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Drekkus
31-07-2006, 13:03:25
Sooner or later there will be none around
[/Tower of Power]

The prices at the pump are high because of the high oil prices, and oil companies are making record profits because of the high oil prices. Am I the only one who thinks that's a little weird?

Too bad Roland doesn't post here any more. :cute:

MoSe
31-07-2006, 13:04:17
not to mention RC

Japher
31-07-2006, 13:26:03
if ppl are still paying for it
what's the point?

MoSe
31-07-2006, 13:33:30
yeah, this mean the price was poorly set before
they could rise it so much, and still gain more thanks to the margin increase over the loss caused by reduction in demand, wich is only compressible down to a point, because of lack of immediate and viable alternatives and reluctance to give up lifestyle level

maroule
31-07-2006, 13:37:22
high oil prices have all to do with geopolitics, and little with geology. Reserves are not really decreasing so much that markets are fretting (the only genuine problem is that the Saudi are probably lying about what they have left, for political leverage)

with a calm ME, we'd have low rates, as we did not so long ago before Iraq went to the dogs and Iran started threatening supplies... the irony is that Bush policy has hugely helped Iran, they are now in a superb position to arbitrage the market.. and hence get the bomb as a bonus

KrazyHorse
31-07-2006, 13:39:37
Originally posted by MoSe
yeah, this mean the price was poorly set before
they could rise it so much, and still gain more thanks to the margin increase over the loss caused by reduction in demand, wich is only compressible down to a point, because of lack of immediate and viable alternatives and reluctance to give up lifestyle level

Only true if there's an oil monopoly. In a market with many producers any individual company which tries to scrape extra money off the top by increasing prices is going to lose all their business. The closest you could come to an entity with such pricing power would be OPEC, and they lacked the cohesiveness to move the market from 30$ to 70$

Japher
31-07-2006, 13:42:38
thing is, oil companies may be getting record profits, but their profits were small compared to other industries

my only concern with that line of argument is that other industires don't have such an inpact on the overall economy as oil does

which just goes to show we need to figure something out

I like the corn ethanol, it would eliminate the need for subsidies and reduce our dependency on oil

KrazyHorse
31-07-2006, 13:44:22
Originally posted by maroule
high oil prices have all to do with geopolitics, and little with geology. Reserves are not really decreasing so much that markets are fretting

You are completely mistaken, sir. The fact that reserves and inventories are not increasing, even with oil at 70+$ (and having been near there for years now) means that market nervousness is only a minor part of the price rise.

World petroleum demand increased significantly over the last 5 years, and not that much more is being pumped. In a relatively inelastic market like the oil industry that means that prices are going to shoot through the roof. Which they did. Analysts are now giving 5 year predictions above 60$. Supply shocks and market nervousness can only add to that.

MoSe
31-07-2006, 13:46:28
Originally posted by KrazyHorse
In a market with many producers any individual company which tries to scrape extra money off the top by increasing prices is going to lose all their business.

I never understood squat about economy, but evidently the gasoline it's not an ideal model market...
If the customers could freely move that would be right, but a single producer's offer capacity is anyway limited, so somehow even without a cartel they must have spontaneously found out that they'd make more profit by raising all together rather than cutting the customer base off the overpriced ones...

puzzles me but that's how they say it's going...

Drekkus
31-07-2006, 13:59:03
I THINK it could have something to do with the fact that maybe excavating the oil, transporting it, refining it and selling it at the pump are all different cost centres.

Chris
31-07-2006, 13:59:22
I have plenty of natural gas.

Buuuuuuuuuuuuuuuuuuuuuuuuurp.

King_Ghidra
31-07-2006, 14:08:29
quick, bottle it!

maroule
31-07-2006, 14:11:31
Originally posted by KrazyHorse
You are completely mistaken, sir. The fact that reserves and inventories are not increasing, even with oil at 70+$ (and having been near there for years now) means that market nervousness is only a minor part of the price rise.

World petroleum demand increased significantly over the last 5 years, and not that much more is being pumped. In a relatively inelastic market like the oil industry that means that prices are going to shoot through the roof. Which they did. Analysts are now giving 5 year predictions above 60$. Supply shocks and market nervousness can only add to that.

doesn't make sense
supply shocks are not minor, they shaped the whole history of the thing. I can't see why suddenly taking a massive producer like Iraq from the equation and having another one ready to block the Ormuz straight mean only "added nervousness"...

as you yourself said, China demand (and SA reaching max output, thereby not playing its buffer role) is a more critical factor than reserves running out in 50 years. Have Iraq back in the production line and the region appeased, and that would have a huge impact

Chris
31-07-2006, 14:15:03
Originally posted by King_Ghidra
quick, bottle it! No worries, I'll just eat a plate of beans.

KrazyHorse
31-07-2006, 14:55:45
Originally posted by MoSe
I never understood squat about economy, but evidently the gasoline it's not an ideal model market...
If the customers could freely move that would be right, but a single producer's offer capacity is anyway limited, so somehow even without a cartel they must have spontaneously found out that they'd make more profit by raising all together rather than cutting the customer base off the overpriced ones...

puzzles me but that's how they say it's going...

???

So there's an unstated conspiracy? You might have a point if there was excess capacity. Which there's not.

KrazyHorse
31-07-2006, 14:59:02
Originally posted by maroule
doesn't make sense
I can't see why suddenly taking a massive producer like Iraq from the equation and having another one ready to block the Ormuz straight

A drop in production is not the same as market nervousness about a possible drop in production.

If the price of oil ws being driven up by speculators and people in fear of supply shocks then you would see increases in reserves and inventories instead of basically flat reserves and inventories.

Hoarders hoard. They don't burn the gas that they boaught at an inflated price.

maroule
31-07-2006, 15:15:17
Great news then. Bush can attack Iran now. Champagne!

HelloKitty
31-07-2006, 15:19:56
Originally posted by Japher
[B]thing is, oil companies may be getting record profits, but their profits were small compared to other industries

Best arguement ever!

Selling gummy bears for 300$ a pound is not a rip off because the Russians sell trips to space for 200 million.

MoSe
31-07-2006, 16:12:48
Originally posted by KrazyHorse
???

So there's an unstated conspiracy? You might have a point if there was excess capacity. Which there's not.
On the contrary.

that's how I get it, exactly because there's NO excess capacity.
(of course I'm a nitwit)

Ideal Market.
the price is balanced.
One producer raises prices alone.
ALL the customers of that producer stop buying his oil, and migrate to other producers, who have to raise the qty they offer, to accomodate the new customers.

Oil Market.
One producer raises prices alone.
Its customers want to leave him and seek to become customers of the cheaper producers.
But those can't increase their capacity.
So, either the others can increase their prices because suddenly the demand exceeds the offer, or the customers who can't find oil from the cheaper producers are forced to buy from the one who raised, who can stay in the market and indeed leads the price rise.
Which is more or less the same.

If it's not the way it worked, I'm too stupid to get it anyway

Venom
31-07-2006, 16:20:08
It's all China's fault. They're buying it all.

MoSe
31-07-2006, 16:22:11
and store it in their new 3 rivers dam instead of water

KrazyHorse
31-07-2006, 17:09:45
One producer raises prices alone.
Its customers want to leave him and seek to become customers of the cheaper producers.
But those can't increase their capacity.
So, either the others can increase their prices because suddenly the demand exceeds the offer, or the customers who can't find oil from the cheaper producers are forced to buy from the one who raised, who can stay in the market and indeed leads the price rise.
Which is more or less the same.

Uh...yeah. That's what I'm saying. The reason oil was not badly priced before is that there was some excess capacity lying around. Then, as the spare capacity got eaten up by increased demand the equilibrium point moved to 70$ a barrel.

This isn't oil producers "learning" that they can price their oil higher; it's a shift in the market situation leading to an increase in prices.

KrazyHorse
31-07-2006, 17:14:48
By the way, the fact that the available supply is limited doesn't make oil a non-ideal market, any more than the fact that demand is inelastic makes it a non-ideal market. Both of those factors simply mean that the price is more volatile. When world economics causes a slowdown in demand, the price drops through the floor. When a large producer (Iraq) loses a significant amount of its production or world economics causes an increase in demand then the price shoots through the roof.

Oil is at 70$ a barrel because all the oil that's available immediately can be sold at that price. If the price was any lower then we would run into shortages (the increased price frees up some marginal supplies as well as decreasing some marginal demand).

Dyl Ulenspiegel
31-07-2006, 19:52:28
Originally posted by Drekkus
Sooner or later there will be none around
[/Tower of Power]

The prices at the pump are high because of the high oil prices, and oil companies are making record profits because of the high oil prices. Am I the only one who thinks that's a little weird?

Too bad Roland doesn't post here any more. :cute:

That would be weird upon the assumption that oil companies only trade in oil. Most are integrated companies though including upstream and downstream. The crude production and refining business should add most to their profits, as they get a much higher price at roughly unchanged costs.

And what's Roland?

Dyl Ulenspiegel
31-07-2006, 19:53:56
For the rest of this discussion here, I have no idea what it's about. Only Drekkus' post made some sense (before mine, of course).

Drekkus
31-07-2006, 22:48:04
So the oil price is high because of the growing chinese economy, plus speculation on even higher prices is pushing prices up more. Higher demand drives up the price, and the profits, that's clear. But oil companies then turn to the pump, and say 'hey, oil prices are up, so we have to raise the price at the pump.', making another profit? Isn't that like having your cake and eat it too?

Oerdin
31-07-2006, 23:53:26
If worse comes to worse we could always connect a pipeline to Don Kings scalp. There is enough oil and grease there to power the world for years.

Venom
01-08-2006, 01:01:15
Originally posted by Drekkus
So the oil price is high because of the growing chinese economy, plus speculation on even higher prices is pushing prices up more. Higher demand drives up the price, and the profits, that's clear. But oil companies then turn to the pump, and say 'hey, oil prices are up, so we have to raise the price at the pump.', making another profit? Isn't that like having your cake and eat it too?

Yes, and they can get away with it. So...

Dyl Ulenspiegel
01-08-2006, 08:20:46
Originally posted by Drekkus
So the oil price is high because of the growing chinese economy, plus speculation on even higher prices is pushing prices up more. Higher demand drives up the price, and the profits, that's clear. But oil companies then turn to the pump, and say 'hey, oil prices are up, so we have to raise the price at the pump.', making another profit? Isn't that like having your cake and eat it too?

Oil demand is up due to several factors, like the boom in Asia and continued energy inefficiency in the US.

Supply suffers some problems, from the failed colonization attempt in Iraq to lack of investment during times of low prices.

The inbalance is settled by higher prices, yes. The continiuing dollar inflation and risk premiums for a broader ME war add to it.

As for "making another profit?", I doubt that the margins in the retail business (often small station owners or contractors) have improved. But if your equation for net price of a liter of petrol at the pump is for example at a 30 $/barrel:

crude 0.2 + refining and retailing 0.3=0.5; the production cost is say 0.1 for crude.

Then the crude price doubles:

crude 0.4 + refining and retailing 0.3=0.7, with the production cost still 0.1 for crude. Production profits triple from 0.1 to 0.3.

So there isn't really "another" profit in retail there, despite higher prices and profits. I think there is also some in refining as there seems to be too little capacity. I doubt there is some in retail. especially as retail capacity should be sufficient and can be added quite easily.

Gary
01-08-2006, 08:22:16
If people rioted more often they wouldn't get pushed around so much.

High time we were all able to run our cars on H2O anyway.

Drekkus
01-08-2006, 15:41:19
Originally posted by Dyl Ulenspiegel
Oil demand is up due to several factors, like the boom in Asia and continued energy inefficiency in the US.

Supply suffers some problems, from the failed colonization attempt in Iraq to lack of investment during times of low prices.

The inbalance is settled by higher prices, yes. The continiuing dollar inflation and risk premiums for a broader ME war add to it.

As for "making another profit?", I doubt that the margins in the retail business (often small station owners or contractors) have improved. But if your equation for net price of a liter of petrol at the pump is for example at a 30 $/barrel:

crude 0.2 + refining and retailing 0.3=0.5; the production cost is say 0.1 for crude.

Then the crude price doubles:

crude 0.4 + refining and retailing 0.3=0.7, with the production cost still 0.1 for crude. Production profits triple from 0.1 to 0.3.

So there isn't really "another" profit in retail there, despite higher prices and profits. I think there is also some in refining as there seems to be too little capacity. I doubt there is some in retail. especially as retail capacity should be sufficient and can be added quite easily. Yes, I think I understand that. But it's still silly that a organisation that owns the whole chain has to turn to the end user and say that because of the higher profit margins in the crude business, we have to charge you more.

Lurker the Second
01-08-2006, 15:55:48
Originally posted by Dyl Ulenspiegel
Only Drekkus' post made some sense (before mine, of course).

Scary, scary, scary........

KrazyHorse
01-08-2006, 16:13:16
Originally posted by Drekkus
Yes, I think I understand that. But it's still silly that a organisation that owns the whole chain has to turn to the end user and say that because of the higher profit margins in the crude business, we have to charge you more.

Why? Otherwise they're not maximising their profit. Selling the gas at retail for less would be stupid when they could just sell the refined products (or even the crude) for more to their competitiors.

MoSe
02-08-2006, 07:15:07
Originally posted by Drekkus
Isn't that like having your cake and eat it too?

what's the point of having a cake if you can't eat it?

I'll have the cherry-chocolate-brandy one
flambée

Gary
02-08-2006, 07:23:54
[100-0 prot] None, but once you've eaten it you can't have it any more: because it no longer exists as a cake.[/100-0 prot]

Why do folk continually question that saying ?

MoSe
02-08-2006, 07:46:42
to bring on an insider joke?

and I'll bake a new one!!!