Big Oil Engaging in Profiteering? No Way!

Show me the malfeasance (0.00 / 0)

I would like to see the AP's evidence if any exists.  To affect oil prices and subsequent product prices a major shift in supply would need to occur.  A loss in production this size from a single company would be disastrous for profits at $50/barrel oil levels.  A coordinated drop in production from several companies together would both violate antitrust laws and negatively affect company profits.  If the AP has evidence of collusion it should be passed on the the DOJ.

I doubt the case of the Bakersfield refinery closure is an attempt to scuttle supply in order to raise product prices.  A likely explanation probably has more to do with the profitability at this refinery on a per barrel basis and what capital investments will be required in Bakersfield to meet the next round of CARB fuel specifications.  My sense is Shell could make the same amount of incremental gasoline/diesel at a refinery in LA that would equal the amount lost by the closure at Bakersfield and for significantly less in capital investments.  This incremental product could then be piped or trucked back to Bakersfield adding only several cents per gallon to the final price at the pump.

I think the AP article lacked reasoning and only presented the cursory facts.  A more in depth analysis of the econmics of this closure would be of more interest. 

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by: eganwh @ Sun Nov 26, 2006 at 18:03:51 PM CST

A true conspiracy theory! (0.00 / 0)

I have no problem with conspiracy theories. People conspire all the time, in finance and politics alike. Has to be done - it true objectives were made known, there'd be rebellions all over the place.

But this is different for two reasons - one, the oil market is so big that a conspiracy to fix prices would have to be done at a governmental level. No one company is powerful enough to control the price mechanism. (OPEC is by definition such a conspiracy, although it is out in the open. But is losing its punch in these post-peak days - they cannot control price as effectively as they once did as their own supply mechanism is being tested.)

Secondly, companies in the oil business make boatloads of money naturally - conspiracy would be rather redundant.

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by: Mark Tokarski @ Mon Nov 27, 2006 at 09:56:11 AM CST