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Old September 14th 08, 03:59 AM posted to
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First recorded activity by BoatBanter: Jun 2007
Posts: 714
Default 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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