MyWAG
Wednesday, April 26, 2006
  Oil Prices and Oil Profits
I want to know why there's no distinction between prices paid for oil and oil profits.

If an oil company paid $35/barrel and made $X profit...

...wouldn't they make the same profit if the oil cost $70/barrel?

I think the assumption is put out that the oil companies PAY the going rate for the oil. If there was a true relationship between the price paid/price sold...then there wouldn't/couldn't be an increase in profit.

What am I missing?

The only thing that I can think of is that the oil companies "buy" the oil for $X amount and then re-sell the oil at a pre-set price above the buy price. This is usual. But, it doesn't justify their price.

5 years ago:

Buy oil:

$25/barrel.....resell oil at $50/barrel...make money. Make $25.

Now:

Buy oil:

$50/barrel...resell oil at $100/barrel...make money. Make $50

$70/barrel...resell oil at $140/barrel...make money. Make $70

The idea of a 'windfall tax' applies to the concept that the oil companies costs haven't increased...it's just been their ability to multiply the original cost of the oil.

Anyone who believes the spin of oil company profits of .09/gallon of gas is guilty of Enron's, Ken Lay denial of knowledge.

I think people put too much emphasis on the 'profit', which is always manipulated for tax purposes.
 
Comments:
Good job. Please contonue to develop your blog. It's really cool! Byron
 
Excellent, love it! »
 
Excellent, love it! » » »
 
Excellent, love it! » » »
 
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