Originally posted by X and Halo:
I just wanted to clear up some confusion on basic economics in the oil industry.
1. Oil supply is controlled by a cartel (OPEC). This is a group of oil producers who get together and determine how much they will produce in order to control the price through supply manipulation. They are acting almost like a monopoly, except that they control the price by supply rather than directly setting the price. These countries could increase oil production, but why would they increase supply to drop the price to $28/barrel when people are willing to pay $120/barrel?
OPEC only controls about 50% of the world's oil supply. (That's NOT saying they don't have the power to influence it.)
2. The supply of oil has not changed significantly since the start of the Iraq war. The current prices are largely being driven by speculation-people are buying oil futures with the expectation that the price tomorrow will be higher than the price today. It becomes a self-fullfilling prophecy through their continued investments. This market is based more upon fear than supply/demand and rational thought.
Not to mention the lack of refinery capacity. That being said, it's not quite as easy as your explanation. Institutions and investors are buying oil (and other commodities - like Gold going higher in price) as a hedge against the falling dollar. If the dollar starts rebounding, watch the oil prices drop.
3. Exxon Mobile had record company profits of 10.9 billion dollars in the first quarter of this year. They paid over 29 billion dollars in federal taxes during this same 3 month period. This means that they only made $1 for every $3 they paid in taxes. And we want to tax them more? It was mentioned earlier that companies pass new costs on to the consumer. Taxing oil companies' profits will NOT drop the price of gasoline, they will pass this increased cost to the consumer--you and me.
You might want to explain that. Only about $10 billion of those taxes were income taxes.
4. If you look at Exxon's filings with the SEC, only 8% of their income came from gasoline sales and refining. 92% of their income came from selling oil for other petroleum based products such as plastics. That's right, they made more money from that water bottle you're drinking out of than that last gallon of gas you bought. Gasoline is just the scapegoat.
Which makes one wonder...when will we start seeing glass returnable bottles again?
Oil companies make a lot of money. But, they pay a lot of taxes. The price that you are paying at the pump is not controlled by Exxon, as Hillary would have you believe, but by OPEC and the speculators who are buying oil futures today.
Yes, they pay a lot of taxes...but it's not much more than the taxes the richest people pay. Highest personal income tax is what, 38%? Exxon paid 41%.
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