Farmers should be so lucky

[TboneMan]

I see a lot of gripes about oil company profits lately on this site and in the media.

While, I hate paying what I am paying for fuel ($3.05) I don't sit around gripping about it. I try to conserve as much as possible.

The issue is, oil/fuel/gas are traded in the commonities market just like corn, wheat, soy beans, and hogs.

If some weather condition causes a general crop failure the price of these items skyrockets (lack of supply, continued demand). If you're a lucky farmer and you have an bumper crop when everyone else's crop failed, you make more money.

example:
If it costs the farmer $1.00/bussel to create this bumper crop and the trading price increases from, $2.00/bussel to $5.00/bussel. The farmer will net a $4.00/bussel profit on the crop instead of a $1.00 profit. That's a good thing for the farmer who was lucky enough to have a product people wanted. The cost of producing the crop is the same whether the trading price is $2.00 or $5.00. Unfortunately for farmers the more likely scenerio is it costs $1.00 to produce the crop but the trading price is $0.50.

Now look at oil companies. It costs them $X to drill, ship or otherwise "produce thier crop". The production costs don't necessarily raise propotionately to the trading price $Y. With the product trading at such record high levels the "producing companies" make more money (profit).

Until traders think oil is a bad investment (remember buy low, sell high) the producing companies will continue to make more money.

Profit envy is not productive in a capitalist society.

Reduce demand and their profits will go down.