Question:

Why don't the oil companies just take a cut in their profit grabs?

by  |  earlier

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It's not like they're going out of business?

Or... Would that mean the Bushes would lose part of their family fortune?

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2 ANSWERS


  1. Then why don't you tell your boss you want a pay cut. It's not like you're quitting your job.


  2. Actually, the oil companies profit on the percentage of sales is about average for business.  The oil companies have big profits because they have big operations.  Banks, drugs and software companies have much higher profit margins.

    The oil companies are making their money by producing oil and gas out of the ground and selling it in the global market.  Those who refined and sell gasoline and other refined products have been losing money in recent months, because the market is not willing not pay as much as it costs to provide the products to the consumer.  Why do you think Exxon is selling their service stations?  It is because there is not much profit, if any, to be made and they expect that to be as long as crude oil prices remain high.

    At no fault of the oil companies, the declining value of the U.S. dollar has effectively made the cost of crude oil cheaper for the international consumers.   The result is a "sale" in the international marketplace which increases demand that drives the U.S. Dollar-based price up.

    The bottom line: it is the market place that sets the price.  Too much supply and prices go down.  When there is not much profit to be made, then supply will shrink.  Too few supply and prices go up.  In such instance, more and more money will go to increase the supply since there is profit to be made.  Unfortunately, it takes time before a discovery of oil can be brought into the market.  In some instances, it can take ten years or more before the producing and transportation infrastructure can be put into place.

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