I have noticed that as gas prices go up-usually very fast-to cover the cost of getting oil, blah, blah, blah. Why is is that after this, oil companies have record profits? Then gas prices SLOWLY come down for a little while.

[edit on 8-8-2005 by noosnomrm]

Originally posted by noosnomrm
I have noticed that as gas prices go up-usually very fast-to cover the cost of getting oil, blah, blah, blah. Why is is that after this, iol companies have record profits?

ummm......because oil prices have gone up.

~Peace ~

Originally posted by Hunting Veritas

Originally posted by noosnomrm
I have noticed that as gas prices go up-usually very fast-to cover the cost of getting oil, blah, blah, blah. Why is is that after this, iol companies have record profits?

ummm......because oil prices have gone up.

~Peace ~

My point was oil companes provide "excuses" of why "their" costs have gone up, which justifies the price increase. Problem is, if that were true, they would not be posting record profits........................

OK let's see.

Assume a company owns an oil field with 1 million barrels of oil in the ground.

It costs that company say $5 to pump out a barrel. They sell it for say $50 and make $45 profit.

Now assume that the price of oil traded on the open market goes to $60 per barrel.

It still costs $5 (or even 20% more - say $6) to pump a barrel out of the ground that the company can now sell for $60 and make an extra $10 in profit.

So the profits go up as the price goes up.
.

Originally posted by Gools
OK let's see.

Assume a company owns an oil field with 1 million barrels of oil in the ground.

It costs that company say $5 to pump out a barrel. They sell it for say $50 and make $45 profit.

Now assume that the price of oil traded on the open market goes to $60 per barrel.

It still costs $5 (or even 20% more - say $6) to pump a barrel out of the ground that the company can now sell for $60 and make an extra $10 in profit.

So the profits go up as the price goes up.
.

But they had to raise the prices do to "higher" costs being incured by them (oil companies). If that is true, profits should stay the same.

I get your point-gools-that the "actual" costs for oil companies has not gone up, so the extra money is pure profit. But that would mean that the oil companies are lying to us and they would never do that......

My only concern (well, other than the cost of gas hitting me where it hurts - the wallet) is that there will eventually be a backlash from angry consumers, resulting in a dramatic drop in oil purchasing, which wil result in profit losses for the big oil companies, which will result in a stock drop, and so on..... and on.... and on...