How much is enough? How much profit from the sales of gasoline to the consumer is enough? The unparalleled profits of the main oil companies is at a staggering amount. The Oil companies have found the means to close the market so there is no such thing as a price competition for gasoline, diesel or heating oil. The one logical answer? There seems to be collusion, and possibly a violation of the Sherman anti-trust act.
On March 5, 2008 MSNBC reported that “the 12-nation Organization of Petroleum Exporting Countries said it would maintain current production levels because crude supplies are plentiful and demand is predicted to weaken in the second quarter.”
Recently, in our local newspaper (March 9, 2008) it was reported that OPEC President Chakib Kehelil is quoted as saying “the worldwide market is well supplied, with current commercial oil stocks standing above their 5 year average.” The article continued to say that “Today’s prices don’t reflect market fundamentals.” If the prices are high, definitely they don’t seem to be attributable to an absence of crude. They’re on account of what’s happening in the U.S.,” Kehelil said. “There is sufficient supply. There’s loads of oil there.”
On their website, OPEC claimed the G8 nations, the USA, England, Germany, France and a few others make more money in taxes on the OPEC petroleum than they make themselves. In Europe some countries have several dollars per gallon tax. A couple of years ago an Exxon Mobil spokesperson said they made a large amount of cash because they are a big company. In researching this on the web, I used to be able to find some data that raises some inquiries to their claims. A better measure of a companies size than income or profits is the number of employees they’ve.
WAL*MART, by variety of employees is about seventeen times larger than Exxon Mobil but they make less money. I divided net income for the two companies by the number of their employees. For 2005 it was: Exxon Mobile net income $331,192.00 per employee and WAL*MART net income $6,222.00 per employee. WAL*MART has been a really profitable company for a very long time. They’ve been criticized and they have been called “Greedy” for not providing more to their employees.
This disparity of profits seems to hold for the other major oil companies as well.
Is Exxon Mobil operating in a special Universe? The oil industry managers can’t be doing what they are to all Americans without the protection of both political parties. Even the press appears to be cowed by oil money and influence, where are the voices being raised in protest?
America is famously a “Free Market Economy” but when hurricane Katrina did so much damage within the Gulf of Mexico some oil companies suffered severe damage to oil rigs and refineries and others didn’t.
The argument for raising gas prices then was to repair and replace damaged equipment. In a free market, companies that can provide products to the customer for less accomplish that to enlarge their customer base. In a hard and fast market suppliers charge the identical. Which American cities has had prices that differed by 50 cents or more over a protracted time period because some companies had no Katrina damage to make up? Why was there no competition for the shopper? There was no competitive pricing. All oil companies raised their prices the same !
EP, Chevron, Conoco-Phillips, Exxon-Mobil, and Shell are among the integrated oil companies. That means the same company that owns and operates the oil field also owns and operates the refinery. They buy crude oil from themselves !
Everyone in the media addressing the prices of crude oil cites prices from the new York Mercantile Exchange. Who buys and sells there, and why? Why pay over $100 per barrel of oil, when you’ll be able to pump your personal for what? $10 or maybe $20? A west Texas article written not so long ago claimed that the price of extracting crude oil in fields there varied from $4.00 to $8.00, depending on the sector. West Texas oil fields are largely depleted and so they use expensive means to extract oil that major fields around the globe don’t require.
How much crude oil is definitely sold at the new York Mercantile Exchange? On their website on March 14 of this year they stated, “although lower than 1% of the commodities traded are actually bought or sold through the Exchange. Giving market participants the choice of delivering through the Exchange , however, ensures that the long run prices will reflect the under-lying market.”
I question why is crude oil sold over the exchange at all if not to push the price higher than a competitive but honest free market could manage?
Unfortunately I was not capable of finding the fee to the oil companies of extracting crude oil from their very own operations around the globe. If like Texas, exploration, drilling and extraction costs amount to $10 a barrel and the host countries get $10 and company profits are $10 (50% profit seems exceedingly high but lets use it anyway), that can be $30 per barrel of crude oil to the market.
Based on some well known analysts, the difference in price of a gallon of crude oil and a gallon of normal gasoline on the pump has historically been 85 cents, including refining, taxes, marketing and distribution. That means the markup is $1.15 when gas is $2 a gallon at the pump.
If the difference between a gallon of crude and a gallon of retail gasoline has been 85 cents historically, then a 42 gallon barrel of crude selling at $30 a barrel should result in a price for gasoline of $1.56 on the pump.
Now if my findings are close to the real world oil company costs (closer than the Mercantile Exchange price) we’re being defrauded on a scale that is nearly unimaginable. The USA uses approximately 410 million gallons of gasoline per day. The excess profits per day for the industry selling gasoline at $3.30 per gallon over even $2 gas is over $6,108.00 per second, 24 hours a day, 7 days every week, 365 days a year. That’s over 22 Million dollars per hour !