Originally Posted by
ewrbasedpilot
Everyone still says it's okay to make a 10% profit, but what they can't explain is how the price of a bbl of oil has gone through the roof, yet the oil companies are STILL only making a 10% profit. Where is the rest of the money going? The price of oil is up over 50% in the past year or so, yet the margins are still only 10%? I don't believe for one moment that the cost of refining that oil has gone up that fast. Someone needs to start investigating what's going on before the whole USA house of cards comes tumbling down.
As oil is extracted from an oil field, the internal pressures that aid in the extraction process decrease so that as more oil is extracted, the extraction process becomes slower and more challenging. Newer and more expensive technologies have to be researched, developed and utilized, significantly increasing the cost.
These extra costs migrate from the previous profit side if the equation to the current cost side of the equation. IOW, the oil companies use previous profits to fund current research and development in order to extract oil from less accessable and more challenging oil reserves.
As the current oil reserves continue to deplete, this extraction process will continue to become more difficult, which will continue to put upward pressure on the costs of extraction.
New oil reserves have been located, however their locations are geographicly very challenging. One is under the Siberian permafrost; another is off shore Brazil under historicly deep water for extraction. Both of these senarios make future extraction very difficult and costly.
It is difficult and dangerous work.