Imagine you have an oil well in your back yard, it produces 50 barrels of oil a day, and that it cost you $10 to get a barrel of oil out of the ground.
What price are you going to sell that oil at? $10? $20 so you only get 100% gross profit? Or whatever you can get for it?
Almost everyone would pick the last answer. Its not just an issue where if you sell it for less your leaving money on the table. If you sell it for less your just handing that money to the refiner or some middle man.
Now your little 50 barrel a day well isn't going to effect the overall oil market, but if you controlled 10 mil barrels a day (almost 1/8 of world production, and a lot more than any private oil company controls). Assuming its taken from other produces and transfered to your control, what could you do with it do get the results you desire?
Lets say you sold it for $50/barrel. Thant what happens? Just about nothing. The people you sell your oil to make out like bandits, but you haven't increased the total supply of oil, or decreased the demand, or increased refining capacity. Gasoline prices won't change much.
Lets say you controlled all of the world's oil production. Well if you sell it for less, you could probably get oil prices down a bit, but the refining capacity is still limited, and total supplies are still not increased, so most of what you do will be to pass along profits to the refiners. I suppose that might encourage investment in refining capacity, which years down the line might make for a lower gasoline price, but if your production can not keep pace with the growth of demand than gasoline prices will probably not go down, at least not in the long run, and if they do go down, your just encouraging more use. |
