Why are we paying $3 a gallon for gas when the oil companies are making record profits ?

Question

Gas prices continue to rise all the while the oil companies are recording record profits. You think if they were making so much money that the prices would drop not continue to rise.

Answer 1

If everyone decided to call in sick and not go to work at one time maybe the prices would go down, but due to greed the prices will keep going up by summer expect to pay $4 a gallon as long as people pay it the companies will keep raising prices. Do not expect wages to go up either. All the politicians currently in government have their hand in the Oil cookie jar do you think they will say anything as long as they are making a profit. No. The rich never have mercy on the poor you never see them trying to help anyone they just keep making us pay more, but why do we work if we can not cover our bills?

Answer 2

The oil companies are only making record profits because of the shear volume being dealt with. The profit margins of the oil companies are between 4-10%. Not very much, considering the risk involved in bringing the oil to market. Heck the company I work for has profit margins typically over 30%. You do the math.

Answer 3

Mostly it's inflation.

A ever expanding supply of dollars chasing a limited supply of oil. Without Iraq oil production the world is short of supply that existed before the invasion. Since all oil is traded in dollars. producers must demand more dollars to get the same value for their oil.

Oil companies have always made huge profits. Profits just seem extreme now in light of the decline of the value of the dollar. In reality there is no gain of real value because the dollar is growing weaker by the moment as more dollars are created to fund our deficit federal budget.

The real value is the oil. A recent development is it's now cheaper to buy existing production than drill a hole. That is one of the reasons the oil industry has been in consolidation. There have been no cheap oil reserves found to exploit. Revenue that would have went into this cost of production has stayed on the books and made it to the bottom line.

Why take a decade and billions to bring in a new field when you can buy it today ? It is in the best interest to shrink the number of producers to gain more control of the marketplace. This enables oil companies to continue making huge profits despite rampant inflation.

Answer 4

The answer "greed" or "Bush" is overly simplistic.

First of all, keep in mind that 6 or 7 dollars per gallon is the norm in Europe. It is heavily taxed there, but that desn't account for all of the extra cost. European countries typically have less access to oil and oil refineries, and many of them are landloocked. By being at the far end of the supply they experience the highest costs.

In the US, we are down the chain, but we are closer to the source. Mexico, Canada, and wells in the Gulf of Mexico all bring prices down below European levels.

We have to deal with inelasticity of supply. The oil that is poduced needs to be broken down into gasoline once it gets here. No new refineries have been built in the last 25 years, so what has happened is that our maximum supply of gasoline has been steady or decliing for 25 years, while at the same time our demand has been growing steadily. This serves to drives prices up.

Futures markets are tending to drive up prices. Oil is bought by middlemen via contracts far in advance of delivery. Bidding for a limited resurce is speculative based on expected supply. Thus, worries about future supply levels based on turmoil in the Middle East, and the nationalization of oil assets and capital in Venezuela all drive the speculative contract bids higher. We end up paying more at the pump because the people who wrote the contract for the oil 6 months ago need to charge enough to cover what they bid, based on the expectation that oil might be in shorter suply six months from now.

Some countries do have remarkably low prices on gas. In places like Iraq, Iran, and Venezuela gas is less that 50 cents per gallon. However, the govenment heavily subsidizes gas and they are countries that produce large amounts of oil i the first lace.

Another pice of gas prices is our ability to pay. It seems like a lot of money, but if people couldn't afford it, they would resort to other, cheaper options, no matter how painful, since we would have no other choice. As of now, the price is such that most people can still afford a car. Thus, the price is at a level that the market can bear. Another way looking at it is if gas becomes expensive beyond a certan level, other types of fuel will eventually become more cost effective. SO far, we have not reached that equilibrium point.

As for the profits, they mostly come from the fact that speculators in the oil market are giving them contracts for oil based on expected future price and competitive bidding. It has little to do ith the actual cost incurred by pumping theactual oil. Hoewever, keep in mind that even a flush company like Chevron is paying a dividend of only 2.9%, and has a P/E ratio very much in line with historical averages for energy and power companies. Until the past two months, oil company stocks were not significantly outperformingthe S&P 500 over te past 3 years.

Thus, as long as there are worries about future supply, and the US does not expand it's ability to supply gasoline to the public, pices will remai high based simply on open market economics.

Answer 5

Why? Because we elected oil men in to the White House. Just look what these morons have done: 1. Purchased HUNDREDS OF MILLIONS of barrels of oil to store in US reserves unnecessarily soon after 9/11. This act alone caused the supply to diminish significantly. This was the beginning of the price hike. 2. Invaded Iraq. Thus disrupting the flow of oil. Price hikes even further. 3. Increased tax breaks from $50K to $100K for business owners purchasing SUVs. This tax loophole allowed them to purchase gas guzzling Hummers for basically free. 4. Vetoed mandates requiring auto makers to increase MPG on all cars. 5. Backs fuel-cell technology as the only alternative, thus ensuring our dependence on oil for the next two decades.

Answer 6

Three bucks a gallon is being paid because we are willing to dish out that amount of money to feed our cars, trucks, and motor bikes.
Supply and demand rules any market. I don't care if you're in the market for chicken$hit, the payment for the supply of chicken$hit is equal to the demand from the consumer!
It has been like that since Cain killed Abel and left home.
It will be like that when the good Lord returns to make things right in the world.

Answer 7

Because, like most of corporate America, Big Oil worships the almighty dollar. They don't give a rat's @$$ about the consumer's well being. As long as we keep given them our money, they are happy.

Answer 8

Remember the hurricanes, they knocked out several oil wells in the ocean. They need rebuilt. I passed one on a yacht a month ago, they aren't lying. that's what we're paying for. Yes supply and demand has something to do with it, a lot to do with it, but if the only place we can get it is from those oil rigs, then we need to fix them, so we have more for "supply and demand"

Answer 9

Because we are not unpaying $3 a gallon for gas when the oil companies are making record profits ?
GO AHEAD.

Answer 10

We have to send oil company ex's kids to college somehow!
Oh and bush is an oil man!