soxfan364 wrote:yeah I know all about supply and demand. Isn't demand DOWN in the US ? So prices should fall (as they are starting to fall the past few weeks). But if the big oil companies COSTS are high (record oil prices, higher costs to produce the gasoline), shouldn't their profit margin remain the same and not increase to a record high?thedude wrote:soxfan364 wrote:This is what I don't get... if the cost of crude oil is also going up, then why are Exxon's (and Shell's) profits also at all time high. Should they barely be breaking even if they are NOT artificially inflating gasoline prices?!
Here is your answer.
Demand for Oil is inelastic in the US, so it really doesn't change that much in the short-run. Demand world wide is continuing to increase (especially in China). Since the Oil market is a monopoly, Exxon can decrease the supply and increase the price.