On 4/20/06, David Breneman <david_breneman@yahoo.com> wrote:
> --- Bill Saidel <saidel@camden.rutgers.edu> wrote:
>
>
> > And I still don't understand how the profit level can be so high
> > even with
> > high prices if a shortage (reduced supply and therefore reduced
> > income)
In the US, there is another factor.
Some time in the mid-nineties, agreements to allow oil drilling an
extraction were signed. Since some of the locations were difficult for
drilling and extraction, there was no immediate royalty to be paid to
the US government, but it was intended that if oil prices rose above a
certain threshold, the oil companies would have to start paying
royalties.
Due to an error (apparently), the agreements did not contain the
royalty threshold. So, now that oil prices have risen and the value of
the oil being extracted has risen, the oil companies STILL don't have
to pay any royalties. Hence: profits!
Your government at work -- giving away valuable resources to oil companies!
Regards,
Simon
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