Is Exxon Behind The Rise Of Gas Prices?

Who gains when gas prices go up?

Let's take a look at the issues facing gas prices, and why they seem to be way up these days. Lot's of folks consider this subject to be a touchy one, and they point to huge oil company profits as proof of a conspiracy. In actuality, high profits alone are not enough to prove anything, but they are UP and they are up huge for Big Oil.

Exxon makes big money when prices for oil go up

Leading the way is Exxon, who posted a net profit of $9.28 Billion dollars in the last quarter. How can we put a number that big in perspective? According to figures from 2001, if Exxon's 3 month net profit were a country's GDP, they would rank ahead of over 100 actual countries for the year! If we look at conservative projections for the entire year, Exxon will EARN around $50 billion. This would put them in the top 100 of countries, on par with the entire economic output of the Dominican Republic. And that's just earnings! Gross revenues (sales of oil products) is even higher. If we considered the revenue of Exxon coming in at a staggering $380+ billion or so this year, then Exxon becomes one of the 30th largest countries on Earth. I'd say that gas prices has a lot to do with both their revenues and their profits.

The entire oil industry is raking in profits, and it's no surprise consumers are wondering why they're paying sky-high prices at the pump. With the oil industry expected to exceed $100 billion in profits in 2007, more questions will undoubtedly arise. No company in history has ever made more business/30cnd-exxon.html?ex=1296277200&en=8ec83a7f4025b22b&ei=5088&partner=rssnyt&em c=rss">Exxon

With an economic output of $380 billion, Exxon will soon move ahead of Pakistan in total numbers. I wonder when their nuclear program will start in earnest. As company's revenues outstrip entire nation's, it seems that their focus on paramilitary power will only increase. It won't be that long until multi-national corporations are richer than ALL nations. When that happens, the balance of power will surely feel a seismic shift.

What arguments support Oil Prices and Big Oil Profits not being a conspiracy?

The single biggest argument in this direction would have to be the fact that Big Oil is a cyclical business. They don't make anywhere this kind of money year after year. In fact, in 2001, the entire industry earned under $10 billion. The oil companies themselves are fairly unapologetic for this reason. They aren't subsidized by anyone during their off years, they would argue, so they don't expect to be penalized for making big money during the boom days.

There are so many other factors and players in the oil game that it's hard to ignore any of them when we look for a culprint to point our outraged fingers at. Demand is certainly still one of the biggest culprits of all. When demand is high, prices tend to soar.

Right now demand is at an all-time high. The burgeoning economies of India and China are creating huge middle class gas consumption in places where it never existed. Everyone in the world is using gas, and everybody competes for the resource. Nobody is better at exploiting demand for natural resources than oil companies. In reality, it's their business, and they're really, really good at it as the numbers explain.

The oil companies will hang tight in the next few years, attempting to drain as many profits as they can from their industry. Times are changing, and alternative fuel is being researched in a legitimate manner these days, so the chance of major improvements is increasing. These improvements could mean radical changes for all of the leading oil companies, including industry leader Exxon. For an old-school industry like this one, largely similar in operation to the Rockefeller days in many ways, you wonder if they can shake their hidebound nature enough to upgrade their business model to seriously include alternative fuel. It's doubtful they'll seriously embrace any changes, though, with business conditions so favorable for their current business model.

My take on the whole gas price conspiracy is that the oil companies are earning huge profits, but I'll stop short of accusing anyone of manipulation. It's too difficult for me to ignore the obvious signs that demand for gas has not slowed up in recent years.

As supply diminishes, prices increase because of the concept of "price rationing":

It means, instead, rationing by price. As oil supplies dwindle, not in themselves (or not for a long time) but in relation to demand, so will the price at first escalate, and then soar.

That's bound to happen. It will happen because the demand for oil is bound to outstrip the supply of oil, and of natural gas and coal and of other hydrocarbons.

The U.S. Energy Department reckons that this ``tilting point" won't happen until 2037. Its calculation is widely criticized, with its forecasts for increases in demand dismissed as far too conservative.

One well-known petroleum geologist, Colin Campbell, has put the tilting point at 2010, or little more than a half-decade away. Another, Kenneth Deffeys, forecasts that it will occur this year.

In essence, all signs would point towards gas prices staying high based on this data. as chief economist John Felmy of the American Petroleum institute explains: "The most important factor in higher gasoline prices has been higher crude oil prices," he said. "More than half the cost of gasoline is attributable to the cost of crude oil.

Right now crude oil prices are high so gas will continue to stay high.

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