Oil rockin' everywhere

Discussion in 'Politics' started by Sign Related, Mar 16, 2008.

  1. Sign Related

    Sign Related The Don Killuminati

    The price to oil isnt set by the oil companies I heard. If that's correct, then why isnt everything made/produced/whatever by other companies not set by those very companies? Why isnt everything you can think of buying rising and lowering in price like oil? What makes oil so different and worthy of a rising and lowering kind of pricing? And what's it because of?

    Here's another question: If everything could rise and fall because of whatever the case may be by whomever, how would the economy be then?

    Like go to a store one day and go "Oh, looks like the price of potatoe chips just rose, but the price of light bulbs lowered." Then go to a store on another day and go "Oh looks like the price of potatoe chips lowered, but the price of light bulbs rose".

    ^^Would it be better if things went that kind of way for whatever the 'because of' reason is on oil?
  2. acga5

    acga5 Senior Member

    because the oil companies are oligopolies, and in this system you cannot set the price yourself(you can try but it doenst work out so well), you can't have oil from one platform costing this much and oil from another costing another price, the market determines the price because oligopolies don't want to decide the price,

    for example,

    you have company A and B, they are selling their oil @ 100 a barrel, if company A undercuts company B and sells it for 90 a barrel then company B will lose customers and they will lower their price to get them back, this then results in both companies selling their product @ 90 a barrel which ends up just costing both of them money

    unless of course company A and B collude and both set the price to 140$ a barrel to make money for both of them because oil is a resource that you can't live without(of course this is illegal :p), also oil is traded as a commodity on the open markets(you can buy oil on the markets and sell it like a stock(usually the minimum is 1000barrels but you can't buy 1000bags of potatochips), whereas potatochips and lightbulbs are not(they may be subject to inflation though) furthermore, the energy sector has historically been very volitile
  3. gardener

    gardener Realistic Humanist

    Such a reasonable picture you paint, but not accurate. And retailers buy 1000 bags of potato chips and light bulbs all the time. The difference is they aren't allowed to manipulate their market by creating false scarcisties like the oil and energy sectors are allowed to do. The price of oil is determined by market/auction value. And if you want to run the price up, you hire shills to manipulate the final price.
  4. real_large

    real_large Member

    From a recent USA Today article: (my bold)

    While drivers have been painfully paying up at the pump, oil companies have been racking up eye-popping profits.
    Thursday, ExxonMobil (XOM) became the most stark example yet of how much big oil companies benefited from the huge run-up in oil prices during the third quarter even as two major hurricanes ripped through the industry's Gulf Coast infrastructure. Exxon reported:

    • Net income up 75% to $9.92 billion. That is the most a U.S. company has earned from operations in a three-month period and greater than the annual gross domestic product of entire nations including Cameroon and Zimbabwe.

    • Revenue up 32% to $100.7 billion. That is greater than the annual GDP of all but just 38 of the world's economies.

    Exxon illustrates the energy's sector's tremendous profit amid record-high energy prices. The industry is on pace to earn $96 billion this year — more than what the USA's industrial and telecom companies will earn, combined
  5. acga5

    acga5 Senior Member

    yes and i pointed out this problem, but the difference between potatochips and oil is anyone can buy oil on the open markets, you can't go to the NYSE and buy 1000 bags of potatochips, and it is this collective buying/selling along with the influence from the supply and demand the influences the price

    the difference is that there are so many different suppliers of potatochips and if you were to try to reduce the supply of your potatochips to drive up the price you would just have customers leave and buy another brand, but you can't really force people to suddenly leave and choose another source of energy very easily so it would take a while a really high price to force people to switch
  6. acga5

    acga5 Senior Member

    I don't get why you are posting their quarterly earnings, they earned 40.6B in profit last year with 400B in revenues. 10% profit margin which is pretty huge
  7. real_large

    real_large Member

    Just for some perspective. I think your annual numbers give an even better picture of what's going on. I don't expect Exxon to be a charity, but no one seems to be asking them any hard questions about their profiteering. Isn't this as much a "national security" concern as what people might be talking about on their cell phones or googling on the internet?

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