From: Joe Garrett (j.garrett@verizon.net)
Date: Wed Aug 24 2005 - 18:21:17 PDT
The only problem with this analysis is that higher prices drive MORE
production. If I can get $3 a gallon for gasoline, I am going to produce as
much as I possibly can, because the more I sell, the more money I make.
The incentive to reduce production is LOW prices. If I can't make any money
selling gas at $1.50 a gallon, why bother to build more refineries?
With many oil refiners (oligopoly), it is impossible for one refiner to
drive prices up by withholding production. As soon as one company stops
producing gasoline, another one will rush in to capture the market share and
the associated profits.
The problem we are experiencing is a combination of market forces and
politics. It is clear to me that OPEC is up to it's old tricks. We are
caught between Saudi Arabia, Iran, and Venezuela. What isn't clear is why
this hasn't caused more of a backlash among consumers.
Joe Garrett
-----Original Message-----
From: Military Vehicles Mailing List [mailto:mil-veh@mil-veh.org] On Behalf
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Sent: Wednesday, August 24, 2005 4:24 PM
To: Military Vehicles Mailing List
Subject: Re: [MV] (OT?) UK - US tax
Good point Randy.
I'd like to also point out that the actual cost to remove oil from the
ground has actually gone down over the years. The cost to transport the
oil from the Middle east to the USA is actually pretty minor. Single
digit cents per gallon.
The price of fuel has more than doubled in the last few years, and with
the production costs staying pretty much the same, this means that some
groups have more than doubled their profits on the same exact product.
Actually it is probably more like tripled their profit margins.
If the rules of supply and demand are actually involved here (I question
that) then why should the oil companies try and produce more oil and
build refineries. It seems to me that their best course of action would
be to cut back on production and let the price of oil rise even further.
If the people of the USA don't get upset with $3.00/gallon and more
on the west coast, then obviously we haven't hit the critical pain point
yet. Perhaps it is around $4.50/gallon?? Maybe $5.50??
The big oil companies are making record profits. That is, that they are
making record profits after doing everything they can to hide their
record profits. There is a lot that can be done to hide profits by
investing in other companies and acquiring assets.
When BP moved in to the US about 15 years ago, the first thing they did
was to shut down refineries. There is a huge refinery in Lima, OH that
was mothballed. I have never heard of them taking any interest in
reopening it. If they did I think they would create a surplus in the
market that would tend to drive the price down. For them it is better
to leave it shutdown and let the prices rise. Their is extra refinery
capacity in this country, they just don't want to utilize it.
BTW, Milk at Sam's club was $2.28/gallon the other day. That milk was
sucked out of a cow 3-4 gallons per cow, refrigerated, transported,
separated in sterile conditions, homogenized, pasteurized, bottled,
transported in refrigerated trucks, delivered to the store with an
expiration date, and sold to me in a quantity of 2 gallons for $2.28 per
gallon.
None of these price levels make any sense at all.
These fuel prices are total BS. And if the citizens of the US don't get
upset about the prices, then they only deserve to pay more.
And why any country would apply a 100%+ tax to motor fuel is beyond me.
The only reason I can think of to apply taxes like that is social
engineering. They simply want to minimize the use of cars and trucks
for some bigger purpose. Nothing else makes much sense.
Dave
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