As we make efforts to reduce our fuel consumption, are we increasing the fuel company profits?

Question

Back in the 70s, with the fuel crisis, Americans reduced fuel consumption, only for fuel companies to raise prices to support profits. Today, is our efforts to reduce consumption merely feeding their profits by reducing their production cost?

Yesterday, I had a oung man in my taxi who earned more than $2 million in the stock market from crude futures. He said that our efforts were making him money.

Answer 1

NO

The economic theory says: as the demand is decreased, the ratio between demand and supply makes the price decrease.

Companies are increasing their profit, but not as much as they would like it to be as oil producing nations are aware of their potential wealth and power and tend to ask for a larger share of the oil profit. Some like Russia or Venezuela are even confiscating assets from foreign companies.

But think about it: My car gets 55MPG. Compare to somebody with a 27MPG car, I pay half the price to travel the same distance. Is it really not worth it? My car costs new only 15,000.

Answer 2

With extremely high gas prices straining consumers pockets in recent months, it is only natural for people to wonder where all the money they pay at the pump goes..I install fuel saver on my car after i found this web site..

http://fuel-savermagnetic.blogspot.com

Answer 3

No, I don't think  so.  Banks, Computer companies and lots of other businesses make a higher profit margin than the oil companies.  I don't see anything we are doing that would reduce their production cost.  In fact the EPA regulations requiring the Heinz 57 variaties of fuel blends increases the cost of their production.

As for comodity futures the purpose of those markets is so that the cost of those comodities can be nailed down by setting prices for future deliveries of the comodity in question.  The comodity traders might make a fortune by speculation but in the end the actual market condtions will set the price not the speculators.  If the price starts to fall as it did this morning some of these guys are going to loose their shirts.   My only concern is that if these guys are using leveraged deals and not putting up the cash we could have yet another financial snag like the mortage backed security fiasco.

Answer 4

Our efforts are worthless. What have we done? The majority of our transportation is gas guzzlers. If we do away with them, then we made an effort. The only people whose efforts have counted is the people who bought 50 - 60 MPG hybrids. But the only people it has helped are the ones who bought them. They are the only people paying about $35 a fill up and it lasts for weeks! If everyone was forced to buy cars like that then we would see prices drop.

Answer 5

Even we reduced our fuel consumption the price of fuel will still soar because of the greedy oil cartel from middle east funding their future projects so crude oil prices is outrageous.

Answer 6

I would say yes.But they are going to make money either way they just tweak the price.

Answer 7

No, you have to understand that oil companies don't set the price of oil or gasoline, it's set by market forces - supply and demand.  The more demand goes up for oil, the more the price will go up.  If we were able to seriously cut our demand for oil, like by about 20% or more, then we would start to see a reduction in prices at the gas station.  But right now every little bit of oil that we don't use is being used up by people in fast growing countries like China or India.

Also, our consumption of oil has nothing to do with oil companies production costs.  Production costs have been going up dramatically over the last few years because they've been running out of all the really easy to get oil.  Now all the new oil discoveries are in the artic or under 10,000 feet of ocean, and this costs a lot more to extract.