high oil prices?

Question

who believes that we are being ripped off by the oil companies, they use any lame excuse under the sun, to put up prices, is it not time for the united nations or some such powerful body, to take control , by limiting price increases to sensible levels, these powerful oil companies are holding the world to ransome, and causing untold hardship to the poorer nations, the amount of oil pumped per day,as far as i can gather, has not been affected in any way by recent events in the middle east, or anywhere else, or am I totaly wrong.

Answer 1

OPEC (a powerful body) controls production rates on three quarters of the worlds reserves. Almost 60% of that is in the Middle East. The middle east is a bit knackered up at the moment and there's no guarentee that it's going to get any better.

Hoary old price breakdown arguement: All figures are in ish (as in 20 dollars ish)

Oil companies in the UK get 15-20p per litre. The cost of the crude is 20P per litre and the rest is tax. UK fuel price is twice that of the US fuel price almost entirely due to the tax. So how does this tax work? You pay two taxes on your fuel Vaguely added tax (OK Value Added Tax) and Fuel Duty.

Fuel Duty has been going up on purpose for the last fifteen years "to discourage car use on environmental grounds". Gordon Brown just scrapped the "Fuel Price Escalator" in the 2000 budget leaving the total tax rate at 81.5% or 75% depending on who you listen to, all I know is that the Tories started it and Labour ran with it for a while before deciding to set their own levels.

anyway...

Here's the good bit the VAT is charged on the total price of the oil company costs PLUS THE FUEL DUTY, you are paying tax on tax. Any rise in Oil prices therefore produces a magnified rise in the cost of petrol.

So, why is crude rising in price? Supply and Demand. Crude is traded by a bunch of excitable city types just like shares. A cow farts near a production platform and CNN reports it as changing the oil price.

The supply of oil is nearing capacity, any uncertainty in the future posibility of getting oil delivered (Nigeria blowing up pipelines, Iraq going back to square one and being mismanaged, Iran not being too happy etc) will have an effect on the oil futures market.

The uncertainty feeds uncertainty. People wearing eye blistering ties talk on Bloomberg and make stuff up.

All I know is that I have been trogging around the world looking for oil like a madman. Yes, I work in the oil industry on the rigs, no that doesn't make me an expert in petroleum economics. During my last hitch I took 18 flights to five different countries because there are not enough people who know how to do this job.

I am knackered.

We are trying to get the oil out of the ground as fast as possible to cover the demand but with Iraq only NOW getting back above 2.5 million bpd (Jun 26th) after three years we have drained our reserves considerably

Petrol supply is at capacity, oil is not petrol.

Did I mention the devaluation of the dollar? The lack of Refineries to produce Petrol and Diesel? The different types of crude and their differing costs of production, transport and refining? Threats to production and a history of corruption within some of the OPEC nations leading to a lack of investment exacerbated by the low price of crude in previous years?

1998 oil price at 10 dollars a barrel Petrol price per litre 60P
2006 oil price at 78 dollars a barrel Petrol price per litre 90P

Oil goes up nearly 800% Petrol goes up 150%

What does it mean? I don't know, someone is making a load of money and it ain't me. The petroleum companies are doing well but I suspect that the Gov't is doing even better.

By the way I don't own a car, too expensive.

Answer 2

You are totally wrong. The oil companies are not ripping us off. They just pump the oil and get it to us. When the supply goes down, due to violence in the Middle East, or the simple fact that there is a finite amount of oil in the ground and no major oilfield discoveries have been made since the 70s, the price goes up and the companies just pass it on to consumers. Because of the inelastic (read: high and often unchanging) demand for oil, the companies make good money no matter what the price is. If you want price regulation, you are going to get lines at the pump.
This is why we need to diversify our energy consumption, and add renewables.

Answer 3

OK, look at it this way. you have a product to sell and you know what sort of price you can get for it.

For many years all goes well and you make a tidy profit selling to a well known group of customers.

Then one day, a certain person or persons that are in charge of your countries financial coffers also see a way to make a quick profit on your product and start to add taxes at exorbitant rates.

Your customers moan and grumble but do nothing so the taxman quietly adds more and more tax until eventually the tax is over two thirds of the selling price.

You however still have to pay for manufacturing, transport, production and development, so that when one day another customer emerges that will pay over the odds for your product WHO WILL YOU SELL TO?

In the current climate China is buying far more oil now than it ever has, and is able to offer better prices to the oil companies, so if you want a share - you have to pay the high price too!!.

So yes - you are totally wrong, the price of crude oil is determined by the buyers market, and then taxed out of all proportion by your governments.

The oil companies hold no allegiance to any particular customer, in the UK oil is taxed at around 76%, so if tax was reduced to the normal VAT levels we would be paying around 50p/ltre.

Answer 4

Yeah, the lame excuses like hurricanes destroyed the drilling platforms in the gulf and the oil refineries and we have to rebuild them. Or there is World War 3 in the Middle East and we can not get as much oil because there are so many wells on fire.

Answer 5

Oil is in more demand, specificly by China and India. If you put restrictions on the amount oil companies can charge that is planned economics, and all the Republicans would scream at you for being a Communist.

Answer 6

A heard a good solution a while back, the problem is getting enough consumers united to do it.
Since the price is tied to demand, everyone just boycots Exxon/Mobile until thier price drops to 1.50 a gallon. Since they know that we will not buy from them until they do that, they will be forced to reduce the price. The others will know that we will buy from them once they drop the price so they will have to drop thier price as well.

Answer 7

i think you are right, these oil companies made record profits and are saying that the only reason oil prices are going up is because of demand. If that was the case then the record profits wouldn't be there.

Answer 8

Hig Oil prices are GOOD,
oil is very very scare and we waste it by burning it for fuel - what madness it should be kept for things that only oil can do - lubricants and plastics. we should be pushing our governments to find alternative energies (green and fusion) rather than moaning about prices.

Also what are you doing to save your usage and improve your energy efficiency that alone would reduce demand and lower prices!!
high oil prices are down to people wanting more and more than is their right or share!

Answer 9

Its really OPEC that dictates the price of oil. Not the oil companies, although their profits do seem to be more than needed.

Answer 10

Buy 2 cows, and use them to pull your car! Raging bulls vs Horse power!

The milk will get you added income! And there won't be all those noxious fumes either!

MODIFY: Of course I agree with you, I am just offering you an ecofriendly alternative!