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Is Biden right that oil companies can lower prices at the pump but won’t? (1 Viewer)
- Thread starter timschochet
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Snotbubbles
Footballguy
Apart from removing any restrictions the oil companies may currently have to increase the supply of oil, the government shouldn't try do anything to effect the price of gasoline. There are two sides to the price of gasoline, supply and demand. If the price of gas goes to $10, then the demand for gas will go down and the price will go down with it. Once Biden starts messing with the free market by doing stupid things like "gas cards" or "gas tax holidays" he'll just cause the demand to remain high, transfer taxpayer money to the oil companies and lengthen the high prices we're seeing.
djmich
Footballguy
Exactly. If you are a oil producer/owner and you know people are willing to pay $5 for oil, you charge $5 for oil.
If you then see the government is going to come in and give everyone $2, what’s your next move? Charge $7 of course, the laws of supply and demand didn’t just suddenly change, supply stayed the same and the government just came in to artificially increase demand…which means price will find a new higher equilibrium.
Sounds a lot like what has been done with education and the cost of tuition. Similarly what is the government considering doing to “solve” this problem…same concepts.
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moleculo
Footballguy
So if I'm understanding you correctly, Big Oil, airlines, I assume Republicans, etc are all working to keep gas prices high, simply because it makes Biden look bad. I'm not going to argue but that's a pretty sorry state of affairs.
Cards on the table - I'm a guy who believes we need to transition away from fossil fuels. I assumed (wrongly, it seems) that people smarter than me had a smoother transition in mind besides "force the issue by restricting supply and raising prices"...but maybe this really is the only way. You clearly can't do it legislatively because some 30% of Americans (and the majority of one party) refuse to believe in Climate Change.
Snotbubbles
Footballguy
That works both ways. Biden (and the Democrats) wants to end the oil industry but at the same time have them help him while he destroys them.
moleculo
Footballguy
Snotbubbles
Footballguy
Why are you comparing anything Biden did with Obama? Even if their policies were identical, the US gas consumption isn't. During Obama the US was consuming around 18M barrels per day, we're now at 20M per day. So when Obama tries to kill the oil industry it doesn't have the same deleterious effect as Biden doing it 8-10 years later because the dynamics have changed.
ETA: I did make a lengthy post about the EOs Biden signed when he entered office. Had he left the energy policies alone, even if they were all nothing more than a return to Obama policies, we'd be in better shape wrt gas prices.
It's also time for Biden to realize that the oil sanctions against Russia are ineffective since Russia simply shifted where they were selling their oil and now those countries are taking the Russian oil and selling it to countries who stopped buying it directly from Russia.
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sho nuff
Footballguy
Someone should have called out soda manufacturers years ago when they went from 20oz bottles to 16.9 oz but charged the same amount.
sho nuff
Footballguy
Thanks for yet another post that addresses nothing at all. Just takes a shot.Sho has dissected them in detail, I’m sure he understands the excuses he makes.
FairWarning
Footballguy
Doritos shrunk the bag and raised the price to $5.59. TBF it’s a very tricky deal with food. For every one that complains about shrinking the size, others won’t pay over a certain amount. This helps explain the popularity of the Dollar General stores.
djmich
Footballguy
Unfortunately this is true but also why the war is not really impacting gas prices significantly. All its really doing is providing an incremental arbitrage opportunity to countries willing to take energy from Russia and probably also adding some additional inefficient delivery costs
djmich
Footballguy
I think they should actually be awarded a medal for reducing the amount of garbage Americans eat
sho nuff
Footballguy
Obama despite a lot of rhetoric...was a pretty big boom for oil. Increased domestic production considerably.
In regards to production now...March this year is the last numbers I saw and we were back to Feb 2019 levels of production and mostly rising on the way back up coming out of the Covid drop and the administration claims they are pushing to record numbers over the next year to 2 years. Even with his executive actions that have placed more limits on the industry and reversed quite a bit of the regulations Trump lowered.
sho nuff
Footballguy
True...I like it with chip companies as that helped me say hell no to chips. And even sodas I cut back...but every trip we go on I like to have a few keeping me loaded with that caffeine (without going through me so quickly like coffee does). Convenience stores still sell the 20oz...but stores you are stuck with 16.9 in the 6 packs. Pepsi products you can find 24 oz from time to time.
Ramblin Wreck
Footballguy
parasaurolophus
Footballguy
The gas stations can't lower the price enough to make a difference.
Most gas stations aren't owned by oil companies
Most gas stations aren't owned by oil companies
Shula-holic
Footballguy
I believe that he would, incrementally it's very little. Of course when the price triples, it does add up. If you added $3, maybe it's 7-8 cents. I'll ask him again when I see him though just to make sure I have that part right. However, when I refer to IRR, keeping up with the CC fee only keeps his raw $ profit the same. If he increases price only to recoup that, if he was making 2 cents per gallon before, he still is only making that 2 cents net after fees. Therefore his IRR would still be lower even increasing price to offset that piece. Of course, if you get terms to pay 7-10 days after delivery there essentially is no capital cost for holding the inventory assuming you can turn it fast enough to also collect the revenue from credit card sales prior to paying those invoices.
Usually CC processing for me ran 2.6-2.8% per month in the aggregate, depending on the type cards used and with what frequency. Some would be as low as 2.2%, Amex tended to track around 3%. I don't know specifically if all of those guys have the same deal or not. I do know that in his case Chevron covers his chargeback issues, which for anyone who takes credit cards you know that is the worst part of it. That was part of the reason I quit running the retail side of my business. I couldn't believe they did that for him when I first heard that a few years back.
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DocHolliday
Footballguy
You think that has helped? Looks like Americans are fatter than ever to me but I didn’t look at any stats.
FairWarning
Footballguy
This is why you cannot find 20 oz 6-8 packs in the grocery stores - the pop companies kept raising the loose bottle price to the convenience stores. They also raised the minimum order (usually 10-20 case min). The CS store owners would get around it by buying it all up at the grocery store when it was on sale, then sell it loose in their stores. Pop companies then quit selling it, changed to 16.9 oz, while forcing the little guy to buy the 20 on from them.
Shawnky
Footballguy
I can be critical of both sides. What I said was true. I don’t expect the likes of you to see anything in a clear point of view.But Trump!
the moops
Footballguy
The oil industry exists solely to make as much money as possible. I am not sure we should be looking to them for answers here
MAC_32
Footballguy
I like this idea. Oil companies have a nice cover running for them because the red team is foolishly pointing all of the blame at the other side. They can set the price at any mark they want and it'll never be their fault. This move would have no tangible impact, but it would show that they're full of ####. This admin isn't smart enough to do it though.
MAC_32
Footballguy
This is not what's happening with education. There are too many schools, not enough students, and there were a lot of poor spending decisions (educators <> administrators) over the last couple decades. A market correction is coming and I'll be shocked if a rate increase comes with any of it.
MAC_32
Footballguy
Agreed- I'm all for policy that inflates the cost of that garbage without impacting real foods. Hell, use the extra profits generated from the garbage to make healthy options more essily accessible.
Shula-holic
Footballguy
None of us are a fan of high oil prices, but before we go blaming Exxon, Chevron, etc., we should remember the info shown in the up to date link below from Fidelity. While these companies are the outlier this year to the good, they were also the worst performers of the past decade. It's easy right now to talk about how good they have it, but there have been some pretty lean years in there too. When your end product is a commodity and you have some high fixed costs, you're going to have some really good and really bad times. It's a political game to try and portray it any other way and it's the risk/reward of being in that business.
https://eresearch.fidelity.com/eresearch/markets_sectors/sectors/si_performance.jhtml?tab=siperformance
https://eresearch.fidelity.com/eresearch/markets_sectors/sectors/si_performance.jhtml?tab=siperformance
Biden, Harris, Elizabeth Warren, AOC… they’ve probably never taken a business course in their lives. The result is a childlike view of economics. It’s embarrassing. I loved the smack down the oil execs gave him a few weeks ago in response to his letter. It’s simple market forces, futures…. He has no freaking clue why prices went up so dramatically. Easier to blame the “Putin price hike.”
If you want more details, just Google why gas prices are so high.
If you want more details, just Google why gas prices are so high.
Max Power
Footballguy
sho nuff
Footballguy
AOC graduated Cum Laude from BU with a degree in international relations and economics. Id guess she took a few business classes.
Harris majored in Economics and Political Science at Howard prior to law school and chaired the Economics Society...so yeah, probably took a few business classes too.
Warren's legal backrgound is also in economic theory I believe. Probably has had a few business courses.
BTW...of course they are blaming everything they can...pass the buck...business as usual in Washington.
GoBirds
Footballguy
djmich
Footballguy
What fueled the opening of too many schools and ability to make poor spending decisions?
If the administration continues current policy and props up university tuition by increasing government spending I wouldn’t bank on a correction.
sho nuff
Footballguy
I don't understand how this became something everybody repeats sarcastically.
Somebody earlier in the thread said to google why gas prices are so high, so I did. From the first result not behind a paywall: "Geopolitical instability has added to crude oil price volatility. At the end of May, the European Union announced it would ban around 90% of oil imports from Russia due to the war in Ukraine—and it continues to rattle crude oil markets and keep prices far above pre-pandemic levels."
Of course the Russia-Ukraine conflict has significantly affected gas prices. There is nothing more obvious than that, right?
The people doing the sarcastic repeating are usually trying to mock Biden, as if Biden is really the one responsible for high gas prices. But gas prices in the U.S. are cheaper than just about anywhere else in the world (besides Russia and Japan). Is Biden the president of all of western Europe?
It's a super weird thing to use a sarcastic tone about.
Sure it’s a part of the increase in price. A part. The part that Biden talks 100% about. The bigger part is his war on fossil fuels, which is causing the oil industry to retreat and not want to invest long term in things like building a new refinery.
BTW - he deserves to be derided for blaming anything and everything on others. That’s piss-poor leadership. What’s super-weird is anyone defending it.
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Shula-holic
Footballguy
Gas averaged $2.42 in Feb 2021. It had moved to $3.61 by the time Russia invaded Ukraine at the end of February. We are at $5.03 by June. No doubt the Russian invasion impacted things, but we had a pretty big issue ongoing prior to that. It's fine to say Russia made it worse, it's obvious that was not the initial driver and even without that we were on a trajectory to be well over $4.00 during the summer of '22. Again, not everything in that was Biden's fault. My grievance is every instinct they have is to jerk the wheel in the wrong direction to correct the problem. It's not a quick solution either.
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Alex P Keaton
Footballguy
Hm. None of the first handful of google results mention anything about a war on fossil fuels. Forbes did mention that Biden administration has authorized the largest release of oil from global oil reserves in history.
Anyway, a war on fossil fuels wouldn't explain why gas is cheaper in the U.S. than in the rest of the world.
Yes, the results in the aforementioned google search all mentioned the pandemic, which did precede the Russian invasion of Ukraine.
FairWarning
Footballguy
MAC_32
Footballguy
Don't know. I'm knee deep in higher ed admin so I am keenly aware of the existing problems, but I don't pretend to know what led us to this position in the first place. I am trying to help clean up the mess on the inside at one institution and it's crystal clear what's going to happen over the next decade or so. Rates are not going to increase at most schools, a lot are going to close, and the rate increases that occur will be due to infrastructure and support new revenue streams.
It's important our gov't prioritizes funding higher ed to keep more of those schools open because competition will keep costs down.
Russia just defaulted on international loans for the first time in over 100 years. I'd say the boycotts/sanctions are having their intended effect:
https://www.cnn.com/2022/06/27/economy/russia-debt-default-sanctions/index.html
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The U.S. has always had cheaper gas than most of the rest of the world. That's not really a good argument Maurile.
The fact that gas prices are higher throughout the rest of the world effectively refutes the assertion that what's causing high gas prices is the United States President.
The idea that high gas prices are caused by the greed of oil companies is stupid, but it's less stupid than the idea that the worldwide phenomenon of high gas prices is Biden's doing.
Shula-holic
Footballguy
I can agree to that, but given that the prices are this high it's asinine to not want that to be produced domestically. To do so would result in the following:
Royalty revenue to the government on federal leases
Revenue to the US Treasury on taxes of US producers
Less environmental damage than having it produced elsewhere
To a lesser extent, the incremental production might have a minor impact on pricing, admittedly small but probably greater than actions such as releasing some of the strategic petroleum reserve.
You’re creating a straw man that Biden’s war in fossil fuels should somehow lead to US gas prices being the highest in the world? I never said that and no one else said that. US gas prices will never be as high as European countries, no matter how badly Biden screws it up. The US is the largest oil producing country in the world - and it’s not even close. We produce 80% more oil than the #2 country - Saudi Arabia.
The problem in the US is lack of refining capacity. We should be building a new refinery right now. But the oil companies aren’t going to invest billions of dollars when Biden and the Democrats are hell bent on moving away from fossil fuels - even if we aren’t ready for it. That’s the issue. Not the Putin Price Hike.
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Sanctions On Russian Oil And Gas Didn’t Work, And Now We Know Why.
“In May 2021, the Russian export revenues were EUR 633 million/day (note: currently 1 EUR is close to the value of 1 dollar). Between May 2021 and May 2022, export volumes dropped by EUR 95 million/day. The discounted price of Russian oil, etc, led to a drop of EUR 101 million/day. So far, it seemed the sanctions were working.
But then the increasing price of fossil fuels on the global market overwhelmed both these effects and resulted in an increase of export revenue to Russia of EUR 447 million/day. Russia’s average export prices were an average 60% higher than last year. By May 2022, the export revenue had increased to EUR 883 million/day – an increase of 39% from pre-war May 2021.
The price of oil today is above $120/barrel. And Russia is pulling in almost EUR 1 billion/day, or $1 billion/day, in export revenues from fossil fuels. With that, you can pay for a huge war effort aimed at Ukraine.
President Putin had claimed that embargoes by the West on Russia’s oil and gas would backfire and lead to global price increases. This seems to have come true…”
I was referring to the overall boycotts/sanctions. If you want to limit it to just oil then yeah it's probably not being that effective. I'm still in favor of it though. The problem is that the U.N. is a worthless organization. If it had value, given the widespread condemnation of this war effort by the world, we'd either be throwing out countries still buying oil from Russia or those countries would be towing the line.
Insein
Footballguy
Biden doesn't set gas prices but his policies sure have an impact on the global price of oil which in turn has input on gas prices.
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