(this is going to make you mad)


Oil Giant Does Well: Exxon Sales Top $1 Billion a Day
$100.7 billion in revenue is a record as profit hits $9.9 billion. Results draw outrage.

By Jerry Hirsch
Times Staff Writer
Published October 28, 2005

More than a billion dollars a day, $45 million an hour, almost $340 for every living American — that's what Exxon Mobil Corp. reported in third-quarter revenue Thursday.

The Irving, Texas, oil giant said sales totaled $100.7 billion — the most by any company in history — and reported a profit of $9.9 billion, an oil industry record.

The financial results drew outrage from politicians and consumer advocates who see historically high U.S. gasoline prices as evidence of profiteering.

Others, however, said Exxon was simply following the laws of free enterprise and reaping a bounty for high-risk investments in exploration in often politically unstable regions of the world.

"This is a staggering profit and proof that we are being gouged by the oil industry," said Jamie Court of the Foundation for Taxpayer and Consumer Rights in Santa Monica.

Court said oil companies had refrained from building domestic refineries so that tight supplies would push up prices.

"Now Exxon needs to invest that money in making more gasoline," he said. "Neither Exxon nor the industry has opened a new refinery since 1976 because the companies know keeping refined supply low is a recipe for huge profits."

Certainly, political pressure is building on the industry to increase its refining capacity, even from a GOP that this year championed an energy bill that included new subsidies for the oil and gas industry.

"These companies are turning in record profits — they have a responsibility to expand," Energy Secretary Samuel Bodman said Thursday before the Senate Energy Committee. Senate Majority Leader Bill Frist (R-Tenn.) called for an investigation of possible profiteering.



Exxon's profit for the three months ended Sept. 30 topped the $9 billion reported earlier Thursday by another oil giant, Royal Dutch/Shell Group. But Exxon's earnings fell short of some past profits posted by companies that benefited from one-time gains, notably MediaOne Group's $26.6-billion profit in the second quarter of 1998 and Ford Motor Co.'s $17.6-billion profit in the first quarter that year.

In a statement, Exxon Chairman Lee Raymond said his company had done its best to restore capacity after hurricanes Katrina and Rita.

"We acted responsibly in pricing at our company-operated service stations, and we also encouraged our independent retailers and distributors to do the same," Raymond said.

Although the numbers are big, the criticism enveloping the oil companies as they announce their financial results this week is largely unfair, said Fadel Gheit, an industry analyst at Oppenheimer & Co. in New York.

He said that Exxon had at least $100 billion of capital at risk in its business and that although the industry looked flush, that was not always the case.

"In the late 1990s, when oil was just $12 a barrel, a lot of these companies were losing money and could have gone bankrupt," he said. "Every time they drill a hole in the ground they spend tens to hundreds of millions of dollars, and there is no guarantee there will be a return."

All told, Exxon said, its profit last quarter was 75% above the $5.68 billion it recorded a year earlier; third-quarter income included a special gain of $1.6 billion from the restructuring of Exxon's interest in a Dutch gas transportation venture.

The $100.7 billion in revenue represented a 32% gain from a year earlier and eclipsed the previous record of $88.6 billion it recorded in this year's second quarter.

Exxon shares fell 60 cents to $55.60.

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(BEGIN TEXT OF INFOBOX)

Exxon's paycheck

Here's what you could buy with Exxon Mobil's $9.9-billion profit:

3,300,000,000 MTA day passes

77,100 Hummer H1 Alphas

3,548,387,000 gallons of regular, self-serve gasoline

33,001,100 Apple video iPods

20,040 median-price homes in Los Angeles County

*

Sources: GM, AAA, Amazon.com, DataQuick, Times research. Graphics reporting by Scott Wilson

Los Angeles Times

But but, I thought that gas was so expensive because of damage to refineries in the gulf... or wait, was it due to the war in the gulf... or was it simply that "Gulf" wanted more money... or perhaps it was the gulf between the rich and poor... I knew "gulf" was involved somehow...

I'm so confused.

these guys act like they have so much risk and like they are the damn victims of the war and the hurricanes....give me a f*cking break. his company records a 75% raise in profits, show me one other multi billion dollar company who has a 75% rise in profits after being hit with the hurricane. And they still havent paid for spilling the oil in Alaska...yes you heard right, the exxon valdez oil spill is still entangled in the court system and probably wont be settled within our lifetimes. I think the world would be better off is exxon didnt exist...

*yawn*

simple supply and demand. There is no price gouging here. You don't like the price of gas? Stop buying it.

*yawn*

simple supply and demand. There is no price gouging here. You don't like the price of gas? Stop buying it.

Supply, demand and good luck. What are the odds that you are one of the wealthiest oil men in the world and you happened to be president of the United States at the exact same time that profits hit all time records?

I remember when gas was 95 cents when Clinton was in office. Has the supply and demand really tripled in that 6 year time frame? Take off the blinders Texas boy. 'W's got ya fooled!

*yawn*

simple supply and demand. There is no price gouging here. You don't like the price of gas? Stop buying it.

Not quite. If the industry had made the capital investments required to keep up with demand, but just could not keep up, you might have a point. But the industry has virtually refused to put capital into increasing refining capacity for 30 years. So over time, while the production of raw crude has increased and the demand for finished products like gasoline and heating oil has increased, the supply for finished products has remained static...on purpose, due to a lack of production capacity.

Citing their investment in exploration, drilling and new sources of raw product as proof of investment in production capacity is a strawman designed to cloud the root issue - which is their unwillingness to invest in increased capacity to produce finished product.

One would think that increased production of finished product to meet demand would still lead to big profits, but such a long term view seems to have disappeared from the corporate boardroom, replaced by huge pressure to satisfy shareholders and the markets on a quarterly basis, which is more easily accomplished when energy prices remain high, keeping both their stock price and short term profits high, by hook or crook.

Exactly. The "free market" line is, as always, just a ruse to bamboozle us. And , uh, aren't subsidies SOCIALISM? (I guess not, not when it's socialism for the rich).

You don't like the price of gas? Stop buying it.
And stop buying food - grow/raise your own
Stop buying anything, everything takes oil/gas to make and distribute.

Al

he looks pretty happy about the whole arrangment:

Subsidies to corporations are a form of socialism.

Can any of you conspiracy theory geniuses please explain why the price of gasoline went DOWN this week? Why on Earth would a greedy self-absorbed oil industry ever lower prices? To be generous? Do you think they can charge whatever they want, that they're feeling a little guilty, and so they chose to drop prices? Why would they do that if they're so evil? Or, have you ever considered the possibility that they don't have as much control over pricing as you think they do?

ok, let me restate:

the oil companies will charge what you are willing to pay, to a point at which enough people stop buying that they stop making more money.


Gas at .95/gal, 100 people buy gas, gross revenue is 95.00
Gas at 2.50/gal, 90 people buy gas, gross revenue is 225.00

The last numbers I saw indicated that americans had cut gas consumption by something like 2.8% this year. Not even nearly enough to indicate that the gas companies' profits are in danger.

Subsidies to corporations are a form of socialism.

Can any of you conspiracy theory geniuses please explain why the price of gasoline went DOWN this week? Why on Earth would a greedy self-absorbed oil industry ever lower prices? To be generous? Do you think they can charge whatever they want, that they're feeling a little guilty, and so they chose to drop prices? Why would they do that if they're so evil? Or, have you ever considered the possibility that they don't have as much control over pricing as you think they do?

Ever notice that the downward spiral never matches the upward spiral, or that the dips in the valleys of the prices are not as deep as the peaks in the hills of the prices. Even though price flucutates, it never seems to recover to the old lows... and certainly not as quickly as it rises.

Is there some "great conspiracy?" Nah... pretty darn obvious to me... the rich just wanna be richer. Period.

I can't say there's a whole bunch to attack here. They have over 100 billion in sales for 1 quarter and about 9 billion in profit. That's a bit under 10% net. I know some businesses work on much smaller margins, but is that really that obscene?!

ok, let me restate:

the oil companies will charge what you are willing to pay, to a point at which enough people stop buying that they stop making more money.


Gas at .95/gal, 100 people buy gas, gross revenue is 95.00
Gas at 2.50/gal, 90 people buy gas, gross revenue is 225.00

The last numbers I saw indicated that americans had cut gas consumption by something like 2.8% this year. Not even nearly enough to indicate that the gas companies' profits are in danger.

Much better. Yes, we Americans like to gripe about getting gouged, but we keep right on filling up and driving those SUVs. I'd love to see some numbers on how many people commute by bicycle since, say 2001 or earlier. If such numbers existed I bet we could correlate increases in commuting to the price of gasoline at that same point in time - maybe even get a feel for our threshold of gas price pain.

I can't say there's a whole bunch to attack here. They have over 100 billion in sales for 1 quarter and about 9 billion in profit. That's a bit under 10% net. I know some businesses work on much smaller margins, but is that really that obscene?!


only to communists and misguided souls who believe that money is evil, especially when it's somebody else's.

This is the reason why those who are car free did not participate in this ripoff. The motorist for the most part is funding these record profits but if it were up to us, Exxon would have gone under long ago.

Ever notice that the downward spiral never matches the upward spiral, or that the dips in the valleys of the prices are not as deep as the peaks in the hills of the prices. Even though price flucutates, it never seems to recover to the old lows... and certainly not as quickly as it rises.
Dodge. Whether the dips are always canceled by subsequent rises does not address my question: Why are there ever any dips? Why? How is this explained in your paradigm?


Is there some "great conspiracy?" Nah... pretty darn obvious to me... the rich just wanna be richer. Period.
A) is there anything wrong with wanting to be richer?
B) So why do they ever lower prices?

Dodge. Whether the dips are always canceled by subsequent rises does not address my question: Why are there ever any dips? Why? How is this explained in your paradigm?



A) is there anything wrong with wanting to be richer?
B) So why do they ever lower prices?


OK Granted... good points... You're right.

The only reason for the dips is to reel in the undecided... the faint of heart. Rather like "loss leaders" at the local Wally World... lower the price, bring 'em in again and then "socko" set the hook and suck that wallet clean.

Hell, they should just run the price right up to 5 or 8 bucks a gallon and be done with it... why bother with all that painstaking number changing on the pumps and signs. The sooner the price gets up to some magic number, the sooner the average sheep will figure out they are being fleeced for all they got!

Then the nation can quietly slow down (no one will be able to afford to drive 55+ everywhere) and the cyclists can finally emerge and take over all those empty perfect "bike lanes" we now call surface streets.

Bingo! Wonderful plan... I love it!

And they still havent paid for spilling the oil in Alaska...yes you heard right, the exxon valdez oil spill is still entangled in the court system and probably wont be settled within our lifetimes.


you might be interested to hear that the massive cleanup effort did more ecological damage than the actual spill.....

Increasing Demand
+ Decreasing Supply
___________________
Increasing Price of Oil


econ 101, kiddies...

Hell, they should just run the price right up to 5 or 8 bucks a gallon and be done with it...
Well that's the corollary to my question...

Why do you think they don't raise the prices to $8/gallon? Are they too stupid? Not sufficiently greedy? Seriously, what is keeping Exxon from raising prices to $8/gallon?

Have you ever considered that they would make less money if they charged $8/gallon, and that's why they don't?

When they charge $3.10, do you know why they don't charge $3.11? Same reason... because, as best as they can tell, they will make more money if they charge $3.10 than if they charge $3.11.

Given their obligation of maximizing profitability to their shareholders, they really don't have any choice in how much they charge... just like for any business, from apples to ipods, flour to flowers, peanuts to bolts and nuts, toy cars to Bentleys, prices are always dicated by the business need to maximize profit and economic viability. While the answer to that is always one particular theoretical price, figuring out exactly what that price is is quite tricky. There is market analysis involved, as well as trial and error, but ultimately it's not an exact science, which explains fluctuations over time as well as price variations within the same markets.

Blaming oil companies for the price of gas makes as little sense as blaming apple farmers for the price of apples, or McDonalds for the price of a Big Mac. Such blame assumes businesses have a choice in how much to charge that they ulimately really don't have. For them, "choosing" the right price is a matter of survival. If they don't get it right, or at least close enough, they cannot survive. Is that really a choice? I think not. If it's not really a choice, then how can you fault them for what they "choose"?

well stated, helmethead

Careful - it's that kind of logical analysis that can lead a cyclist to opposing bike lanes!

Well that's the corollary to my question...

Why do you think they don't raise the prices to $8/gallon? Are they too stupid? Not sufficiently greedy? Seriously, what is keeping Exxon from raising prices to $8/gallon?

Have you ever considered that they would make less money if they charged $8/gallon, and that's why they don't?

When they charge $3.10, do you know why they don't charge $3.11? Same reason... because, as best as they can tell, they will make more money if they charge $3.10 than if they charge $3.11.

Given their obligation of maximizing profitability to their shareholders, they really don't have any choice in how much they charge... just like for any business, from apples to ipods, flour to flowers, peanuts to bolts and nuts, toy cars to Bentleys, prices are always dicated by the business need to maximize profit and economic viability. While the answer to that is always one particular theoretical price, figuring out exactly what that price is is quite tricky. There is market analysis involved, as well as trial and error, but ultimately it's not an exact science, which explains fluctuations over time as well as price variations within the same markets.

Blaming oil companies for the price of gas makes as little sense as blaming apple farmers for the price of apples, or McDonalds for the price of a Big Mac. Such blame assumes businesses have a choice in how much to charge that they ulimately really don't have. For them, "choosing" the right price is a matter of survival. If they don't get it right, or at least close enough, they cannot survive. Is that really a choice? I think not. If it's not really a choice, then how can you fault them for what they "choose"?

Ah yes, the old "elasticity of the market" issue... thank you Mr Smith and the
"invisible hand" of market pressure.

I have a feeling though that the market is much more elastic in this case then the consumer really knows... push that price up to 5 bucks a gallon and just watch and see how many consumers "boycott" gas stations... far too many folks are too complacent in their lifestye to find alternate modes of transportation.

Ah yes, the old "elasticity of the market" issue... thank you Mr Smith and the
"invisible hand" of market pressure.

I have a feeling though that the market is much more elastic in this case then the consumer really knows... push that price up to 5 bucks a gallon and just watch and see how many consumers "boycott" gas stations... far too many folks are too complacent in their lifestye to find alternate modes of transportation.
I agree. If the purchase price of gas went up to 5 bucks, it would still be below the price of gas in Europe 20 years ago (it was 5 bucks then, in 1985 dollars...). Who knows, we might even pay 10 bucks without reducing demand significantly. A decent dinner and a movie is about $100 these days, would it really matter much if the transportation cost for the 20 miles (1 gallon assuming 20 mpg) is $1, $2 or $10?

So, I ask again. If the vast majority are willing to pay it, why don't they charge $5/gallon?

Answer: because even though you would pay $5 if that was your only choice, you'd still rather pay $3 than $3.50. And many of us are willing to go out of our way to pay $2.70 instead of $2.80.

So if you charge $3.00, you're going to lose all those who will make the effort to go to that other place that is still charging $2.80. If you charge $3.20, you lose a few more. Try selling gas at $5/gallon and see who shows up, when your competition is still at $2.70.

Say the going price is $3.00, and you figured out you can still make a profit at $2.90. In fact, because you'll sell significantly more volume at $2.90 then at $3.00, you'll make more profit by selling at 2.90 instead of $3.00. That's how "greed" and the desire for profit drives prices DOWN (not just gas, everything). That's why they don't charge $5 or $8/gallon... because they need to make money...

It is illogical to blame greed, profit, capitalism, the free market, etc., for how HIGH prices are without also crediting greed, profit, capitalism, free market, etc., for how LOW prices are.

I notice all the genius anti-capitalism conspiracy theorists in this thread quieted down...

The real question is why we always get a song and dance about why the price of gas goes up...

The press releases set up the expectation that there is just a temporary issue at bay, when in reality... as Serge points out... they're just trying to make a buck.

Well that's the corollary to my question...

Why do you think they don't raise the prices to $8/gallon? Are they too stupid? Not sufficiently greedy? Seriously, what is keeping Exxon from raising prices to $8/gallon?

Have you ever considered that they would make less money if they charged $8/gallon, and that's why they don't?

When they charge $3.10, do you know why they don't charge $3.11? Same reason... because, as best as they can tell, they will make more money if they charge $3.10 than if they charge $3.11.

Given their obligation of maximizing profitability to their shareholders, they really don't have any choice in how much they charge... just like for any business, from apples to ipods, flour to flowers, peanuts to bolts and nuts, toy cars to Bentleys, prices are always dicated by the business need to maximize profit and economic viability. While the answer to that is always one particular theoretical price, figuring out exactly what that price is is quite tricky. There is market analysis involved, as well as trial and error, but ultimately it's not an exact science, which explains fluctuations over time as well as price variations within the same markets.

Blaming oil companies for the price of gas makes as little sense as blaming apple farmers for the price of apples, or McDonalds for the price of a Big Mac. Such blame assumes businesses have a choice in how much to charge that they ulimately really don't have. For them, "choosing" the right price is a matter of survival. If they don't get it right, or at least close enough, they cannot survive. Is that really a choice? I think not. If it's not really a choice, then how can you fault them for what they "choose"?

I 'can' fault them for making a purposeful decision not to invest in refining capacity. Failing to make the capital investments required to meet the demand for your products is just bad business. As an industry they are taking advantage of the fact that there are few alternatives to their products for US consumers, who have become utterly dependent on those products due to our highly mobile and spread out lifestyle. I don't fault them for taking advantage of the laziness of consumers and government, nor do I fault them for making a buck, I fault them for putting the short-term demands of their shareholders over long term service to their customers.

On the other side, the price of oil itself is not their fault - there we can lay the blame squarely on the speculators who try to use some crystal ball to associate everything under the sun to the future supply and demand of oil.

But, that is our captialist system, it is what is is. No system is perfect in practice, but IMHO if people in general were less spastic, ours might work a little better. ;)

No matter what price is being charged, if the costs of drilling, refining, transportation, delivery, etc are such that one can charge less and still make a profit, someone will be greedy enough to do it. That's the genius of free market capitalism; instead of fighting greed, it harnesses greed to make things better (cheaper) for others.

So when prices go up in a free market, you can rest assured about one thing... no one can offer the product or service for significantly less without losing money doing so.

So, it may be appropriate to have a "song and dance" explanation... loss of refinery capacity reduces supply, etc., but bottom line is whether you know what the reason is or not, you can be sure that's it a good reason, and a lot of smart people are working on trying to resolve it, so they can be the first to be able to afford to offer the gas (or whatever) for less than everyone else...

No other system motivates people to work so hard for the interests of others. The trick is that free market capitalism causes people to work for the interests of others inadvertently - their primary motivation is their own selfish interest, and this rubs people the wrong way. But as long as they are ultimately acting in the interests of others, who cares what their real motivations are? Thank you free markets, and greed.

I 'can' fault them for making a purposeful decision not to invest in refining capacity. Failing to make the capital investments required to meet the demand for your products is just bad business.
What you're essentially saying is that you're smarter than all of the decision makers at all of the oil companies. With all due respect, I don't buy it.

Surely at least one of the decision makers at one of the oil companies is as smart as you, and would have convinced his company to invest in additional refining capacity, so they could make a killing a few years later, if it were truly possible.

I'm not in the oil industry, not even close. But I do know they have a lot of money, a lot of smart people, and a lot of desire to make even more money. I do have faith in that. So if it were practically, economically and environmentally feasible to do it, I'm sure they would have.

On the other side, the price of oil itself is not their fault - there we can lay the blame squarely on the speculators who try to use some crystal ball to associate everything under the sun to the future supply and demand of oil.
Gotta disagree with you here. In all markets, the speculators aborb and dampen price fluctuations... they don't cause them!

The rising price of oil is caused by increasing demand and/or decreasing supply, period. There is no one to blame for that.

Gotta disagree with you here. In all markets, the speculators aborb and dampen price fluctuations... they don't cause them!

The rising price of oil is caused by increasing demand and/or decreasing supply, period. There is no one to blame for that.

No HH, in this case you are wrong. It is not the actual supply or demand that causes these wild fluctuations in the cost of oil and it's byproducts - it is the perception of the FUTURE supply and demand that affects the cost. Speculators are what drive the cost of the futures, based on their reactions to events and their perception of how it will affect the price of the futures, but the IT systems I develop are what monitor the daily futures costs and adjust the current pricing. The law of supply and demand is sound in theory, but in practice it is the perception of what the future costs may do that directly impacts the price down the food chain.

Well, reading your words again, perhaps you do understand this because you used the words 'increasing' and 'decreasing' which are dynamic, not static. But that does not support your claim that speculation ansorbs and dampens...speculation is the root cause of the wild price fluctuations we see, because people freak out and overcompensate their crystal balls over external events that MIGHT affect supply and demand.

Yes, I'm an IT geek, not an economics professor, so my explanations are far from elegant. But I do have to have an understanding of the business processes to be able to build the systems that support them. ;)

Would you invest your money for a 10% return?

What you're essentially saying is that you're smarter than all of the decision makers at all of the oil companies. With all due respect, I don't buy it.

Surely at least one of the decision makers at one of the oil companies is as smart as you, and would have convinced his company to invest in additional refining capacity, so they could make a killing a few years later, if it were truly possible.

I'm not in the oil industry, not even close. But I do know they have a lot of money, a lot of smart people, and a lot of desire to make even more money. I do have faith in that. So if it were practically, economically and environmentally feasible to do it, I'm sure they would have.

Oh come on, that is a straw man and you know it. The reasons why they have not increased capacity are many and varied - government regulation, uncertainty about future regulation, you name it. But yes, they do take advantage of the situation to maximize profits, rather than proactively try to overcome the obstacles or uncertainty. They take advantage of a spoiled populace who are quick to *****, but rarely take meaningful action. They are taking the money and running, rather than taking a risk to provide for the needs of their customers. Their jobs hinge on the satisfaction of their shareholder's short term needs, not the long term needs of their customers.

No I don't think I am as smart as they are, I know I am. I have to be because I have to translate their vague goals and strategies into a practical designs, concrete specifications and working, usable systems. You see, IT weenies are not just about fixing your PC, at least not at my level. My job is to create systems that align to their business strategies and processes.

I don't doubt they are smart enough to make money...where they are lacking is in the will to take the risks to do so. I'd bet you and I both agree on that. ;)

Would you invest your money for a 10% return?

Freakin-A I would. Would you 'invest' in a new bike if doing so gave you a 10% return on your investment? We can have some fun figuring out the ROI of a new bike. ;)

they're just trying to make a buck.

What? A company trying to make a buck? Why, there ought to be a law......!


Of course, to be able to "control prices" directly, we would have to put oil companies under the direction cotrol of the government. Or just overregulate them to sqeeze out profits "for the good of the country."

Either way it seems a bit, ("little c") communistic.....is America ready for that?


One moment, the environmental crowd is glad the prices are high to stick it to those SUV owners (people may consume less). At the same time, they want lower prices because of the big bad oil guys.

What? A company trying to make a buck? Why, there ought to be a law......!


Of course, to be able to "control prices" directly, we would have to put oil companies under the direction cotrol of the government. Or just overregulate them to sqeeze out profits "for the good of the country."

Either way it seems a bit, ("little c") communistic.....is America ready for that?


One moment, the environmental crowd is glad the prices are high to stick it to those SUV owners (people may consume less). At the same time, they want lower prices because of the big bad oil guys.

Please point out where I said that making a buck is a bad thing. Being a right-wingnut myself, I am all to familiar with the tactic of taking a statement out of context and doing a little old-fashioned commie/liberal baiting. Nice try, but no cigar. :p

Edit: my apolgies, it seems you were not addressing a similar phrase from one of my posts. I should probably turn threading on to compensate for those of you who don't keep the username in the quote. My bad! ;)

Well, duh, speculators are speculating on the unknown, the future, by definition. Of course the perception of the unknown future is going to fluctuate. But what that does is absorb future increases and decreases into today's prices, so that when that future becomes the present, the actual rise or drop is not as dramatic. That's what I mean by speculators absorbing and dampening fluctuations. They cause prices to fluctuate a bit more today than they would without speculation, for the benefit of not having them fluctuate as dramatically tomorrow, next week, next month, next year and in the coming decades. For example, as much as we got hit by Katrina, we would have gotten hit a lot harder if we hadn't had the speculation a day, week, month, year and decades prior to Katrina...

Another example of how speculators dampen price changes over time: Because of speculators speculating that prices will go up when supplies drop in the future, they add an artificial demand today that raises the price today. This speculator artificially boosted value of oil funds exploration today, exploration that will reduce the magnitude of the drop in supply in the future, and thus soften the associated price increase.

If speculators had crystal balls, then there would be no fluctuations, for the speculators would be able to anticipate all future changes in supply and demand, and buy and sell futures accordingly that would naturally settle on current prices that reflected the average price through the future foreseeable in their crystal balls. Can we agree on that?

If there were no speculators, then there would be lots of dramatic fluctuations, in reaction to the actual changes in real demand and supply from minute to minute, day to day. Agreed?

Now, reality check. Speculators do exist, but they don't have crystal balls, which means they cannot fully anticipate all future changes in supply and demand. But, and here's my point, to the extent that they can anticipate the future, and the best ones make the most money, the worst ones find a new avocation, through buying and selling of futures they cause the current price to move closer to the future price, hence absorbing and dampening fluctuations.

Now, if you want to say if speculators were better we'd have fewer fluctuations, okay, but that's kind of like blaming fires on fire fighters.

Well, duh, speculators are speculating on the unknown, the future, by definition. Of course the perception of the unknown future is going to fluctuate. But what that does is absorb future increases and decreases into today's prices, so that when that future becomes the present, the actual rise or drop is not as dramatic. That's what I mean by speculators absorbing and dampening fluctuations. They cause prices to fluctuate a bit more today than they would without speculation, for the benefit of not having them fluctuate as dramatically tomorrow, next week, next month, next year and in the coming decades. For example, as much as we got hit by Katrina, we would have gotten hit a lot harder if we hadn't had the speculation a day, week, month, year and decades prior to Katrina...

Another example of how speculators dampen price changes over time: Because of speculators speculating that prices will go up when supplies drop in the future, they add an artificial demand today that raises the price today. This speculator artificially boosted value of oil funds exploration today, exploration that will reduce the magnitude of the drop in supply in the future, and thus soften the associated price increase.

Sorry dude, but to borrow a phrase, them's voodoo economics. You miss that fact that these fluctuations would not be nearly as severe if the companies made the investment in capacity, relying on that, rather than the unscientific, paranoid spastic-ness of speculators and the market to even out the impact of variances in supply and demand.

We've seen the trend over the last 40 years towards JIT capacity, which is in theory a good way to do business. The last thing a company wants is unused capacity because it is overhead that is not contributing to the bottom line. That is understandable, especially in today's climate where short term profits are more important than long term investment. But just as in IT systems, any industry must have scalable capacity to meet future and unexpected demand for JIT to work over the long haul. That takes investment in infrastructure that does not imediately contribute to the bottom line, something the oil industry and others are not willing to do. The government only throws up further roadblocks through regulation and tax policy. Our sad state of refining capacity is just one example. How about power generation - how confident are you in it's capacity to serve the current and future demand of your home state? How did the industry as a whole get to the sad state that it is in? Lack of captial investment in favor of short term profits is the reason. How many times over the years have we gone through the exercise of re-building our military, usually triggered by dire emergency, because we were not willing to invest in keeping it at a minimum level of readiness and capability? I see it in my own company, which is struggling to recover from years of neglect in capital investment.

If speculators had crystal balls, then there would be no fluctuations, for the speculators would be able to anticipate all future changes in supply and demand, and buy and sell futures accordingly that would naturally settle on current prices that reflected the average price through the future foreseeable in their crystal balls. Can we agree on that?

If there were no speculators, then there would be lots of dramatic fluctuations, in reaction to the actual changes in real demand and supply from minute to minute, day to day. Agreed?

Now, reality check. Speculators do exist, but they don't have crystal balls, which means they cannot fully anticipate all future changes in supply and demand. But, and here's my point, to the extent that they can anticipate the future, and the best ones make the most money, the worst ones find a new avocation, through buying and selling of futures they cause the current price to move closer to the future price, hence absorbing and dampening fluctuations.

Now, if you want to say if speculators were better we'd have fewer fluctuations, okay, but that's kind of like blaming fires on fire fighters.

It's not a matter of the speculators being better, it is a matter of scalable capacity being better than speculation, long term capital investment being better than short term profits.

HH, you and I could debate this for weeks, but frankly, I have to deal with this stuff daily, as part of my job. It's Friday night, and I really don't like stress on any night, I get enough of it at work. So I am going to respectfully bow out of this particular thread, at least for now, and go back to the stress relief that I get from talking about cycling and cutting up like a buffoon. Cool? :)

Cool.

Ya know you might have just hit the nail on the head regarding the whole current trend of short tempered motorists buying larger then needed vehicles for their own short term satisfaction... not to mention the "hell bent for leather" driving styles...

The whole national corporate picture is based on immediate short term gain... which drives the "do it NOW" attitude. Over night delivery, cell phones, faxed contracts, and fast drivers to meet artificial deadlines for that immediate short term gain.

Meanwhile ifra is left undone, maintenance is defered and the larger long term picture is one of choas.

Ain't greed a wonderful thing... now if 1/2 a cookie was enough...

Sigh.

I think we all need to keep in mind that publicly owned "greedy corporations" are not owned and driven by a single individual at the cost of everyone else. Rather, they are owned by people like my father who works for $35,000/year and really really needs a good return on his 401K in order to retire by the time he is 80 years old. Come on people! We have to accept the fact that regular old americans are the ones behind the wheels of corporations. They demand high returns or they sell their stock. So management complies at just about any cost. It is not Exxon that is at fault, it is our national values. And even then, the benefits are redistributed back to the owners (regular old americans who invest; albiet not necessarily in a linear fashion).

Well, here in California, in order to build the refineries needed to meet demand, it would take years of permitting reviews and fighting environmental and NIMBY groups in the courts, just to get permission to build one. There are repeated calls to shut down the ones we've got now, since the "remote" areas they used to be in are now populated. Why go through that hassle when they can jsut charge us more money?
After our little debacle with the cost of electricity, and shortages, they STILL have only approved and built one small generating plant in my area. Reliance is still on electricity being sent here long distances by wire. STill, people whine.
Let's use tonight, Halloween, as an example. Let's say the citizens of my town get together, including all the parents of children, and get a law passed that candy can't be sold in our city to anyone without a permit. The permit will cost $500 and take two years of paperwork to get. Tonight, when the children come around for bags of candy, how many households would be handing candy out?

You can see were he is keeping his money, in his chin.

he looks pretty happy about the whole arrangment:

I'm happy ExxonMobil is doing well. They're one of our key customers. If they do well, I have more money to devote to cycling. If they were to fail, I'm possibly unemployed, and my family suffers.

It's not so simple as "us and them". We're all in it together.

I think we all need to keep in mind that publicly owned "greedy corporations" are not owned and driven by a single individual at the cost of everyone else. Rather, they are owned by people like my father who works for $35,000/year and really really needs a good return on his 401K in order to retire by the time he is 80 years old. Come on people! We have to accept the fact that regular old americans are the ones behind the wheels of corporations. They demand high returns or they sell their stock. So management complies at just about any cost. It is not Exxon that is at fault, it is our national values. And even then, the benefits are redistributed back to the owners (regular old americans who invest; albiet not necessarily in a linear fashion).

Yup, reminds me of the time the local gas and electric concern (SDG&E) was pushing hard for conservation measures in their service area... and they got them... consumers actually decreased their use of the various utilities, dramatically. Then the consumers were "rewarded" with a rate increase, because that was what the shareholders wanted to maintain their profits.... D'OH!

I'm happy ExxonMobil is doing well. They're one of our key customers. If they do well, I have more money to devote to cycling. If they were to fail, I'm possibly unemployed, and my family suffers.

It's not so simple as "us and them". We're all in it together.

You're all in it together.