Why is Exxon Mobile and Shell raising their prices?

[liberal N proud]

The shut down was to BP oil pipeline, not Exxon or Shell. But they all jump on the band wagon and jack the prices 25 cents this morning, while the BP spokesman is saying it should only raise the price 5 cents.

This is all bu$h shit
:mad: :mad: :mad: :mad: :mad: :mad: :mad: :mad:

[Nickster]

1. Because they can and no one will hold them accountable. n/t

[Xenotime]

8. exactly. They rape and plunder the american pocket.

[lonestarnot]

2. This is reason enough to buy a Costco card. I don't know where they

get their gas, but at least you don't have to look at EXXON/MOBILE signs while you fill up the guzzler.

[OnionPatch]

11. I wish Costco was closer

I have to use half a tank of gas to get there.

[lonestarnot]

12. Well damn, that doesn't do you any good then.

[TexasLawyer]

3. What they charge

has little to do with their own internal cost of production.

Oil is an international commodity, and they peg their price on international benchmmarks.

[uppityperson]

4. Demand may go up they say.

People might worry that gas will be in short demand or cost more or something like that so they are filling up their tanks so gas may be in short demand so it should cost more. See?
:sarcasm:

[meldroc]

5. Because they can.

Why do you think Bush & Cheney & co. are throwing gasoline on the fire in the Middle East? Because it creates uncertainty in the oil markets, so while cost of production remains roughly the same, market prices go up. Free money for them!!!

[elehhhhna]

6. Antitrust class action suit, anybody?

[ProfessorGAC]

15. Nope!

Why do you think the oil companies were excited (they didn't fight it at all) when unleaded gasoline went on the commodities markets? They knew the speculators would always add price to the goods without adding any value.

In most commodities, the bidders, buyers, and brokers add value by creating a stream of goods from producer to consumer, and create the operational infrastructure for that commerce and transfer of ownership to take place.

In the gasoline business, no such facilitation was ever needed. There have gas stations, and pipelines, and terminals, and trucking firms dedicated to this business for 75 years! So, the transer of ownership through the markets brings ZERO added value, but drives the consumer price up by the added layer of profit taking, and the price changes to a constant, so every oil company benefits in the exact same way when any market reaction occurs.

Add to that futures, where they are insulated against sudden downshifts in price, because speculators are hedging down by shorting, and you get the perfect situation for the oil firms.

They get high prices, and get to blame someone else, even though not a single one makes any effort to undercut the market by expanding market share on price. Not one! But, since they don't "set" the prices, they can't be accused of anti-trust violations.

Pretty convenient, huh?
The Professor

[louis-t]

24. Repugs claim it's "free-market"

Seems to be the opposite.

[ProfessorGAC]

26. Then They Would Be Wrong!

The entire oil and fuel market violate a minimum of 3 elements that both Adam Smith and the Austrian School preaches make up a free market. (And Smith & the Austrians were hardly in locked agreement, philosophically.) But, even the most ardent free marketeers (at least theoreticians) could not look at this industry and describe it as a free market.

Anybody who thinks it is, is automatically showing that they haven't examined it very carefully.
The Professor

[rock]

7. Duh. To make more money

(Just a guess)

[Robbien]

9. The only way to win on Wall Street is to show higher profits

than the last quarter.

BigOil just found its road to higher profits for this quarter.

[enuffs_enuffs]

Yet another aspect of the "free-ta-fuckya market" economy! n/t

[hobbit709]

10. And to top it all off

The vast majority of the Alaskan oil goes to Japan and the rest of Asia- not here to the US.

[unc]

14. HAHAHAHA

Alaskan oil goes where? THE UNITED STATES OF AMERICA. The US only exports a total of 100,000 barrels a day, which is a mere 6.7% of Alaskan oil production. A 'vast majority'? 100,000 barrels a day to Asia, or 1.4 million barrels a day to America? Which one is bigger? Hmmm...

[LSK]

17. I love the sources you provide

Not!

[slaveplanet]

13. The BP fields represent less than .5% of world production

that's half a percent of world production. Half a percent of $3 is 1.5 cents, they're still making out like a bandit with a 5 cent raise let alone 25 cents.

[unc]

16. It's called supply and demand

You can't use reciprocals with supply and demand especially for a commodity with high demand and customers with plenty of capital. The price determined after a disruption must be enough to force demand down by the amount equal to the drop in supply. Therefore, if your customers do not have a desire to stop using your product and they have plenty of money for your product, you'll need to increase prices higher than the the drop in supply in order for demand to equal supply, otherwise you have a shortage on your hands. Ask yourself: would a 1.5 cent rise in gasoline make you drive .5% less?

[LSK]

18. demand will not drop

http://en.wikipedia.org/wiki/Who_Killed_the_Electric_Car%3F

Try living in reality. Do you expect 1.5% of the population to suddenly stop driving to work or going to the stores?

[Freedom_Aflaim]

30. But actually it will. It has to.

For most people, they'll continue to use the same exact amount of fuel.


Some however, this will be just enough of the nudge to push them off the log and buy that hybrid.


Some may take one less trip this month.


Sadly, some are already spending every single penny on their meager minimum wage living. When prices rise they buy less. If that means they don't have enough fuel to get to work, then they either walk, carpool, take the bus or simply not go. They have but one choice, buy less.

There will be more who drive MORE because of higher prices. That group is limited to those profiting richly because of the increase in cost. Perhaps they'll buy a new luxury car with that V-12. Maybe a couple extra trips to Europe this year.

Which group do you think is bigger? The people profiting by oil costs, or the people hurt by it?

Its a big world, but its still a world of finites.

[ProfessorGAC]

19. Simplistic Nonsense

This is not merely supply and demand. The concept of S&D requires a free and open market, which does not exist, the willingness and ability to compete for market share based upon price, which doesn't happen, and the contribution of some value at every stage of profit taking. That last point does not happen in two stages of profit taking on this product. So, the model is not the two dimensional one you suggest.

In addition, there is no freedom to the consumer, because the entire industry has adopted a cost-plus model, and end up being the only major industry in which increases in raw material pricing is WHOLLY absorbed by the consumers. Yes, it's the ONLY one! When raw material prices go up, the big detergent people don't get to immediately reprice. The big box stores will simply refuse to accept the increase. When the increase finally goes through it cuts into the profit margins because it will never be high enough to cover the TVM losses already incurred.

So, that's another variable in the equation that doesn't fit into your 2-D point of view.

You can go ahead and think you've got it all figured out, but that would mean you've voluntarily stopped learning. That would be sad.
The Professor

[slaveplanet]

21. not to mention

the cause for the offline supply is 100% BP's fault,

They completely threw maintenace to the wind,


Part of the pipeline that ruptured in March leading to the worst spill on Alaska's North Slope. BP began shutting down Prudhoe Bay after it discovered a small spill and more than a dozen sections of severe corrosion on other pipelines in its field.

the problems with the pipeline should not be a surprise, adding it's been well known that oil companies are not doing enough regular maintenance on their infrastructure.

When oil prices were low, they were reluctant to spend on that kind of maintenance, he said. But when prices soared in recent years, the cost of shutting down a pipeline or other facilities for maintenance would have meant too much lost production.

http://money.cnn.com/2006/08/07/news/international/oil_alaska/index.htm?cnn=yes

PS: Does anyone else find that pic strange?

unless that's all recently new pipeline in that pic, and the brown section part of the old line...I'd say it look's like a hell of a lot of corrosion, now if the reverse is true and that brown pipe is the repaired section, I'd say something very fishy is going on. The pipes corrode from the outside in, right?

pps: also,they do have the ability to shut those pipes valves independently, do they not?

[ProfessorGAC]

22. Another Dimension Added

Things get so difficult when the world doesn't work in 2 dimensions, doesn't it?
The Professor

[Freedom_Aflaim]

23. I understand your concerns and sentiment

But supply did just drop and cost certainly did rise.

Exactly as the supply/demand model says it will.

You do have a good point about uniqueness in regards to this the only industry being the one where the consumers absorbs the entire raw material price changes. This is actually a remnant of regulation where utilities where limited to raw material recovery, a dictated profit, and a dictated margin for maintenance.

That model of regulation for delivering energy worked quite well. Utilities were forced to spend all the maintenance money on actual maintenance of their supply system (as opposed to say exec bonus's), raw material was just passed on, and profits were limited to reasonable levels.

Now with deregulation, we are seeing the skyrocketing prices, along with shortages ala california, or prolonged outages ala NY

Also with deregulation, the companys have kept the part of regulation that was attractive (i.e. passing raw material cost directly to the consumer), while adopting unlimited profits. Essentially the worst of both worlds for the consumer.

[ProfessorGAC]

28. When Supply Can Be Manipulated Despite Demand. . .

. . .the regulation has nothing to do with it. And, by the way: When was the oil industry regulated?

You seem to be mixing apples and oranges here? The conversation was about the oil industry, not other utilities. And, on top of that, we were told by the dereg hawks, that the prices during regulation were artificially HIGH! That competition and free markets would LOWER the price to the consumer.

Those promises were based upon the same sort of "X therefore Y" you and the other poster are offering. It didn't happen.

In addition, when the prices jumped up in May, did supply go down? No. Did demand rise? No. In fact, it was an uptick in ANTICIPATION of increased demand at the end of May. Hmmmm! So, now supply and demand works in two dimensions, but we can add the anticipatory dimension of time? That already means the X thus Y is invalid.

Come on! You don't have to be a statistical genius to figure out that none of these simple models actually describe what goes on in an industry this big!
The Professor

[Freedom_Aflaim]

29. Im talking about the energy industry as a whole

If Im mixing apples and oranges, than this negates your point about the uniqueness of oil being the ONLY industry where the cost is directly absorbed by the consumer.

But the truth is that oil is the other side of the coin from every other utility and sometimes the seperation is little more than paper. The profits end up in the same pockets. While oil is not regulated and never was. The oil execs simply choose from desireable elements of regulated utilities (and similiar) while leaving behind the undesireable elements (from their point of view)

The rule of supply and demand is a huge simplification. The real dynamics of the market are not 2d, 3d, but closer for 100 dimensions that include everything from actual pumping/delivery cost to market sentiment to market hunches to plain old greed and manipulation.

Supply and demand is just a way of boiling down all those elements into something understandable enough to put on a textbook page. Suprisingly it usually works.

In this case, it did not fail. supply went down, prices went up.

[ProfessorGAC]

34. Explain Prices Going Up When Supply Doesn't Fall

You're agreeing with me, while trying to disagree. Which is it? The energy industry did not get to pass on every increase in coal or NG during regulation. That's not even happening now. We don't see increases in electrical prices at a 100% correlation to the increase in coal or nuclear materials, here in Illinois. So, i didn't negate my point, you negated yours.

S&D is meant to explain nothing. That's the problem with using it as a hypothetical construct. It's meant only to provide some extremely basic, although not realistic and applicable, framework to cover the short range microeconomic concepts involved in pricing within a fully opened market. So, supply & demand cannot "work". It was never meant to explain the detail, and it doesn't apply except in limited situations, and then only occasionally.

Hence, my objection. It is not meant to explain what's happening. It never was. So, any attempt to use to explain the pricing factors in this market is apropos of nothing.
The Professor

[Freedom_Aflaim]

38. corruption

Well 98% corruption, 1% inflation, 1% increased overhead

" You're agreeing with me, while trying to disagree. Which is it?"

Actually I was getting the same vibe from you :)

I think that we are largely agreeing here. The exception is that I believe that S&D as an explanation does work in most situations where you feel its works in limited situations.

[Freedom_Aflaim]

20. supply and demand

supply dropped when BP's pipeline was shutdown

[lpbk2713]

25. Simply put: Because the rethugs have all the power.

They have had the House, the Senate, the Judicial branch and the Executive Branch for at least the last six years. The whole ball game. That's why Big Oil can give their execs hundreds of millions of dollars in retirement packages.

[AngryAmish]

27. Suppy was reduced when the pipeline went down

The only way short term to reduce demand is by raising prices. Especially in the short term demand of gasoline is very inelastic (it takes a large price increase to reduce demand by a little).

[Donnachaidh]

31. price-gouging and price-fixing

they all do it. No one in the government stops them.

[Strelnikov_]

32. Because Petroleum Is In General A Fungible Commodity

Drought in Nebraska lowering the corn yield does not just raise the price for corn from Nebraska.

On edit: As for the amount of the increase, because they can.

[mtnester]

33. Because they have gotten away with gouging for years, and NO ONE

will stop them, and they know that.

[Odin2005]

35. Commodity markets are goofy things.

Price is determined by total GLOBAL supply and total GLOBAL demand, which is why a regional distruption sends oil higher everywhere.

[onethatcares]

36. so if I understand correctly,

Iraqis will have to pay 38 cents for a gallon of gas now. I was under the impression the oil from the Alaskan Pipeline went to Japan. It isn't refined anywhere in the U.S. of A. so the disruption should not affect us here.

[Javaman]

37. Because they can. nt