Re: Record oil company profits

On Sun, 04 May 2008 14:17:59 -0500, tscottme wrote:

One thing that is very hard for some people to understand is that oil
companies don't charge a fixed dollar and cents amount for their product and
services. Many of their costs and revenue are relative amounts. Unlike
paying a salary to an employee or paying a truck driver a fixed amount of
money per mile they travel, oil companies charge/pay a relative amount and
that amount is related to the cost of the crude oil.

They pay the lease-holder from where they get the crude 1/8 of the price of
the oil. If the oil price goes up, the lease-holder gets more cash for the
same amount of oil. If the price goes down, the lease-holder gets less for
the saem amount of oil. Pipeline charges, same way. For some reason people
just assume the oil company pay and are paid some fixed dollar amount and so
when ol is $100 per barrel rather than $40 per barrel they must be a
profiting an extra $60 per barrel. That's not true. The oil companies that
we are familiar with are public companies and you can read their actual
financial data. As Tony points out, they have been making about 10% profit
for decades. The truth is that 10% earned when the price of oil doubles or
triples is a much highr profit, a record profit. However, that profit
doesn't even approach the imagined profit many assume when the price of oil
is $60 or $70 than a year or two ago. The easiest way to understand this is
to think of oil companies like real estate agents charging their usual % fee
in a market when buyers and sellers bid up homes. It's the buyers and
sellers that negotiate the price of the house, and the oil, once they come
to agreement the RE agent collects his small fee

Damn..... This analysis is actually not wrong. Bottom line: the oil
companies do not CAUSE the prices. But they benefit greatly from the rise
in the prices.

That does not mean, however, that the oil companies have no pull or
control over the owners of the mineral rights. And so it does not mean
that a windfall profit tax on oil companies will have no effect on their
behavior or the behavior of their suppliers. It matters what is done with
the proceeds of such a tax. That is the part that makes such a tax a good
or a bad thing to do.

--
"I know no safe depository of the ultimate powers
of society but the people themselves; and
if we think them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it from
them, but to inform their discretion by
education." - Thomas Jefferson
http://GreaterVoice.org/extend

.

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