How long will we let the oil companies SHAFT us?

[hugo]

Occasional periods of sudden price increases? If that’s what you want to call it OK…but your wrong.

The government you all like to bash is the only thing standing in the way of the Oil companies charging $5.00 a gallon right now. And the only reason the government holds the price down is because it is non-conducive to public pacification and economical growth. The government give subsidies to the oil companies much in the same way they subsidies farming, your paying more for gas then what is posted at the pumps it’s just buried in your tax’s.

America consumes the vast majority of the oil produced in the world; it has been this way for a long time, and the biggest contributing factor to obtaining cheep oil. But that is changing; emerging markets and social changes all across the world are consuming more oil and beginning to compete for the available oil on the market. That means you’re going to pay more and should be paying more right now compared to gas prices everywhere else in the world. In the end you will pay what ever the oil companies charge for a gallon of gas, just like you will pay what ever they charge for a loaf of bread at the super market, and just like you will pay what ever inflated price housing is going for in your area right now.

My heads not up my ass just because you chose to live in a fantasy world and chose to believe everything you read in economics 101

Your head is up your ass. I suggest you retake Economics 101. The oil industry is relatively competitive and at some point reduced supplies and increased demand will create competitive alternative energy sources. Please go back and take Econ 101 again.

Individuals react to higher energy costs by reducing consumption and investing more in conversation.

 

[hugo]

Econ 101, believe it folks.

profit maximization
In economics, profit maximization is the process by which a firm determines the price and output level that returns the greatest profit. There are several approaches to this problem. The total revenue -- total cost method relies on the fact that profit equals revenue minus cost, and the marginal revenue -- marginal cost method is based on the fact that total profit in a perfectly competitive market reaches its maximum point where marginal revenue equals marginal cost.


Basic Definitions
Any costs incurred by a firm may be classed into two groups: fixed cost and variable cost. Fixed costs are incurred by the business at any level of output, including none. These may include equipment maintenance, rent, wages, and general upkeep. Variable costs change with the level of output, increasing as more product is generated. Materials consumed during production often have the largest impact on this category. Fixed cost and variable cost, combined, equal total cost.

Revenue is the total amount of money that flows into the firm. This can be from any source, including product sales, government subsidies, venture capital and personal funds.

Average cost and revenue are defined as the total cost or revenue divided by the amount of units output. For instance, if a firm produced 400 units at a cost of 20000 USD, the average cost would be 50 USD.

Marginal cost and revenue, depending on whether the calculus approach is taken or not, are defined as either the change in cost or revenue as each additional unit is produced, or the derivative of cost or revenue with respect to quantity output. For instance, taking the first definition, if it costs a firm 400 USD to produce 5 units and 480 USD to produce 6, the marginal cost of the sixth unit is approximately 80 dollars, although this is more accurately stated as the marginal cost of the 5.5th unit due to linear interpolation. Calculus is capable of providing more accurate answers if regression equations can be provided.


Total Cost-Total Revenue Method
To obtain the profit maximizing output quantity, we start by recognizing that profit is equal to total revenue minus total cost. Given a table of costs and revenues at each quantity, we can either compute equations or plot the data directly on a graph. Finding the profit-maximizing output is as simple as finding the output at which profit reaches its maximum. That is represented by output Q in the diagram.


Profit Maximization - The Totals ApproachThere are two graphical ways of determining that Q is optimal. Firstly, we see that the profit curve is at its maximum at this point (A). Secondly, we see that at the point (B) that the tangent on the total cost curve (TC) is parallel to the total revenue curve (TR), the surplus of revenue net of costs (B,C) is the greatest. Because total revenue minus total costs is equal to profit, the line segment C,B is equal in length to the line segment A,Q.

Computing the price at which to sell the product requires knowledge of the firm's demand curve. The price at which quantity demanded equals profit-maximizing output is the optimum price to sell the product.


Marginal Cost-Marginal Revenue Method
If total revenue and total cost figures are difficult to procure, this method may also be used. For each unit sold, marginal profit equals marginal revenue minus marginal cost. Then, if marginal revenue is greater than marginal cost, marginal profit is positive, and if marginal revenue is less than marginal cost, marginal profit is negative. When marginal revenue equals marginal cost, marginal profit is zero. Since total profit increases when marginal profit is positive and total profit decreases when marginal profit is negative, it must reach a maximum where marginal profit is zero - or where marginal cost equals marginal revenue. This intersection of marginal revenue (MR) with marginal costs (MC) is shown in the next diagram as point A. If the industry is competitive (as is assumed in the diagram), the firm faces a demand curve (D) that is identical to its Marginal revenue curve (MR), and this is a horizontal line at a price determined by industry supply and demand. Average total costs are reprsented by curve ATC. Total economic profits are represented by area P,A,B,C. The optimum quantity (Q) is the same as the optimum quantity (Q) in the first diagram.


Profit Maximization - The Marginal Approach
If the firm is operating in a non-competitive market, minor changes would have to be made to the diagrams.


Modes of Operation
It is assumed that all firms are following rational decision-making, and will produce at the profit-maximizing output. Given this assumption, there are four categories in which a firm's profit may be considered.

A firm is said to be making an economic profit when its average total cost is less than the price of the product at the profit-maximizing output. The economic profit is equal to the quantity output multiplied by the difference between the average total cost and the price.

A firm is said to be making a normal profit when its economic profit equals zero. This occurs where average total cost equals price at the profit-maximizing output.

If the price is between average total cost and average variable cost at the profit-maximizing output, then the firm is said to be in a loss-minimizing condition. The firm should still continue to produce, however, since its loss would be larger if it was to stop producing. By continuing production, the firm can offset its variable cost and at least part of its fixed cost, but by stopping completely it would lose equivalent of its entire fixed cost.

If the price is below average variable cost at the profit-maximizing output, the firm is said to be in shutdown. Losses are minimized by not producing at all, since any production would not generate returns significant enough to offset any fixed cost and part of the variable cost. By not producing, the firm loses only its fixed cost.

 

[Cogito Ergo Sum]

Econ 101, believe it folks.

I took both Micro and Macro Econ courses. What a joke. Never before in my life had I seen an opinion stated so strongly as fact!

The truth about Economics is, that although some observations and calculations may be appropriate and function at a given moment in time, the real magic of Economic theory are the variables; Chaos personified and unpredictable.

Truly, I like the definition that learned mathematicians use for Economists...

"Glorified Dice-Rolling Soothsayers..."

If Economic Theory was foolproof, so would be business.

Nice try Hugo. Weak.

 

[Rockhard]

I see that the sixty to ninety day memory of the average citizen is still working . When Rita hit Texas The damage was reported as 10% motor fuel 30% loss of supply for aviation fuel. The price didn.t go up 10% 0n fuel for your cars I increased by about 40% to three dollars plus per gallon. God bless those humanitarian oil companies, and the rag head in atlanta that was charging six bucks a gallon.

 

[hugo]

So what you are simply saying is when gas goes up to 3,4 or 5 bucks a gallon you wont pay it?

At a certain point alternative energy sources will be competitive. The market price will be quite close to where marginal revenue equals marginal cost. I drive less than I did a couple years ago. Many others do the same.

 

[hugo]

I took both Micro and Macro Econ courses. What a joke. Never before in my life had I seen an opinion stated so strongly as fact!

The truth about Economics is, that although some observations and calculations may be appropriate and function at a given moment in time, the real magic of Economic theory are the variables; Chaos personified and unpredictable.

Truly, I like the definition that learned mathematicians use for Economists...

"Glorified Dice-Rolling Soothsayers..."

If Economic Theory was foolproof, so would be business.

Nice try Hugo. Weak.

Whose arguments are weak? First you argue a mere 10 percent profit margin is gross exploitation. Than you argue that Exxon might be understating income when recent history shows corrupt companies tend to overrstate income. Then your blanket statement, based on freshman economics courses, that the science of economics is pure opinion. The weak arguments are yours. The oil business is highly competitive. Gas prices are higher than they should be due to government interference.

Try taking some higher level economics courses. You might learn something.

 

[hugo]

Hugo will pay what ever they charge at the pumps, he is just being argumentative, probably because I over simplified the issue in my previous statement by just saying;

 

[Cogito Ergo Sum]

...Am I talking to children here?

No, you just tend to be very condescending and talk to everyone as if they were a child and you were so wise. That's all.

 

[Cogito Ergo Sum]

Whose arguments are weak? First you argue a mere 10 percent profit margin is gross exploitation. Than you argue that Exxon might be understating income when recent history shows corrupt companies tend to overrstate income. Then your blanket statement, based on freshman economics courses, that the science of economics is pure opinion. The weak arguments are yours. The oil business is highly competitive. Gas prices are higher than they should be due to government interference.

Try taking some higher level economics courses. You might learn something.

Are you always a condescending snot when you are so wrong Hugo?

Wal-Mart, the company so many here like to call "The Evil Empire", operates on a profit margin of 3.54% and an operating margin of 5.88% total. I know this because I hold stock in this company.

Check it out for yourself. It's right here.

http://finance.yahoo.com/q/ks?s=WMThttp://finance.yahoo.com/q/ks?s=WMT

Exxon Mobil's numbers are profit margin of 10.62% and an operating margin of 17.47% total. I also hold energy stocks including XOM.

http://finance.yahoo.com/q/ks?s=XOM

I guess you somehow think companies have much higher profit margins?

Hmm...

-----------------------
Your claim about recent history showing companies overstating income is incorrect. They tend to severely understate debts and in many cases, with a healthy dose of smoke and mirrors and clear criminal intention, state those debts as assets.

Conversely, as long as there has been government taxation, companies as diverse as the corner Speedy Mart to giant corporations do the high wire balancing act of hiding revenues to avoid taxation. This is a fact that the IRS deals with on a daily basis.

----------------------

As to MRIH claims that Exxon is so ethical. Well, now that they have just finally lost lost $1.975 billion dollar lawsuit to their dealers and have finally agreed to pay up for cheating them, well...you do the math.

http://biz.yahoo.com/ap/060203/exxon_dealers.html?.v=2

-------------------------

The crux of my original point is this.

The oil companies act as if their prices are set by some divine force outside of their direct control. Although a brilliant smoke screen and outstanding public relations tool, this is a bold faced lie!

At a time when America was reeling in debt, hemorrhaging money in a useless war in Iraq, and billions were being thrown into the toilet called New Orleans and Mississippi post Katrina, wages were and are down, unemployment was and is high, the oil companies (and they are not the only ones) took advantage of the situation and the distraction of the American Public in an unprecedented display of avarice.

They did what any greedy corporation would do. They shafted us.

After all, at a time when they claimed HUGE increases in expenses to them in order to justify the $3.00+/gal prices, (they claimed they weren't making any money off of the catastrophe) in actuality, they were rolling in money because "higher oil prices and fat refining margins outweighed a sharp fall in production." In layman's terms, they GOUGED!

----------------

Finally,

What amazes me more than anything is just how stupid college can make people like you. They take your money, fill your head with some babble, proclaim you smart, and you actually believe it.

 

[hugo]

Are you always a condescending snot when you are so wrong Hugo?

Wal-Mart, the company so many here like to call "The Evil Empire", operates on a profit margin of 3.54% and an operating margin of 5.88% total. I know this because I hold stock in this company.

Check it out for yourself. It's right here.

http://finance.yahoo.com/q/ks?s=WMThttp://finance.yahoo.com/q/ks?s=WMT

Exxon Mobil's numbers are profit margin of 10.62% and an operating margin of 17.47% total. I also hold energy stocks including XOM.

http://finance.yahoo.com/q/ks?s=XOM

I guess you somehow think companies have much higher profit margins?

Hmm...

-----------------------
Your claim about recent history showing companies overstating income is incorrect. They tend to severely understate debts and in many cases, with a healthy dose of smoke and mirrors and clear criminal intention, state those debts as assets.

Conversely, as long as there has been government taxation, companies as diverse as the corner Speedy Mart to giant corporations do the high wire balancing act of hiding revenues to avoid taxation. This is a fact that the IRS deals with on a daily basis.

----------------------

As to MRIH claims that Exxon is so ethical. Well, now that they have just finally lost lost $1.975 billion dollar lawsuit to their dealers and have finally agreed to pay up for cheating them, well...you do the math.

http://biz.yahoo.com/ap/060203/exxon_dealers.html?.v=2

-------------------------

The crux of my original point is this.

The oil companies act as if their prices are set by some divine force outside of their direct control. Although a brilliant smoke screen and outstanding public relations tool, this is a bold faced lie!

At a time when America was reeling in debt, hemorrhaging money in a useless war in Iraq, and billions were being thrown into the toilet called New Orleans and Mississippi post Katrina, wages were and are down, unemployment was and is high, the oil companies (and they are not the only ones) took advantage of the situation and the distraction of the American Public in an unprecedented display of avarice.

They did what any greedy corporation would do. They shafted us.

After all, at a time when they claimed HUGE increases in expenses to them in order to justify the $3.00+/gal prices, (they claimed they weren't making any money off of the catastrophe) in actuality, they were rolling in money because "higher oil prices and fat refining margins outweighed a sharp fall in production." In layman's terms, they GOUGED!

----------------

Finally,

What amazes me more than anything is just how stupid college can make people like you. They take your money, fill your head with some babble, proclaim you smart, and you actually believe it.

OK, let us ignore the fact that Wal-Mart and Exxon are different industries and the profit margin on goods sold varies greatly from industry to industry. Let us ignore that the retail, and particularly the grocery business, has a very low profit margin. ROI is a much better figure to look at when comparing companies in different industries. Ignoring all that we have a mere 7% difference. Let us take CES's statement that prices were $3 bucks a gallon ($2.79 was the most I paid). Now we got 7% times three bucks a gross exploitation of 21 cents a gallon. Gasoline taxes are much higher, the cost of regulation, which has prohibeted new refineries from being built, is much higher. The oil companies charge the market rate, the same as all other companies.

Once again, you can see CES's disdain for education showing. Most likely why he falls for the socialist viewpoint on corporations.

 

[hugo]

And at a certain point we will have space colonies on the Moon and Mars, but until then you will still be using gas in some form and you will be paying what ever they charge you at the pump, and that sir Hugo was my one and only point you seem to have totally missed.

Economics 101 applies only in the barest of ways when dealing with the oil industry and the farming industry, as well as the currency industry and the stock market. We don

 

[Cogito Ergo Sum]

...Once again, you can see CES's disdain for education showing. Most likely why he falls for the socialist viewpoint on corporations.

LMAO. I don't disdain education, and you make an incorrect assumption about me and a college degree.

However, I do disdain pseudo education majors such as Economics, Political Science, or Religion.

Furthermore, my point with you is that you simply believe that because you have a college education, you are smart.

Whereas, I believe that I am average, yet I maintain the ability to observe, ponder, formulate and think for myself. This is my wisdom. Not the piece of paper(s) hanging on the wall.

Lastly, socialist, yes on some items, liberal on others and yet conservative on others. Like I just said...I observe, ponder, formulate and think for myself; I don't allow a political party to dictate to me what I should think.

For the record too Hugo, you and I belong to the same political party.

I know, it shocks me too.

 

[hugo]

LMAO. I don't disdain education, and you make an incorrect assumption about me and a college degree.

However, I do disdain pseudo education majors such as Economics, Political Science, or Religion.

Furthermore, my point with you is that you simply believe that because you have a college education, you are smart.

Whereas, I believe that I am average, yet I maintain the ability to observe, ponder, formulate and think for myself. This is my wisdom. Not the piece of paper(s) hanging on the wall.

Lastly, socialist, yes on some items, liberal on others and yet conservative on others. Like I just said...I observe, ponder, formulate and think for myself; I don't allow a political party to dictate to me what I should think.

For the record too Hugo, you and I belong to the same political party.

I know, it shocks me too.

Actually, I did not get my degree until I was 31 and I thought I was pretty damn smart before I got that degree. I am quite liberal on social issues, quite conservative on economic ones. I am basically a classical liberal strongly influenced by the writings of Locke, Von Mises, (who I never even studied in college despite having a double major in business and economics), JS Mill, the Federalist Papers (wish our USSC justices would read them) Milton Friedman and even liked a couple of JK Galbraith's ideas. I observe, ponder and think for myself and have come to the same conclusion one of our founding fathers did that the government that governs best governs least. When you find long-term excessive profits, except for in the rare cases of natural monopolies and oligarchies, you find excessive government.

While I am an extremist in the defense of liberty it has come from much pondering over what I have learned from inside and outside the classroom.

I chose the political party that I agree with on about 80 to 90% of the issues. My beliefs were shaped before I became a Libertarian and I think their open borders idea is about the dumbest idea I have ever heard of. It might work if we had a libertarian society to start with it won't work in a socialist country with a nation of paupers on our southern border.

I suggest people read Milton Friedman's "Free to Choose". If there is one man who I could be accussed of blindly following it would be him.