Paul Meisel

Falling Oil Prices: Producers Are Playing a Game of Chicken

Maximization of profit when a limited number of producers, with high barriers to entry, control supply is a classic economic problem, and the question of whether you characterize the actions of the players as "manipulation", "speculation", or "prudent business decision making" largely depends upon your own point of view. It is clear that the producers are in the driver's seat, deciding when and if to bring additional supply on line, when to maintain what facilities, etc.

The only way to change that is to develop more economically feasible substitutes -- which any number of people are trying to do because it would make them rich (although they can claim their motivation is environmental, patriotic, populist, or whatever else).

Like Cuba Gooding said, show me the money...

Oil Price Manipulation: Taking from the Poor to Give to the Rich

I think the key point is that they are earning huge margins in what is supposed to be a commodity business. That is not supposed to be likely or even possible according to basic economics.

Maybe they are just brilliant traders and make a lot of money that way, and just scrape by selling their petroleum based products.

Banks typically are squeezed when the price of their raw material (money) is going up, and make money as it is going down. Exxon is making more as prices go up... you've got to hand it to them, they are brilliant at recovering cost!

Disclosure: I am long XOM. I don't have to agree with it to profit from it.

Oil Price Manipulation: Taking from the Poor to Give to the Rich

Good analysis, Phil..... but I am not entirely sure you are right when you say Congress can understand. Perhaps we should test you hypothesis by having many of us forward the e-mail to our favorite Congressman!