Well, gee, can we also look at who is benefitting the most from the increasing prices? And, while we're looking, can someone explain why/how oil companies can be making RECORD profits right now? I mean, if a lumber company in Florida started advertising rent seeking prices for lumber just after a hurricane, would we tolerate it?

This is not to say that oil companies are the sole contributors to high oil prices, but as they are profitting so intensely from our woe I'd like to see some good ol' American pay back. Can we pick just one day where everyone agrees to stay away from the pumps to make a point?

can someone explain why/how oil companies can be making RECORD profits right now?

What a coinkydink that Bush is from the O&G industry.

I'm hardly an economist, but this might have an impact on alternative energy. Yesterday the TV news reported that people were buying Priuses. Expect similar reports to be filed, congressmen to demagogue, etc. etc. But, perhaps some good will come out of it.

It would seem, perhaps not at this particular moment, that it would('ve) be(en) smart to buy stock in oil companies, thus share in their profits and give your own holdings a boost when you fill up, no?

Also, given the increasing viability of alternative energy sources in light of the price of oil, why would one not investigate investments in that arena (to help, via those profits, pay for the gasoline, whose purchase helps the previous investment)?

Like Conrad, I pine for the days of Jimmuh Carter and government mandated gas lines.

Not.

Notice how that all went away when Carter was fired?

If you look at the second quarter personal consumption data released with the 2nd quarter GDP numbers there is some interesting data on enegy consumption. But it shows that over the last year real energy consumption rose 4.1%. This is actually above its trend growth rate and stronger then the growth of consumption of all other goods & services. The big surprise to me in the data is how strong energy consumption continues to be.

Be careful in looking at the import data. Remember, oil imports are the marginal demand.
Partially, as a consequence they are really impacted by inventory changes. Over, the last few years we have had some strange and unusual behavior in energy inventories that have significantly impacted energy imports. But the short message is that oil imports have been weak largely because inventories were drawn down, not because final demand was weak.

Lee -- I think if you check your history you will find that the gas lines were under Nixon, not Carter.

Gas lines were under both, 73 Nixon and 79 Carter.

conradq:

If retail prices are really a function of wholesale cost then the margins should remain about the same (sales revenue - cost of goods sold) even though retail prices are up.

Since the profits are skyrocketing either 1) the margin has increased dramatically or 2) the oil companies have made a dramatic shift in their operating costs during the past year without telling anyone.

(Yes, I understand a barrel of oil gets cracked down into different products and the product mix can change, and yes, this is a bit oversimplified.)

Over simplified perhaps, but the only apparent explanation is that retail prices are rising much faster then cost of goods sold.

Gasoline retailers seem to be the only retailers in the country allowed to publically fix prices (Oh yeah, it is the market at work - not!)

Oil companies are affected differently by rising oil prices depending on the nature of their reserves. Some get their oil relatively cheaply, and this is where the huge margins come in. Rustbelt, why would operating costs have to drop? If they remained exactly the same, profits would still be huge merely due to the increase in prices.

Statoil is a particularly good example of this.

John:

You are absolutely right, some companies with cheaper reserves would have higher margins, and would not need lower operating costs to show dramatic profit increases.

It seems to many of us that either many companies have cheap reserves or there is manipulation.

Also, if I have cheaper reserves, why not compete on retail price to win market share? Answer, the retail price is fixed (within pennies) in plain sight of the public (and the government).

If you looked at where the high profits are coming from it would be from the upstream (oil producing) part of the oil companies not the downstream (oil refining). Gasoline prices have gone up but the refiners have had to pay more for the crude to make the gasoline.

Refiners are margin players, they make a certain amount of money over what they pay for their crude. If crude prices go up gasoline prices do also. But the refinery profit won't change much. The lack of refinery capacity and government mandates requiring different blends of fuel for different regions have a substantial impact on gasoline prices.

Even if a company had cheap reserves and a refinery it is going to make its own refinery pay market price for the oil it buys. If it doesn't the oil producing end of the company is subsidizing the oil refining end of the company.

This will not make the oil producing part of the company or its stockholders very happy because it will have less money to explore and drill for more oil that it can sell at $60 dollars per barrel.

save_the_rustbelt,

competing on price to win the market share works if the company has spare capacity. If they are already pumping the oil at 100% of their capacity or close to that, winning bigger market share does not make sense because they would not be able to use it.

Save the rust belt

"It seems to many of us that either many companies have cheap reserves or there is manipulation."

I think most oil companies assume a price of around $22 per barrel when doing exploration economics. So if a reserve is not going to be profitable at $22 dollars per barrel it will not be drilled. If a reserve makes money at $22 / bbl it will make a lot of money at $60 / bbl. This is why profits are so high right now.

Given the amount of times the price of oil has stayed flat or dropped over the years and given the amount of money the oil companies have lost when prices dropped the idea that the oil companies are manipulating prices does not make sense.

Prices are currently high so oil companies are doing more exploration, additional production is being brought online, conservation is increasing and fuel switching is taking place. These actions are the best way to bring down the price of oil. The fastest, best way to bring down the price of gas would be to reduce the number of mandated fuel blends.