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Wednesday, July 11, 2012

Is Fuzzy Math Keeping Oil Company Profits High?

Well an entire dissertation could be written about this factual spike in gasoline, diesel fuel, and other fuels in general. In fact that is exactly what Simon Mui suggests in his paper on the subject. As we all are too well aware, in a capitalistic economy whenever supply outstrips demand the price should fall.

But the problem of the supply curve is that big oil has gotten used to the outrageous profits that they experienced in 2008 and do not want to let go of them.

Additionally there has been a virtual boom in America's production of oil, as well as natural gas. In the past three years, the number of rigs in U.S. oil fields has more than quadrupled to 1,272. Upping our output of this precious commodity.

But while we are producing more of said commodity, we are also exporting much more of it. Last year ended the fifty plus years of the US being a net importer of oil, to make us a net exporter of oil for the first time in fifty plus years.

So, how exactly are they keeping prices so high? Well the Koch brothers are in large part contributing the most that they can to keep prices high. They have a built a plethora of tanks near their headquarters out in Witchita, Kansas and are rat-holing oil in them! They are not without the support of other oil companies, as I detailed in this post a few months back.

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