Profit
1: the excess of returns over expenditure in a transaction or series of transactions; especially : the excess of the selling price of goods over their cost

2: net income usually for a given period of time

3: the ratio of profit for a given year to the amount of capital invested or to the value of sales.

So you are saying that if the oil companies purchase (capital invested) oil at $140/barrel, they could only make (value of sales) 9.9 cents/gallon, right?

And are you also saying that if the oil companies purchase (capital invested) oil at $90/barrel, their profits will increase?

Each of your three questions are glaring examples of ignorance. Some of it is your choice to be ignorant but not all of it. I will try to explain it so you can better understand and then learn from it.



Oil companies do not control the supply of oil and can not control the supply of the worlds oil supply. Saudi Arabia controls the supply within their borders, Iran controls the supply within its borders and so on. Oil companies pay the owners of the land for the rights to drill and recover the oil. So unless the oil companies own the land they can’t control the supply of the world’s oil. OPEC tried in the 70’s to control the supply of oil and because it took the world by surprise it took a while for nations and companies to adjust. Instead of getting 70% of our oil from OPEC we get that same 70% from outside our country but only 21% comes from OPEC nations. This price is set in the futures market by speculators.




The easy answer is volume. The more they sell the more they make. The harder to understand answer is if they are drilling in the United States they are getting the oil on land they lease or own. They don’t have to pay the per barrel price to anyone but themselves. This reduces the cost of a barrel of oil because they don’t charge the market price to themselves it is just a money shuffle that the windfall profits tax takes so why charge it? By eliminating the foreign nations all the money is made in the US which means oil workers make money, they spend more money that causes other companies to make more money and so on. At the same time the world price of oil goes down to compete with what is pulled out of the ground domestically at a lower price. This means the price of gas goes down world wide.

Look at it like this are you going to pay 100 dollars a barrel from someone when the US is able to sell it for 50 dollars a barrel? You would have to be a very foolish person to charge 100 dollars because no one is going to buy from you at that price as long as they can get it cheaper somewhere else.



You misunderstand what he wrote. First OPEC is not an oil company it is an Organization of the Petroleum Exporting Countries is an intergovernmental organization made up of twelve oil producing nations. (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five Founding Members were later joined by nine other Members: Qatar (1961); Indonesia (1962); Socialist Peoples Libyan Arab Jamahiriya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973) – suspended its membership from December 1992-October 2007; Angola (2007) and Gabon (1975–1994).

OPEC does not control the price they control the supply of their oil. Since we are restricted in where and how we drill for oil in the US OPEC when they want more money slow down the amount of oil pumped from the ground. In a way they can influence the price but they don’t set the price.

When American oil companies are allowed to drill domestically with few restrictions they can produce more oil at a lower price. This brings down the world price of oil because there is more supply. Because China and India both started expanding their society by modernization at the same time the balance of the reserves was reduced. More people competing for oil drives the price up unless more oil comes on the market.

I hope this helps you understand why drilling will reduce the price of oil and make more money for the oil companies. While higher oil prices means the oil companies make less profit while taking in more money.




Right.



Wrong. You keep missing the point but you are so close. The price of a barrel of oil translates to the price we pay at the pump for gasoline. If the price remains the same and the demand remains the same the amount of money they make will be the same. If the can increase supply domestically then the price for a barrel of oil will go down, the increased supply will mean they can sell more gas. The gallons sold are where they make their money. The more they sell the more they make the less they sell the less they make. Take out a calculator because this might be hard for you.

One barrel is about 12 to 15 gallons of oil. Not all of that becomes gasoline but for the purposes of this discussion it will. They sell all 15 gallons then at 9.9 cents or if you’re anal about it 0.099 cents per gallon, they make 1.50 if you round up. If the price of gasoline at the pump is 10.00 a gallon they make 9.9 cents a gallon or 1.50 for the barrel of oil. If the price at the pump is 3.00 dollars a gallon the oil companies make 9.9 cents per gallon. Ever wonder why the price of gas always has 9 tenths of a cent in the price? Now you know. The rest of the price of a gallon of gasoline goes to local taxes, state taxes, federal taxes, refining cost, the cost of buying the barrel of oil, the cost of shipping the oil to the refinery, refining the oil to gasoline and shipping from the refinery to the gas stations and the speculators that set the price of oil. So the only way for evil oil to make more money is to either get it domestically which means they can earn more as the supplier, or sell more volume. That means people have to consume more to increase volume. The federal government gets 68 cents per gallon of gasoline sold. So you subtract 0.68 cents for the government and 0.099 for the oil company and the figure out what your state and local taxes are you can then figure out how much it cost to get that barrel of oil from the ground and into the gas station. That is the cost of doing business in order to make that 0.099 cents per gallon. Oh wait, I forgot, if you buy from and independent station like my family used to own .03 cents goes to the gas station. So evil oil makes a whopping 0.129 cents per gallon if they sell gasoline at one of their stations.

What if OPEC decrease their supple whenever the American oil companies increase their supple?

By the way, ask Anne Korin.

Try the Red Sox as a replacement for Manny.  

Testimony by Anne Korin, co-directior institute for the analysis of global security:

Mr. Chairman, Members of the Committee, about ten years ago, Osama bin Laden stated that his target price for oil is $144 a barrel and that the American people, who allegedly robbed the Muslim people of their oil, owe each Muslim man, woman, and child $30,000 in back payments. At the time, $144 a barrel seemed farfetched to most. Today, bin Laden is a mere $20 a barrel short of his target and there is little doubt it will be attained.

OPEC, spearheaded by Saudi Arabia, is deliberately keeping oil supply tight to prop up prices. Not only is Saudi production lower today than it was two years ago, despite the increase in demand, but the cartel has effectively deleted 2.4mbd from the global oil market in what amounts to an accounting scam. In 2007, OPEC expanded its member roster to include Ecuador and Angola – together the two had accounted for nearly 2.4mbd of non-OPEC oil. Yet, total OPEC production remained constant, allowing existing members to reduce production. This translates into a net reduction in non-OPEC supply with no equivalent increase in OPEC supply. This is equivalent to the production of Norway disappearing off the market . Further, while non-OPEC production has doubled over the last thirty years, OPEC production today is virtually identical to its production thirty years ago, even as the global economy has grown and with it demand for oil.

Not so because American oil companies will not reduce the price knowing OPEC is the only entity that can undercut them at will. And domestic oil drilling will not be worth the investment as has been the case since 1950.

If that is the case and it has happened in the past, the price will stay the same or go down because it is an artificial shortage. The first time it was tried it worked. A good idea like that is only a good idea once.



And your point is?



Sorry but you might have missed the part about supply and demand. Once supply reaches the level it was before China and India started expanding the price will have to go down. We are already seeing the price drop because of the demand side. Once gasoline is produced it has a shot shelf life. Sit on it too long and you have to either spend more money to re-refine it or throw it out.



Please show me the case

The supply and hence the price, remains the same. But then you get cheating (again, see OPEC, 1970s and 90s). However, instead of paying OPEC all that money to drill, they are paying the American Lease holders (in some cases the Federal government) to drill. Thus the money goes to Americans, not foreign nations.

But to take your example one step further. What if America does not allow drilling and OPEC reduces their supply?

It is a relative game, but the more drilling America controls, the less susceptible to foreign blackmail we become. The price may not go down if the "ifs" are realized, but then if no drilling is done, and the "ifs" are realized, $140/barrel oil will appear cheap in comparison.

The more producers you have (and you can look at OPEC as a single producer in the short term) the less power they have to control the market. I am sure that McDonald's would love to charge $10 a burger. They cannot because everyone would go to Burger King and Wendy's if they did.



Yea, but I would have to live in Boston - and it aint worth it!

Now, I agree--creating American jobs is almost always a good idea.

Right, let the illegal immigrants do the work.

It is time for America to turn the page--alternative energy should replace fossil fuel like the computer replaced the typewriter.

The computer replaced the typewriter when it is economically feasible for the average person to afford it (you can get a cheap computer for a couple hunderd dollars today). Show me an alternative energy that is currently economically feasible to replace oil. At the moment there aren't any, they're getting close but they simply aren't there yet. In the short term we need to find ways to use oil more efficently and allow our American oil companies to drill for domestic oil to lower our dependence on foreign oil. In 20-30 years when alternative energies are economically feasible it will be time to switch over gradually.

And so alternatives will replace oil when the same time comes. Higher oil prices are the critical ingredient.

When the market allows it, we will.

This is great! Now that you have provided the answer, how about you provide us with an alternative fuel? You see the problem is there is no alternative fuel available as a replacement. Until there is we don’t have a choice but to use oil as our fuel.



I must disagree with you sir. Higher prices will spur on development but until we come up with something that will replace oil all it will do is hurt the consumers.