Are oil companies really paying more for crude?

Isn’t the over 0/barrel price just on the futures market? I have heard that the oil companies are not actually paying any more for the crude oil they are buying right now than they were before. That is why their profits were at record highs during the last spike in the futures market.
And IF this is true, then why isn’t that a violation of the price gouging laws?

3 Responses to “Are oil companies really paying more for crude?”

  1. Omaha Oppressor Says:

    That would make sense. The last time it went over $100 a barrel all the companies were making record profits. I hate to sound like a conspiracy theorist but I seriously think that there is a false scarscity of oil kind of how they do diamonds. The oil price also is said to be based off of speculation but as with your thoughts who is controlling the price aside from world issues? There is shadyness around big oil companies and also will. Just by changing the price at the pump by a few dollars you influence the economy up or down. So, lets say they were paying the same price. Do you really think anything will ever happen?

  2. Molok Says:

    To determine that you could compare the spot market contract price of oil to the futures contract price of oil.

    Even if oil refiners are paying that much for spot oil delivery they probably aren’t buying much and are chosing instead to use existing reserves of oil which they store.

    Most of the upward price pressure on oil may be due to commodities specuators and corporate cost hedging.

    Hedgers protect themselves from future price increases by buying futures options as a sort of insurance policy, in order to get a known fixed maximum price on their future oil purchases. They will never actually exercize the options to buy if prices decrease below the option’s strike price.

  3. For Me to know Says:

    NO from what I can find and it took some digging for this data and its somewhat out of date but could be characterized as atypical "Total costs up to the loading of the crude oils for export, including Saudi Aramco’s administrative costs, piping and terminalling, are now said to average about $2.80/b, up from less than $2.50/b in 1993. Costs were reduced as a result of reorganization and cost-cutting measures That’s $ 2.50 per barrel as of 1993 at that time oil acquisition costs was average 16.74 +/- a barrel

    http://www.allbusiness.com/mining/oil-gas-extraction-crude-petroleum-natural/550563-1.html

    I doubt the cost to extracting oil has increase so the rest appears to be profit for oil traders and spectaculars for commodity contracts

    Here is more proof speculators are driving the cost of oil upward
    http://en.wikipedia.org/wiki/Oil-storage_trade
    The oil-storage trade is a trading strategy where oil tank owners and companies that lease storage buy oil for immediate delivery and hold it in their storage tanks, then sell contracts for future delivery at a higher price. When delivery dates approach, they close out existing contracts and sell new ones for future delivery of the same oil. The oil never moves out of storage. Trading in this fashion is only successful if the forward market is in "contango", that is if the price of oil in the future also known as forward prices are higher than current prices or spot prices. Storing oil became big business in 2008 and 2009, with many participants – including Wall Street giants such as Morgan Stanley, Goldman Sachs or Citicorp – turning sizeable profits simply by sitting on tanks of oil.

    It has been estimated that one in twelve of the largest oil tankers are being used for the storage, rather than transportation of oil, and that if lined up end to end, the tankers would stretch out for 26 miles.

    What happened in Egypt needs to take place on Wall Street the oil traders (TRAITORS) are the only one driving up the price of oil through greed and speculation to profit and the rest of the countries misery OIL needs to be removed from commodities invest in gold, silver, ect because the dollar will be worthless if oil goes to what it was in 2008 and people having to pay $4 to $6 for a gallon the U.S. economy will implode and collapse and then the world will be in a super depression that it will never recover from. Stock up of food stuffs now many millions Americans are angry as HELL at WALL Street OIL traders (TRAITORS) Millions of unemployed and hungry may flood into New York City Wall Street and Washington DC demanding justice I am angry as hell that this is happening again at Wall Street did not learn anything from the Great recession the crooks OIL TRADERS caused the last recession with the run up in oil Mark my words oil traders the country is angry as HELL at you

    Note Jimmy Carter put oil on the commodities oil was not always futures traded

    WE ARE ALL DOOMED: we are calling on the federal gov’t to stop allowing runaway speculation on oil and essential basic crops. To not control this speculation will result in our economy floundering once again, and countless thousands starving. Where is our governments conscience? Stop this speculation NOW!!!.