Is the war in Iraq one of the reasons gas is so high?

Question

I calculated at 42 gal barrel raw oil that historically we have paid about 40-50% of price of gas to raw oil. We pay about $1.80 for raw oil now with $3 gas. that's about right, but it is a huge increase from just a year ago. With record profits, It looks like oil companies are gouging us by riding the larger increase in raw oil. I don't buy the idea that the US is gaining by securing the oil in Iraq, unless it is to secure contracts for the oil industry to maximize profits..The president can't really be so much for big oil and in appearance so against the little guy in America (It seems too much to expect that from any politician, no matter how self serving he is). so what is really going on? Your opinion.

Answer 1

Of course the war in Iraq is one of the reasons. To me it is surprising ExxonMobil was only able to make $10 billion on sales of $100 billion. That is only a 10% profit margin. Most companies work in a higher profit margin than that. So I believe that is the first clue they are not gouging.

The second clue pertains to the first. The best refining margins are on light sweet crude, which is in very short supply. The majors are trying to fill demand with heavy sour (higher sulfur content), which has a lower refining margin due to the added sulfur, which must be removed.

The third clue is most telling. Prices are not set by oil companies, they are set by the market. The largest oil trading market is the NYMEX (New York Mercantile Exchange), where the price for WTI (West Texas Intermediate - the gold standard of crude) is set. Another exchange is in London, where they trade North Sea oil. There are others around the world. On these markets, the majors are generally viewed as price depressers because they attempt to increase supply at higher prices.

When prices are high, it is natural for profit-maximizers to continue to increase supply until the marginal profit on sale of an additional unit reaches zero. That the majors appear to be doing this indicates they are acting rationally.

Now, as for the demand side, that's a whole different story. You can point a lot of fingers; SUV's and Pickup trucks, increased industrial production capacities in China and India, and on and on. But the truth of the matter is oil is in a lot more products than just gasoline, the world is richer than it has ever been, and the demand for energy just keeps rising.

Isn't it funny that the current political crises in Venezuela and Nigeria, two major oil-producing regions, are never mentioned?

Answer 2

the reason gas is so high is because the oil company's know that no matter how much we all complain we are going to keep buying gas i drive truck for a living and you would think they were giving the stuff away with the amount of people who are out on the highways and the speed they are all traveling if people would start carpooling and combing trips that might help but we seem to be too stubborn to do these things.

Answer 3

the war in Iraq has a small affect on the price of gasoline in the U.S.

our biggest oil supplier is canada, our second biggest is mexico, our third biggest is saudia arabia

unrest in the middle east certainly has short term affects on pricing

oil companies have record profits because they have merged to become record-sized companies, that with inflation, makes record profits normal and expected

Exxon-mobiles earnings last quarter were around 10 billion dollars(the largest a company every earned in a quarter)

exxon-mobile stock did not shoot up based on this news because 10 billion dollar earnings, although a record, are barely enough

EXXON-MOBILES EARNINGS WERE NOT HIGH BY ANY NORMAL MEASURE, THE BRUHAHA IS EITHER IGNORANCE OR DELIBERATE DECEIT

exxon mobile capital asset is 400 billion dollars, that means that stock holders need 10 billion every quarter to get a measley 10% return

gasoline prices in the U.S. are still low compared to most of the world

the real answer is supply and demand

Answer 4

Probably Yes...iraq is one of the great suppliers of oil all over the world...and when US suffers..all other country suffer...oil price is on it's hike every now and then..there is a big difficulty in halting this war.....since there's oil down below the war will not end....t.c.

Answer 5

Oh yea and George Bush too.

Answer 6

Oh yea and George Bush too.

Answer 7

Ask the speculators

Answer 8

duh