Economics, monopoly and profit margins
I have several patents giving me an absolute monopoly on a specific
type of product for 21 years (I really do). The amount that is sold plus royalties is enough that I could live well from it. However, I know that I can live much better if I sell more. This means I pressure my customers to sell more or pay me a bigger royalty/unit. An oil company is under even more pressure to increase production because they have tens of thousands of shareholders all who want a bigger piece of pie, the only way to do that is to increase the size of the pie, Hence, they find themselves under high pressure from their own shareholders to increase production and capacity. Thus, the idea that they limit availability of fuel is nonsense because their shareholders want more pie. My monopoly allows me to charge whatever profit margin I like and in my field it is 60%, yes, that is right, if it costs me $40 to make something, I charge $100. In the oil business, profit margins are only 10%, is this a windfall? It was EPA regs that caused small refineries to shut down, not pressure from the majors. The same regs hurt the majors too but they can absorb it. The small refineries were never a threat to the majors so the idea that the majors wanted them shut down is absurd. Likewise, it is environmental regs that cause stripper wells to be plugged and abandoned instead of being "shut-in" to wait till it is economical to operate them again thus losing millions of barrels/ year. Of course regs are necessary but we need to realize the economic costs of over regulation. |
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