Gas Crisis? Huh?

[ZooTech]

If ExxonMobil wasn't the leader 3 yrs ago & it is now, but the demand for oil & gas remained the same during the same period someone is getting raped.

With a 3% profit margin, I doubt it's Exxon.

[MrGompers]

If ExxonMobil wasn't the leader 3 yrs ago & it is now, but the demand for oil & gas remained the same during the same period someone is getting raped.

With a 3% profit margin, I doubt it's Exxon.

With a 10.87% profit margin, I doubt it's Exxon. <---I fixed that typo for you.

Based on 2005 year end reports.

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

[ZooTech]

With a 10.87% profit margin, I doubt it's Exxon. <---I fixed that typo for you.

Based on 2005 year end reports.

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

Coca-cola posted a 22% profit margin for 2005. Damn them all to hell!

[MrGompers]

Coca-cola posted a 22% profit margin for 2005. Damn them all to hell!

Yea F those guys. I drink Pepsi.

[High_Side]

Damn that free market economy. Profits? Those bastards! Last time I checked up here in Little Saudi there is nobody restriciting the taps to force the prices higher down in Kansas... They are going full tilt exploiting all that they can, hiring away all my guys and overheating every part of our economy. It is supply and demand and quite frankly I WISH THEY WOULD restrict the pipelines at the border. It would go a long way towards slowing things down a bit here and making my job alot more secure (we currently consume $600K+/day of natural gas and it is killing us). But that would kill the free market economy. Everytime the gov't does it, they screw it up.

[flynrider]

Demand may fluctuate slightly but in the oil & gas industry that doesn't affect price. As I said earlier oil & gas is one of the few products that have an inelastic demand curve. If you have taken an economics class you would understand how this works. I'm willing to bet three coconuts that if everyone tomorrow in the USA said "We are not buying gasoline for the next 7 days" the price won't drop one cent.
Furthermore, the price of middle eastern oil is illegally controlled by OPEC. Their decisions to increase/decrease production have an effect on the whole worldwide supply.

I'm not sure what economics class you're recommending, but I actively invest in the energy sector, so I keep track of real world results. Go back and read my last paragraph about the post-Katrina drop in prices. It's very clear that the 9% reduction in demand caused prices to drop. Particularly since the drop in prices began while most gulf refining facilities were still offline. If the greedy oil companies could control the price, why would they have dropped it to about $.40/gallon lower than it was before Katrina? That's close to $1/ gallon off the high point and better than a 30% reduction. That's no minor fluctuation. If you're sticking to you're belief that supply and demand don't affect the price, then I recommend a different economics class.

As for OPEC, I'm not sure what law makes it illegal for them to control prices, but there's not much anyone can do about it. It might be interesting to note that during the oil glut of the 90s, OPEC didn't do a very good job controlling prices, seeing as oil bottomed out at $12/bbl. Just about what it cost them to pump it out of the ground. They were still subject to the market conditions of oversupply. They only look like bad guys when the supply/demand shoe is on the other foot.

[MrGompers]

Demand may fluctuate slightly but in the oil & gas industry that doesn't affect price. As I said earlier oil & gas is one of the few products that have an inelastic demand curve. If you have taken an economics class you would understand how this works. I'm willing to bet three coconuts that if everyone tomorrow in the USA said "We are not buying gasoline for the next 7 days" the price won't drop one cent.
Furthermore, the price of middle eastern oil is illegally controlled by OPEC. Their decisions to increase/decrease production have an effect on the whole worldwide supply.

I'm not sure what economics class you're recommending, but I actively invest in the energy sector, so I keep track of real world results. Go back and read my last paragraph about the post-Katrina drop in prices. It's very clear that the 9% reduction in demand caused prices to drop. Particularly since the drop in prices began while most gulf refining facilities were still offline. If the greedy oil companies could control the price, why would they have dropped it to about $.40/gallon lower than it was before Katrina? That's close to $1/ gallon off the high point and better than a 30% reduction. That's no minor fluctuation. If you're sticking to you're belief that supply and demand don't affect the price, then I recommend a different economics class.

As for OPEC, I'm not sure what law makes it illegal for them to control prices, but there's not much anyone can do about it. It might be interesting to note that during the oil glut of the 90s, OPEC didn't do a very good job controlling prices, seeing as oil bottomed out at $12/bbl. Just about what it cost them to pump it out of the ground. They were still subject to the market conditions of oversupply. They only look like bad guys when the supply/demand shoe is on the other foot.

You don't have to understand economics to invest in the financial markets.

I don't know how much more clear I can make this. I'll try again. Inelastic demand = Demand which is not greatly affected by a change in the price of a product. That wikipedia link even has a mathematical equation demonstrating this. This isn't my personal opinion its a fact proven by mathematics. I don't think you have taken an economics class because, if you did you would understand what I'm saying.

The only way you can win this debate with me is you'll have to show me that oil & gas DO NOT have an inelastic demand curve. And you'll need equations. If you can do that I'm with you on the whole price affects demand thing for oil & gas.

Getting back to OPEC maybe I should have worded that differently. The way OPEC controls prices would be illegal in the US & most other countries. Since they are not ruled by the US & don't have to follow our laws they can do whatever they want. Which in turn effects worldwide prices of oil.

Trust me OPEC & big oil has alot of very smart people working for them.
And they can set the price to what ever they want. The price of oil previously has been low to discourage the US from seeking & developing alternative fuels. In my guesstimate US consumers would only start seeking alternatives if a gallon of gas went over $5.00. Believe me, OPEC & the oil companies know that too. They are maximizing their sales & profits below this price point and will continue to do so.

Personally, I would love to see gas hit $5.00 a gallon tomorrow. That would bring out every jackass in America with a tool set looking for alternatives to gasoline. I believe someone will find it too. At that point the oil companies will be out of business cuz all of that previous demand will dry up & will never return.

Any economics majors in the house? Help me out with this inelastic demand curve.

[flynrider]

You don't have to understand economics to invest in the financial markets.

Are you kidding me? You do if you want to invest successfully.

Trust me OPEC & big oil has alot of very smart people working for them.
And they can set the price to what ever they want.

You still have not explained the dramatic price drop in the 3rd quarter of '05. Inelastic? I don't think so. You also haven't explained why gas sold for $1/gal in 2000. You have also not explained why most of the industry suffered financial hardships in the 90s, if they could "set the price to what ever they want". Your arguments just don't jibe with history.

You can go on and on about "inelastic demand", but that does not mean it applies to the U.S. gasoline market. I have no idea why you would imagine that market to be inelastic. I think I've given you plenty of examples that show it is in fact elastic. The consuption vs. supply numbers in recent years would indicate that it is more elastic than most commodity markets. Taking a term and applying it willy nilly to any market is not something I wish to go to school for.

I think I'm done with this thread. Conspiratorial groups of very smart oil magnates are always more interesting than the more obvious tried and true economic principals.

[MrGompers]

You don't have to understand economics to invest in the financial markets.

Are you kidding me? You do if you want to invest successfully.

Millions of people have money invested in the financial markets and don't know jack about economics. You are one of them.

You still have not explained the dramatic price drop in the 3rd quarter of '05. Inelastic? I don't think so. You also haven't explained why gas sold for $1/gal in 2000. You have also not explained why most of the industry suffered financial hardships in the 90s, if they could "set the price to what ever they want". Your arguments just don't jibe with history.

I don't have to. Economics & mathematics can do that all day long for me.

You can go on and on about "inelastic demand", but that does not mean it applies to the U.S. gasoline market. I have no idea why you would imagine that market to be inelastic. I think I've given you plenty of examples that show it is in fact elastic. The consuption vs. supply numbers in recent years would indicate that it is more elastic than most commodity markets. Taking a term and applying it willy nilly to any market is not something I wish to go to school for.

You are drinking the kool-aid my friend. I can assure you that oil & gas have an inelastic demand curve. Like I said before if you have ever taken an economics class you would agree. Obviously, you have not. The examples you give have affected price. They have not greatly affected demand. Think back to the definition of inelastic demand I gave earlier. The price chages you noted still put the demand curve between 0 & 1.

You also failed to show me any equations that would demonstate your position. I'll give you a hint. If oil & gas has an elastic demand curve as you say the demand is greater than 1.

I think I'm done with this thread. Conspiratorial groups of very smart oil magnates are always more interesting than the more obvious tried and true economic principals.

Please don't run away now. I haven't broke out the equations & graphs yet.

One more hint before I go. A hallmark of a product that has inelastic demand is "a product that is not easily substituted for by other goods. That is, for a good with an inelastic curve, customers really want or really need the good, and they can't get what that good offers from anywhere else". Taken directly from my macroeconomics book from 10 yrs ago. Actually, my macroecomics book uses gasoline as an example of a good that fits this description. I find it hard to believe that anyone can disagree with that. The book was written by a prof with a PHD in economics. I have more faith in him than I do in you. But, if you come back with those equations & graphs disproving him & me I'll change my mind.

P.S. Ain't this a great place. One minute your debating inelastic demand curves next minute your debating what loud pipes you should get for your bike.

[NorthernPete]

My new cage has XM satalite radio, so I get fox news radio on it... I didnt realize that there really isnt a crisis, its all a liberal smear campaign....