymond, in January of last year, Tillerson, 55, has raised capital spending just 18 per cent against a 75 per cent jump in expenditures on share buybacks.

That gambit increases earnings per share, but obviously doesn't add a drop of oil or gas to the firm's reserves in order to sustain the business. Yet Shell and Chevron Corp. also are furiously buying back their stock, at a rate that will see Exxon and Chevron retire all of their stock by about 2024. It comes down to this: buying back the company's stock is a far more certain bet on increasing investor returns than operating a new deep-water drilling program.

Oil companies no longer have a strong economic incentive to explore new oilfields. The results are evident.

just stop buying from Exxon