Oil company profits hit record high

[Paula62]

Yesterday's profit reports showed a record high profit by Chevron, and other oil companies were not far behind.

My understanding, apparently incorrect, was that oil prices were rising because of instability and disruption in the supply due to the conflicts in Iraq, etc. So, getting oil to market costs more, which drives the price up, but theoretically the company is spending more to get us our gas. So why is the profit so high?

[Brandon]

Because oil companies do not set the price, we do.

Basically an oil company drills oil and say it comes out to 20 bucks a barrel. They then walk into an auction house (Wall Street) and put the barrel down on the floor and yell to all the traders "How much do you want to buy this for?"

Then traders fight to win the highest bid. Currently they are willing to pay over 70 bucks a barrel. That is were the $50 profit per barrel comes from.

[Paula62]

So basically, the recent price increases are like a run on the bank.

Let's just hope the companies make wise use of their windfall profits to fund research into energy sources for the future.

[sushimonster]

It is not really a run on the bank. It is more like a regular auction house. Traders bid up or down the price due to supply and demand.

[Word2Action]

Let the oil companies enjoy their big payday. Their days are numbered, humans cannot live on oil forever.

[vicki2]

No, but we all have to get through the winter now. Summer gasoline prices were just the starter. Here in the UK, fuel oil was sky high last winter which forced a lot of people back to using coal. So much for the environment when it comes to staying warm without going more into debt.

[sarah]

Didn't the price drop to $73 a barrel this past week?

[Brandon]

Apparently the market wasn't as fearful as most thought about the Alaska pipeline problem.

[sarah]

so do you think the oil price will continue to drop?

[Brandon]

It might drop in the interim, but I doubt until Iraq is taken care of it won't. Most likely we will see oil go higher.

[sarah]

As if it weren't high enough.. *Sigh* I just hope that pay rates go up at some point so that it is possible to actually afford oil/gasoline.

[LyricB]

I didn't know that some people were being forced to turn back to coal as a fuel source. Isn't that even worse on the environment?