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Originally Posted by Daytripper
By they way....all of our paycuts went right into the pockets of the oil companies...with their record profits. Heck, I didn't even get a thank you note from them.
I am as mad over high oil prices as anyone, but it is a misconception to think that oil companies are "gouging" everyone. Oil is a commodity traded on the open market, and prices are governed by supply and demand.
It is easy to look at an oil company that made a billion dollar profit and say they are overcharging. But that several billion dollar profit come on over $100 billion dollars in sales. Oil companies take a % percentage of profit from oil sales, and naturally as the price increases, the % percentage becomes a larger chunk of $$ money. Oil companies are monster corporations (remember they are vertically integrated) that makes huge profits, but look at their profits as a percentage of revenue, and it is like 8%. Imagine a pizza company, it cost them $0.92 cents to make a pizza, and they sell it for $1.00. Ya right!!! Most companies double or tripple the "cost" of the product and sell it for that price.
As someone who has looked into investing in oil companies, and who has done a lot of research, I have some insight. The biggest problem is finding oil. Everyone thinks there is a giant ocean of oil and all we have to do is simply drill down and we will hit oil. Not true. In fact the world's oil supply is like a bunch of tiny puddles. Most drills come up DRY. Drilling is more of an art (and luck) than it is a science. Really! Oil infact does cost more to drill for than it did several years ago.
The solution to high oil prices is reinvesting these large oil company profits into new technology to make drilling for oil more reliable, more of a science, and therefore MUCH cheaper and easier. Some sort of government incentive might help this out. I mean an extremely high tax on profits over a billion dollars that is not reinvested into new means of exploration and scientific drilling. This needs to happpen, otherwise high oil prices are here to stay.