Why aren't oil companys working to lower prices?

Question

Our gas prices rise. We claim price gouging, and abuse by the oil companies. They defend themselves saying that demand has risen, and accidents/unplanned/planned maitenance has lowered production. They don't build new plants because it's costly, and takes a long time to get through environmental red tape. My question becomes, why aren't oil companies taking these profits, and using them to increase the speed of repairs and open new refineries despite the red-tape? If production starts to fall, wouldn't most companies readjust their fund distribution to restore production as quickly as possible? Is there any way to get details on the "accidents" and "maitenance" on these refineries so we can know what is slowing oil production so much that we haven't had a break from rising gas prices for quite a while?

Answer 1

Why would oil companies be interested in lowering prices? That doesn't make sense. Demand is at record highs right now. Lowering prices would be like throwing money away. I agree that prices are waaaaaay too high. But I sure don't look toward oil companies to do anything to stop it.

Answer 2

Lets say that the price of gas goes up by 10 cents tomorrow. That does not mean that the gas company is making 10 cents more profit per gallon. The gas company is probably making the very same profit they were when the gas was cheaper. They are trying to get everything fixed and going again but some of these chemical plants are ancient. The environmental red tape is not slowing down the building of new plants. It has halted it altogether. Now the oil and gas companies are stuck with aging plants that are going to fall apart even more as time goes by. This will make the price of gas go higher and higher.

Also, there is the cost to find new oil. A lot of money is spent to find oil. That money has to come from somewhere. It comes from the money spent at the pump. As oil becomes harder to find and extract, then it will be more expensive to find and extract. That will drive up the price of oil and also of gas.

Gas is not some magical substance that the oil companies are finding and turning around and selling. They have to work hard to get it. These companies are not making obscene profits. If they lower their profits, they will lose investors. That will make the price of gas go even higher because the oil companies will not have enough capital to pay to keep things maintained the way they should. Go and look at the stock of these guys. They make profit but they are not setting the world on fire with the money they make. Investing in an oil company will not make a person rich.

Supply and demand. That is what it is all about. There has never been any proof that the oil companies have been rigging the prices. With all of the investigations, there has never been an instance to show that this is going on.

Answer 3

Most companies have the view that they need to "spend money to make money" by reinvesting in new technology that helps things run smoother with less mechanical breakdowns. However the oil companies spent their money 50 years ago to build their oil refineries and as long as they are still able to squeeze a drop of oil out of those refineries they aren't going to spend money to make new ones.

The temporary supply and demand influxes have allowed them to slowly raise the price per gallon from 80 cents in the early 90's to $3.15 today. In just a few short years they've spent millions on repairs but it has allowed them to MAKE BILLIONS by creating an aritificial imbalance between supply and demand. Why would they spend BILLIONS to build NEW refineries when the old ones still work and have helped them make billions? They aren't.

The only way they'll build new refineries is if someone blows up the old ones....and even then the price of oil will never go down. Ever. We've allowed them to get this high, surely we'll pay more and more and more.

Also, taxes are outrageous on a gallon of gas. Do some research, if you can even find the data -I'm sure it's buried by the government, taxes are also a big percentage of the cost of a gallon of gas.

Answer 4

I can't answer all of these questions but I can tell you, it IS NOT just the red tape that's holding up the building of refineries. It's people. No one wants an oil refinery in their backyard. The oil companies WOULD LOVE to build more refineries but wherever they go to build one, people protest, the local and state governments get involved and they block them from building on the sight. The oil company ends paying hundreds of thousands of dollars and getting NOTHING for their troubles.

California should understand this problem. The reason California is always having Rolling black outs during the summer months is because no one will let them build a new power plant, they don't want natural gas or oil because they pollute and they don't want nuclear because they say it's dangerous. Makes me wonder how badly they really want electricity. Same thing could be said for the refineries.

Since they can't build in the states, they go overseas. They're building lots of refineries in the middle east. Of course, that gives the Arab states even more say about our oil and our prices.

As for gouging. It's hard to proof whether they do it or not. NO ONE, not even economists can explain how gas prices are determined. The oil companies say it's by how much they pay for a barrel of oil plus the refining charges. Problem is, the price of a barrel of oil goes down but the price of gas continues to go up. So that can't be right. That is what leads to claims of gouging. But SO MANY people in the government are reliant on the oil companies for campaign contributions and such that no one is willing to tick them off.

Answer 5

Ok lets say you have a lemon aid stand and you set your price at $0.25 a cup. You get hammered and sell all the lemon aide you made. The next day you make twice the amount you did yesterday and decide to set your price to $0.50. You sell out the second day. You keep raising you price until you find that at $4.50 you can sell most of your lemon aide, taking in a huge profit, but three or four of your original customers stopped buying and started complaining. Would you consider lowering your prices from $4.50 a cup to supply the demands of the three or four customers you lost? No. As long as we keep using the fuel and the demand stays consistent the oil companies are free to charge what they want to charge. WTF is price gouging anyways? Do we not live in a free trade capitalistic society?

Answer 6

gas prices will not go down until we can harvest a new form of energy to fuel our cars. there is a finite amount of oil and eventually it will go away. it's basic supply and demand. the supply slowly creeps down and even though alot of people are complaining, demand hasn't really slowed down. these companies shouldn't put any money into opening new refineries, but instead into research of earth friendly renewable energy sources.

but their 'defense' is just BS. i made about $800 off my exxon stock in the last month alone so i doubt that the company is hurting at all...

ps. gas up your car ASAP!!!! i've seen the gas guy at the corner raise the price twice already today for the memorial day weekend crowds!!

Answer 7

Why would they? individual companies lower prices to take market share from competitors, or in response to a competitor's price-cutting move. Whole industries very rarely lower their prices, and never voluntarily. If it happens its only as a result of outside influence, usually the government's. This government (on both sides) has not taken any public steps to pressure the oil industry to lower prices as a whole.
Remember that companies have one clear stated goal - make as much money for their shareholders as possible. That is certainly something the oil companies have been successful in doing!

Answer 8

There isn't just one answer to this question. The real question is why isn't our government doing more to end this crisis; we have the technology right now to end the use of gasoline driven vehicles. Car companies would have to re-tool factories-which would cost them and big oil would have to re-think where their market would be--losing billions. This just one reason why the average citizen is being strangled by gasoline prices. Answer this, if you could buy a car that ran on water and created no toxic fumes, performed excellent and ran great would you buy it for let's say $20,000? Most would. This alone scares the oil and car companies.

Answer 9

The evidence that the oil companies are only fueled by greed is overwhelming. For instance, look at the compensation of top executives in these corporations. They've always been rich, but look at the rates of increase in their salaries and bonuses. It's quite telling. They are trying to get as much money as possible out of us before we realize that we are destroying the world.

Answer 10

Because they don't have to. They exist to make money. They can ignore any pressure put on them by government or business because at the end of the day we are all completely dependent on Oil based energy and they know it. To increase profits they simply lower production. It's win - win for them.