Oil Companies are not to blame
Posted on May 14, 2008 by
Paul WhiteI have heard alot of people claim there is a conspiracy with Oil. They Claim that Oil Company's ( which are the world's largest corporations ) are greedy and rigging the price of Oil. Taking advantage of consumers and their lack of choices. Many feel this is just as bad as a monopoly. Here is are some of the more popular theories and my views on them.
Oil Companies are keeping Oil prices artifically high. This is both true and false. Oil is a commodity. Its value is based on two factors just like any other commodity. Supply and Demand. There is little they can do to impact the demand for oil, but by manipulating the supply they can change the price. In the past they have used this technique of lmiting the production of oil to ensure maximum profits. To achieve this maximum profit, the price of Oil needs to be in a zone where the price is as high as possible without affecting the demand. Companys hire economists to figure out what they theoretical ideal price of their product would be. Oil company's always thought that if the price of Oil got too high it would cause americans ( the biggest consumers of oil ) to drive less and therefore decrease the demand and profits. But they were wrong. Americans for the most part live in dept. With the convience of using a Credit Cards at the pumps this takes the phycological effect of the price off americans minds. Even though they see the price as they pump their gas, there is not a physical exchange of money for the gas. It has been proven that when americans use a credit card they spend more, than if they were to just use cash. Today the price for Oil is around $126 / barrel. But it seems that it might be a little high. As demand has started to go down. I personally think Oil will level off around $105 / barrel once the speculators stop pushing the price up.
The Car Companys ( GM, Ford, Chysler ) are in bed with Big Oil. This is not true. The fact is developing
cars that get better mileage is not easy. It takes years and billions of dollars of research to even have a working concept. This is alot of money if when you bring a production model to the market and it doesn't sell in the numbers you wanted. Its cheaper and easier for car companys to make small changes to current vehicles rather than start from scratch. Consumers need a reason to buy ultra efficient
cars. The idea that its better for the environment or reduces your carbon footprint only motivates the hippies out in California. Most Americans only react when it affects their pocket book. In Europe Oil is expensive so they have already adapted with ultra fuel efficent
cars. In America Oil was so cheap it allowed us to buy the big SUVs. We demanded them, and so the American companys worked to fill that demand. The rest of the world was demanding ultra efficent
cars, and so Toyota and other companys filled that demand.
The world will run out of oil. This is not true. We will never run out of Oil. The reason is as Oil gets more expensive it will cause new technologies to form. These technologies will greatly reduce the demand for Oil. If our demand didn't change then yes we would run out, but since
cars of the future are likely to run on hydrogen fuel cells, the biggest consumer of Oil will drop, leaving more supply for future generations.
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