If Exxon-Mobil drills its own oil, why do they charge as though they were buying it from a cartel?

If I buy wholesale, I get a discount because there are fewer profit-takers between the manufacturer and myself. If Exxon is extracting and refining its own oil - and selling it in its own stations, but some other company is buying it from the Saudis or from Venezuela, why wouldn't the Exxon gas be cheaper?





If this turns out to be an incredibly stupid question, I'll most likely remove it. At the moment, though, it looks to me like the profit-taking for the monolithic petroleum companies like Exxon-Mobil is the main reason why they don't offer a competitive price to the consumer.If Exxon-Mobil drills its own oil, why do they charge as though they were buying it from a cartel?
First, there's the basic concepts here: http://www.npr.org/templates/story/story鈥?/a>





There are at least 2 factors.





1. There is currently enough oil supply in the US, but Exxon drills for a fraction of its own oil because





a) the oil in the US is very low quality and expensive as crazy to refine. The Middle East oil is very nice light sweet crude oil. I might be wrong on this, but I think this is the case.


b) refining adds much to the cost, especially after the hit in capacity after Katrina.





You can see this effect from


crude oil prices: http://tonto.eia.doe.gov/oog/info/twip/t鈥?/a>


gas prices: http://tonto.eia.doe.gov/oog/info/twip/t鈥?/a>





This is our daily usage: http://tonto.eia.doe.gov/oog/info/twip/t鈥?/a>





US companies can pump nowhere near that. I don't have the numbers handy, but I'm sure you can Google it pretty easily.





Exports account for 60+% of our oil and it's rising: http://www.eia.doe.gov/emeu/mer/pdf/page鈥?/a>





In additon, other countries are starting to industrialize and demand more oil: http://www.eia.doe.gov/emeu/ipsr/t24.xls





Exxon will sell at market price, and they don't really determine the market price themselves as you read in the article at the very top. It's more the futures market and those oil futures traders. They see the higher demand. They see the unstable future supply and the futures prices go up.





I really wouldn't call that 10% profit margin cartel-like: http://finance.yahoo.com/q/is?s=XOM%26amp;annu鈥?/a>





I have no idea what OPEC's margins are but I'm sure they're much much better than Exxon's. You could say that Exxon is price-gouging that last 10% and should give it back, but lots of companies run higher than 10% margins and it's not called price gouging.If Exxon-Mobil drills its own oil, why do they charge as though they were buying it from a cartel?
I think (not sure) that the thing making gas prices high right now is not where the oil is coming from. It is a lack of manufacturing capability to refine the oil. Many refineries (17?) are still not operational after Katrina. We have plenty of oil, but not plenty of refinery capacity. So, supply curve on domestic refined product has shifted left. We are bringing in some imported refined product at a higher price, and are selling our domestic stuff also at the higher price.





Every producer will maximize profits, so don't hold your breath waiting for Exxon or anyone else to be the good guy. It sure would be nice for a change to have someone look out for total social welfare, or consumer welfare. It won't happen. The suppliers have the power, and are definitely profit-taking as your question stated.
It's supply and demand. Why should ExxonMobil sell gas for $1.98 a gallon if people will pay over $3.00 for it? Should Johnny Damon give back half of his $50 million he gets for playing baseball so ticket prices will go down?
Oil prices are set by market rates not by exxon mobil or even the cartels...
Greed is the answer to your question.