Crude Politics and Crude Science
Originally posted by Bladestunner316
If a gas company is recording record profits then why cant they keep prices down for the consumer?
blade
Crude Politics and Economics
The simple answer is that oil profits are too lucrative to pass up.
No, one is a bigger fan of free-markets than I am, but gas companies don't embrace laissez-faire (i.e. hands-off approach,) and they conspire to rig prices and production under the auspices of OPEC and in the U.S. they use their political influence for patronage. Needless, to say I am not a big fan of crude politics, and I hope to see market innovations displace our dependency on oil in the coming years in favor of alternative energy sources.
Gas companies don't operate on a strict competitive basis in the least... It's frankly a racket and OPEC is little more than a
cartel. A cartel is nothing more than a group of producers whose goal it is to fix prices, to limit supply and to limit competition.
Cartels typically collaborate in secret and set an occasional accord on prices. In the case of OPEC, their collaborative efforts come in the form of limiting production or setting production quotas. They've been maintaining such an arrangement pretty steadily since World War II. At times, new entrants into the market didn't play ball, but generally at our present juncture, most oil companies are perfectly content to limit production. Because of the large quantity of imported oil the U.S. receives, American oil prices are heavily influenced by
OPEC. Sometimes, OPEC has their prices undercut by rogue cartel members that break rank to increase production quotas which was the case briefly in 1990s. However, in the last five years, the cartel solidarity has been unprecedented. It would be conceivable that our anti-trust law could be applied to outside producers operating, but oil companies enjoy some powerful political influence and they stave off the risk of anti-trust suit by the federal government. Though, they pay a price in that some politicians have threatened to fix or limit prices at various times in history... Some are doing it now... Though this would only cause shortages in long-run.
Ironically, if OPEC were based in the U.S. than what they do would be considered illegal and the Feds could feasibly invoke restraint of trade, price-fixing and antitrust laws. Though, oil companies used their palm-greasing influence among international institutions like the UN, to solidify the idea that by virtue of the doctrine of state immunity under public international law, Anti-Trust laws cannot be applied to foreign oil companies distributing oil within any country. It is crude production that is limited by production quotas set by the producer cartels,. However, the gas refining business is slightly more competitive than crude production but utilizes the crude as a raw material from OPEC-limited supply of crude nonetheless. America has increased it's refining capacity steadily in recent years. Though, it remains to be seen how 2005 hurricanes will impact production by impairing or damaging our capacity.
One of the bittersweet ironies is that even if we were to reduce our dependence on foreign crude imports, our environmental and labor regulatory red tape is so costly that we cannot possibly hope to cut consumer prices even modestly because of operating costs. Some oil companies are subsidized with perks from Washington (that they lobbied for) to make up for the red tape and supposedly to make them competitive with foreign oil.
Despite price-fixing, gas prices in the U.S. still have a somewhat broad price range, however, the biggest factor in state-to-state price differentials is often gasoline excise taxes. On average, in most federal and state jurisdictions, gasoline excise takes up to forty percent of the sticker price of a gallon gas.
Geological Myth and Reality
Another prevalent myth that serves the oil cartel's purposes is the their myth of the biological origin of oil -- the biogenic theory holds that oil is essentially organic matter (i.e. dead plants, animals, etc.) that were entombed in the folds of the earth and buried by layers of rock as the Earth's surface shifted and folded over millions of years. I find that theory that fossilized ancient organic matter suffices to account for all the abundant oil resources to be untenable. Even if biological or fossilized matter has been found in surface oil deposits, it does not vindicate the bionic theory, and there may be simpler explanations for the biological matter mixed with oil deposits. I personally do not buy the fossil fuel argument and believe it is myth perpetrated by geologists on the payroll of oil companies; it also is a corollary to the dogma of evolutionary theorists.
Obviously, the idea that oil is not a renewable resource serves the purpose of conveying extreme scarcity and in perpetuating the myth that oil may be exhausted, it better enables them in conspiring to limit production becomes less of a crime. Oil of course produces pollution which may be an argument for limiting production or at least consumption, but with technology investment, refining techniques have improved the clean-burning quality of fuels over time and automotive engine technology has greatly improved in time while reducing overall pollution. Air pollution has greatly decreased in the U.S. over the repugnant levels that were sustained in the 1970s. Again, I'm all for alternative energy sources, so air pollution concerns are beside the point.
Of course, oil wells can be exhausted but they most replenish themselves when left alone overtime. I believe that oil emanates from within the earth and believe in the so called
abionic origin of petroleum which states that petroleum is produced by non-biological processes deep in the Earth. Oil composed of hydrocarbons seeps out of deep pockets within the crust, and the process of its formation perhaps involves earthen magma, or at the very least owes to the extreme heat of subterranean earth.
"The capital fact to note is that petroleum was born in the depths of the Earth, and it is only there that we must seek its origin." --D. Mendeleev, geologist, 1877
Having said all that, I do acknowledge there are organic fuels (i.e. peat in bogs rich in nitrates) but they account for scant portion of our energy resources. I just think the bionic theory is spurious and absurd... the idea the primordial ooze from dead biological matter (whether ancient plants or dinosaurs) has led to the production of billions upon a billions barrels of oil harvested from the earth is just plain asinine.
I loathe
crude politics and
crude science, but I love earth science and geology! It's fascinating!
[Edited on 9-27-2005 by Puritanhead]