Originally posted by RTStabler51:
Originally posted by ODC:
Well dude, why complain then ?


Why? Because, there is no end insight to the raising gas prices. Companies claim there is a shortage, etc. When, in my eyes, the reason isn't because of shortages or demand, but more because the big oil companies have squeezed out the little guys and in essence gotten rid of competition.

Look at Microsoft, they are always getting hammered for monopolization etc, but oil companies for the most part are not. That might be a stretch, but get my jist?



1> the main reason that Microsoft gets hammered while Big Oil does not goes back to that margin thing. There's nothing inherently wrong with a monopoly where the players are only making single-digit margins. MS gets hammered because it's margins are several times larger. To put that difference into perspective, if Exxon-Mobil had the same margin that Microsoft had, Exxon-Mobile would have made over $320 Billion in profit alone last year.

Also, with a half-dozen major players, and hundreds of smaller ones, the industry is far from "monopolized."

The very nature of refined petroleum product refining and distribution in the US makes it virtually impossible for there to even be a monopoly. Prices are largely set by the gasoline and oil futures market (you could try charging more, but there's an incredible amount of competition), the product is distributed via a national pipeline system that anyone can pull from, and can charge whatever they want for it. You can start up a gas station tomorrow if you wanted to and do just fine. You can start up a refinery if you wanted to (and could get through the, literally, 20 years of EPA paperwork) and plug it into the national system and have instant access to every buyer.

2> The consolidation of oil companies, or the "elimination of competition" as you call it, doesn't measurably affect the price you pay at the pump. The market, not Big Oil, sets prices of crude oil and therefore gasoline primarily via the futures market. The consolidation of the US oil industry was a necessary step. Oil companies in early-mid 90s were hurting. It was that consolidation and the resulting reduction in overhead and consolidation of reserves and expertise that allowed those companies to absorb much of the impact of rising crude oil costs in the past few years. If nothing else, those consolidations pleased investors, and happy investors make better, less-rash bets on the futures market. Without that consolidation you'd probably be paying quite a bit more than you are today, both because of weaker oil companies and decreased investor confidence.

In the end, even after all the consolidation in the last 10 years, you likely still have more choices on where to buy gasoline than you have on where to buy a hamburger.

3> The oil industry in the US is a lot more diverse than most people think. There are hundreds of companies that do the exploration, hundreds more do the drilling, tens of thousands of independent gas station operators (even those that are branded are actually largely independent), and dozens of companies that do much of the refining. People just know the "Big Oil" companies because they're the signs they see on every corner. Few people realize how many other companies are involved in getting that oil from the ground to them. They only know the one they deal with when they actually buy it. Few people can list off names like "Tesoro", "Valero", "Schlumberger" or countless others -- but those are all big companies. Valero in fact refines more oil than any other company in North America.

4> For the most part, Big Oil isn't claiming there's a shortage, the market is. The market is afraid that there is one and it's the market that sets prices, not Big Oil. In fact, Big Oil is constantly trying to allay fears that it's reserves are dwindling to the point where they've been accused of over-exaggerating their reserves. Unfortunately, this activity, meant to prevent the fears of shortages actually feeds it on occassion when these figures are revised lower.


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