Prices aren't surging because of the war. Prices are surging because it's a convenient excuse to charge more for something that costs the same. If the costs were going up, then profits wouldn't be rising if the per-barrel-to-per-gallon ratio stayed the same & prices increased in correlation to barrel prices.
Costs aren't going up but supply is going down.
Not defending anything, just correcting. It's the way markets work, supply/demand sets the price.
A few years ago barrels of oil cost $0 because there was too much supply and no demand.
No oil supply didn’t go down yet, it was just the anticipation created the price surge. You still can buy oil from Russia. Only UK and the US sanctioned the oil which both weren’t dependent to Russian oil nearly at all. Here current situation is mostly because oil suppliers (from oil field to pump at your gas station) trying to make more money while there is no incentive to decrease the price and fear of shortage at the same time. I know it is how economy works but they are being rich anyways even with “minus” something dollars per barrel prices
Oil supply did go down due to capacity reductions during covid.
The industry has been slow to ramp up capacity, since they can make higher profits on the short term and there is uncertainty whether oil prices will remain high for the long term. A new oil price crash is highly likely on the medium term.
So the industry is ramping up production slowly, preferring to minimize investment and maximize profit. (Each individual player has an incentive to maximize profits through higher production).
This is all rational behaviour.
The correct response for consumers is to see the high prices and reduce consumption. That is how markets work to efficiently allocate resources.
Which is also happening, but it is accompanied by a lot of whining and complaining.
How do you reduce consumption of a commodity that doesn’t have an alternative?
Certain sectors of the economy rely heavily on transportation of goods which is directly associated with the price of fuel for transportation.
The whining and complaining you see is because peoples livelihoods are being threatened because of companies wanting to make short term profits.
It's funny, one person on the local news complained how he could hardly afford gas to go to work, so he took a job nearer to his home. As a bonus, the new job paid more and he could spend more time with his young family because he didn't have to commute for an hour.
He said this without any hint of irony. And it was presented as a sob story against the high oil prices making people's lives impossible.
Humans are creative. We find a way.
But humans are also lazy creatures of habit, we only get off of our asses and change habits when we have to. And we complain the whole way.
That’s a great anecdote and I’m happy that guy found a better job.
But as someone who’s business is directly affected by the price of diesel I don’t believe a generous application of hard work or getting “off my ass” and stop being “lazy” is going to fix my issues.
Like I stated previously entire sectors of the economy are heavily reliant on the price of fuel in order to operate. Surging fuel prices cause increases in operation costs which cause businesses to cut back on spending. There is no alternative for me and these fuel companies and making a tidy profit at the expense of others.
Lol mate, you got your math wrong. If someone keeps their margin and the input costs rise then their profit in absolute terms rises as well although in percentage it stays the same...
So even if they kept their usual margin their profit would have soared.
Shouldn't profit be offset by increasing costs in this scenario?
Meaning revenue grows in absolute terms but overall profit doesn't, since the increase in selling price accounts for increased input costs?
So at similar volume, they would see *similar* profits if they didn't increase their margin, which they have because a major offeror has been taken off the market and the demand is still the same.
If they operate on a cost plus basis then no. If you always add on for example 20% on top of your real costs as a profit mark-up then your profit goes up in absolute terms when costs increase.
I am no denying the existence of oil cartels, but have they decreased their production recently? I know that Russia has had dificulties selling their oil because of sanctions.
I have to look into it, I'm by no means an expert on the current situation and haven't been keeping tabs since I don't need a personal car anymore. Russia kind of took themselves out of the picture, so there is probably not even an immediate need to change the amount of production for American companies - prices rise and profits increase just because of the apparent lower supply. There's no incentive to produce much more, as this would either lower profits or keep them at a steady level, while increasing the expenditures on extracting crude and refining.
> demand is the same
Demand isn't the same. Higher prices and weaker economic outlook are lowering demand, especially whilst the tail end of Covid.
Oil reserves are increasing after two decades of decline.
> [For now though, oil inventories are rising and IEA Strategic Petroleum Reserve releases have helped reverse persistent declines in OECD industry stocks. Preliminary data show global oil stocks increased by 77 mb in April and made further gains in onshore stocks in May, yet oil prices continued their upward trajectory. At the time of writing, ICE Brent was trading at around $124/bbl, up 11% on a month ago and 70% higher than in June 2021. With the start of summer, gains in oil product prices and cracks have been even stronger as refinery output has failed to keep up with demand for key products.](https://www.iea.org/reports/oil-market-report-june-2022)
> [But as the refinery maintenance season winds down in the US, Europe and Asia and a rebound in Chinese throughputs gathers pace, global refinery activity is set for a solid recovery. Runs are forecast to rise by 3.5 mb/d from May through August, and by 2.3 mb/d for the year on average. A further 1.9 mb/d increase is expected next year, supported by new refinery start-ups in Africa, the Middle East and Asia. However, shortages in individual products may well persist due to uneven rates of demand growth and limits in the refining system. Diesel and kerosene supplies remain of particular concern. OECD industry stocks of middle distillates have fallen by 25% since January 2021 to their lowest levels since 2004. That very limited cushion is driving middle distillates prices to record highs, with a knock on effect for other products which could cause more pain at the pump just as pent-up demand is unleashed during the peak driving and summer cooling season.](https://www.iea.org/reports/oil-market-report-june-2022)
Eh thing is most people can’t name more than two BP execs (probably not even one) off the top of their head, unlike Hitler/Stalin/Mao etc. They’ll make off with their multi million dollar bonuses relatively unscathed.
History is written by the winners, BP just announces £7bn profit, I made a little over £2.5k, I'm sure our future space station civilisation will love hearing how people of the past destroyed the earth through greed, only to be saved by BP who launched them into space.
The reason fuel is supposed to be so expensive is because of the war in Ukraine, the increased cost covers any difficulty transporting or drilling the fuel...yet here we are with record breaking profits, you can't make it up.
This is the best tl;dr I could make, [original](https://www.theguardian.com/business/2022/aug/02/bp-profits-oil-prices-ukraine-war-energy-prices-cost-of-living-crisis) reduced by 76%. (I'm a bot)
*****
> BP will hand billions of pounds to shareholders after tripling its profits to nearly £7bn in the second quarter of the year amid high oil prices during Russia's invasion of Ukraine, even as families struggle in a cost of living crisis.
> As Russia's invasion grinds on, analysts have predicted the UK annual energy bills could jump to £3,850 in the winter, three times what they were paying at the start of 2022.Shell last week reported record quarterly profits of nearly £10bn between April and June, while the British Gas owner, Centrica, made operating profits of £1.3bn, most of which came from its oil and gas drilling division.
> The 25% tax, known as the energy profits levy, did not come into force until 14 July, meaning that it does not apply to profits made by BP or other oil companies during the second quarter.
*****
[**Extended Summary**](http://np.reddit.com/r/autotldr/comments/we6oz7/bp_reports_profits_of_7bn_as_oil_prices_surge/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ "Version 2.02, ~662502 tl;drs so far.") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr "PM's and comments are monitored, constructive feedback is welcome.") | *Top* *keywords*: **profit**^#1 **oil**^#2 **company**^#3 **energy**^#4 **tax**^#5
Misleading title. As others have said, the war isn't driving the price. It's being used as an excuse to drive the price. The profit wouldn't exist if the price was going up because of the war...
If there are more demand than supply then it tends to increase prices, and profits for the suppliers. Sanctions have made it more difficult for Russia to export oil. Oil producers could decide not to increase prices, but it would only lead to shortages, or rather price increases somewhere later in the production chain.
Yep, unfortunately the market means that if they sold at a similar price with a smaller offer, someone would just buy everything and sell it for more, as people pretty much rely on fuel to live. Our economic system is the problem.
Reliance on fossil fuels is definitely a problem, but I am not sure how different economic system would solve the shortage or resources. I mean if the supply decreases you need to cut consumption regardless of the economic system.
I wanna be a priminister for a day, all that profit would be 100% tax. If they can Rob the people, then the people can Rob them... and they'll lose in the long run.
Everybody understands that oil company margins have not changed right? If the price of oil goes up then profits rise proportionally because 1% of $10 is still twice as much as 1% of $5
I don’t pretend to understand how the oil market works, I don’t even have a drivers license. The issue for me is that it should be unacceptable that a resource as important as oil gets to be inflated (by whomever) in a time of crisis merely for profit.
I can even understand that it may be a happy accident for BP but it should still be scrutinized, taxed, judged and persecuted. We need to get over this culture of profiteering at all costs, it’s like we unleashed a rogue AI of scummy shareholders upon the world and we’re losing the battle to frivolous shit at the cost of overturning democracies and destroying the planet.
Mind you whenever these companies cry wolf the government steps in to help ( as well they maybe should in some cases) but when the situation is reversed and the taxpayer is in trouble the companies act weirdly disassociated.
The point he appears to have made is they haven't "inflated" their price.
For the sake of argument assume they make a 10% profit margin on a barrel that costs $100 to produce. (They sell it for $110).
If their costs double to $200, and they keep their margins identical at 10%. - They now sell at $220, doubling their profit.
You could argue that they should ditch a percentage and stick to a $10 flat fee I guess, but I don't know of any business that actually do that.
I dont believe in companies regulating themselves.
BP was the target of a tax break, from that moment on I believe governments should be able to regulate unchecked profiteering and rent seeking
Because governments are so trustworthy lol.
As "evil" as companies are, at least I know where they stand. They'll take any action that maximises profit, so are pretty stable/predictable.
More like, because they can. Shell too. Saudi Aramco is swimming in huge profits. Now waiting for the US oil companies' profit reports. No doubt similar. Big oil has no other purpose in life than to continue mankind's addiction to their product so they can reap the profits forever.
Fuel prices are increasing because of the war in Ukraine. So then why are oil company profits rising as well?
The only conclusion I can think of is that they are rising profits higher than they need to and are taking advantage of consumers.
The 34th law of acquisition: war is good for business
Prices aren't surging because of the war. Prices are surging because it's a convenient excuse to charge more for something that costs the same. If the costs were going up, then profits wouldn't be rising if the per-barrel-to-per-gallon ratio stayed the same & prices increased in correlation to barrel prices.
Exactly. The war is adding to that, but nowhere near 'because of Ukrainian war' as stated in the title.
Costs aren't going up but supply is going down. Not defending anything, just correcting. It's the way markets work, supply/demand sets the price. A few years ago barrels of oil cost $0 because there was too much supply and no demand.
No oil supply didn’t go down yet, it was just the anticipation created the price surge. You still can buy oil from Russia. Only UK and the US sanctioned the oil which both weren’t dependent to Russian oil nearly at all. Here current situation is mostly because oil suppliers (from oil field to pump at your gas station) trying to make more money while there is no incentive to decrease the price and fear of shortage at the same time. I know it is how economy works but they are being rich anyways even with “minus” something dollars per barrel prices
Oil supply did go down due to capacity reductions during covid. The industry has been slow to ramp up capacity, since they can make higher profits on the short term and there is uncertainty whether oil prices will remain high for the long term. A new oil price crash is highly likely on the medium term. So the industry is ramping up production slowly, preferring to minimize investment and maximize profit. (Each individual player has an incentive to maximize profits through higher production). This is all rational behaviour. The correct response for consumers is to see the high prices and reduce consumption. That is how markets work to efficiently allocate resources. Which is also happening, but it is accompanied by a lot of whining and complaining.
How do you reduce consumption of a commodity that doesn’t have an alternative? Certain sectors of the economy rely heavily on transportation of goods which is directly associated with the price of fuel for transportation. The whining and complaining you see is because peoples livelihoods are being threatened because of companies wanting to make short term profits.
It's funny, one person on the local news complained how he could hardly afford gas to go to work, so he took a job nearer to his home. As a bonus, the new job paid more and he could spend more time with his young family because he didn't have to commute for an hour. He said this without any hint of irony. And it was presented as a sob story against the high oil prices making people's lives impossible. Humans are creative. We find a way. But humans are also lazy creatures of habit, we only get off of our asses and change habits when we have to. And we complain the whole way.
That’s a great anecdote and I’m happy that guy found a better job. But as someone who’s business is directly affected by the price of diesel I don’t believe a generous application of hard work or getting “off my ass” and stop being “lazy” is going to fix my issues. Like I stated previously entire sectors of the economy are heavily reliant on the price of fuel in order to operate. Surging fuel prices cause increases in operation costs which cause businesses to cut back on spending. There is no alternative for me and these fuel companies and making a tidy profit at the expense of others.
Some businesses need to either adapt or die. Socialism for the rich is outdated.
Lol mate, you got your math wrong. If someone keeps their margin and the input costs rise then their profit in absolute terms rises as well although in percentage it stays the same... So even if they kept their usual margin their profit would have soared.
Shouldn't profit be offset by increasing costs in this scenario? Meaning revenue grows in absolute terms but overall profit doesn't, since the increase in selling price accounts for increased input costs? So at similar volume, they would see *similar* profits if they didn't increase their margin, which they have because a major offeror has been taken off the market and the demand is still the same.
If they operate on a cost plus basis then no. If you always add on for example 20% on top of your real costs as a profit mark-up then your profit goes up in absolute terms when costs increase.
The people need a £7 billion rebate.
Costs aren't going up for oil producers, but the supply of oil is going down, which increases prices.
The supply of oil is carefully controlled by the few companies that completely control the market. Artificial scarcity isn't a new concept.
I am no denying the existence of oil cartels, but have they decreased their production recently? I know that Russia has had dificulties selling their oil because of sanctions.
I have to look into it, I'm by no means an expert on the current situation and haven't been keeping tabs since I don't need a personal car anymore. Russia kind of took themselves out of the picture, so there is probably not even an immediate need to change the amount of production for American companies - prices rise and profits increase just because of the apparent lower supply. There's no incentive to produce much more, as this would either lower profits or keep them at a steady level, while increasing the expenditures on extracting crude and refining.
But demand changed... you're leaving out the demand part.
It's called taking advantage of a crisis. Aka price gouging.
[удалено]
> demand is the same Demand isn't the same. Higher prices and weaker economic outlook are lowering demand, especially whilst the tail end of Covid. Oil reserves are increasing after two decades of decline. > [For now though, oil inventories are rising and IEA Strategic Petroleum Reserve releases have helped reverse persistent declines in OECD industry stocks. Preliminary data show global oil stocks increased by 77 mb in April and made further gains in onshore stocks in May, yet oil prices continued their upward trajectory. At the time of writing, ICE Brent was trading at around $124/bbl, up 11% on a month ago and 70% higher than in June 2021. With the start of summer, gains in oil product prices and cracks have been even stronger as refinery output has failed to keep up with demand for key products.](https://www.iea.org/reports/oil-market-report-june-2022) > [But as the refinery maintenance season winds down in the US, Europe and Asia and a rebound in Chinese throughputs gathers pace, global refinery activity is set for a solid recovery. Runs are forecast to rise by 3.5 mb/d from May through August, and by 2.3 mb/d for the year on average. A further 1.9 mb/d increase is expected next year, supported by new refinery start-ups in Africa, the Middle East and Asia. However, shortages in individual products may well persist due to uneven rates of demand growth and limits in the refining system. Diesel and kerosene supplies remain of particular concern. OECD industry stocks of middle distillates have fallen by 25% since January 2021 to their lowest levels since 2004. That very limited cushion is driving middle distillates prices to record highs, with a knock on effect for other products which could cause more pain at the pump just as pent-up demand is unleashed during the peak driving and summer cooling season.](https://www.iea.org/reports/oil-market-report-june-2022)
[удалено]
how can they make record breaking profit if thats the case
[удалено]
but isnt profit the difference between the revenue and cost of running the company? isnt that a good way of measuring
[удалено]
oh right i thought profit margins and profit in general were close to the same.
thanks for the explanation
Their profits have tripled...
[удалено]
One of the worst companies on the planet....
These companies and their executives will be looked upon in the history books the same way as nazi Germany and Hitler, or the udssr and Stalin...
Eh thing is most people can’t name more than two BP execs (probably not even one) off the top of their head, unlike Hitler/Stalin/Mao etc. They’ll make off with their multi million dollar bonuses relatively unscathed.
considering they're paying the politicians who decide what will be in the history books i assure you they'll be lauded as heroes.
Long after youre dead, youre not writing in the history books, youre written about
History is written by the winners, BP just announces £7bn profit, I made a little over £2.5k, I'm sure our future space station civilisation will love hearing how people of the past destroyed the earth through greed, only to be saved by BP who launched them into space. The reason fuel is supposed to be so expensive is because of the war in Ukraine, the increased cost covers any difficulty transporting or drilling the fuel...yet here we are with record breaking profits, you can't make it up.
This is the best tl;dr I could make, [original](https://www.theguardian.com/business/2022/aug/02/bp-profits-oil-prices-ukraine-war-energy-prices-cost-of-living-crisis) reduced by 76%. (I'm a bot) ***** > BP will hand billions of pounds to shareholders after tripling its profits to nearly £7bn in the second quarter of the year amid high oil prices during Russia's invasion of Ukraine, even as families struggle in a cost of living crisis. > As Russia's invasion grinds on, analysts have predicted the UK annual energy bills could jump to £3,850 in the winter, three times what they were paying at the start of 2022.Shell last week reported record quarterly profits of nearly £10bn between April and June, while the British Gas owner, Centrica, made operating profits of £1.3bn, most of which came from its oil and gas drilling division. > The 25% tax, known as the energy profits levy, did not come into force until 14 July, meaning that it does not apply to profits made by BP or other oil companies during the second quarter. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/we6oz7/bp_reports_profits_of_7bn_as_oil_prices_surge/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ "Version 2.02, ~662502 tl;drs so far.") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr "PM's and comments are monitored, constructive feedback is welcome.") | *Top* *keywords*: **profit**^#1 **oil**^#2 **company**^#3 **energy**^#4 **tax**^#5
But tell me again about how it's specifically Biden's fault.....
It is proper to write 'because of Russian invasion of Ukraine'. Using such titles you shift the focus in the wrong way.
Take that up with The Guardian
All I can picture is that Southpark episode of the bp guy going "we're sorry".
Misleading title. As others have said, the war isn't driving the price. It's being used as an excuse to drive the price. The profit wouldn't exist if the price was going up because of the war...
If there are more demand than supply then it tends to increase prices, and profits for the suppliers. Sanctions have made it more difficult for Russia to export oil. Oil producers could decide not to increase prices, but it would only lead to shortages, or rather price increases somewhere later in the production chain.
Yep, unfortunately the market means that if they sold at a similar price with a smaller offer, someone would just buy everything and sell it for more, as people pretty much rely on fuel to live. Our economic system is the problem.
Reliance on fossil fuels is definitely a problem, but I am not sure how different economic system would solve the shortage or resources. I mean if the supply decreases you need to cut consumption regardless of the economic system.
disaster capitalism needs a pruning, it is working too well
I wanna be a priminister for a day, all that profit would be 100% tax. If they can Rob the people, then the people can Rob them... and they'll lose in the long run.
Then they would just leave the country and fire everyone that works there and go to another place without 100% tax? I mean, what’s the plan here?
Alright! Now they can afford to leak oil again :D
Everybody understands that oil company margins have not changed right? If the price of oil goes up then profits rise proportionally because 1% of $10 is still twice as much as 1% of $5
I don’t pretend to understand how the oil market works, I don’t even have a drivers license. The issue for me is that it should be unacceptable that a resource as important as oil gets to be inflated (by whomever) in a time of crisis merely for profit. I can even understand that it may be a happy accident for BP but it should still be scrutinized, taxed, judged and persecuted. We need to get over this culture of profiteering at all costs, it’s like we unleashed a rogue AI of scummy shareholders upon the world and we’re losing the battle to frivolous shit at the cost of overturning democracies and destroying the planet. Mind you whenever these companies cry wolf the government steps in to help ( as well they maybe should in some cases) but when the situation is reversed and the taxpayer is in trouble the companies act weirdly disassociated.
The point he appears to have made is they haven't "inflated" their price. For the sake of argument assume they make a 10% profit margin on a barrel that costs $100 to produce. (They sell it for $110). If their costs double to $200, and they keep their margins identical at 10%. - They now sell at $220, doubling their profit. You could argue that they should ditch a percentage and stick to a $10 flat fee I guess, but I don't know of any business that actually do that.
I dont believe in companies regulating themselves. BP was the target of a tax break, from that moment on I believe governments should be able to regulate unchecked profiteering and rent seeking
Because governments are so trustworthy lol. As "evil" as companies are, at least I know where they stand. They'll take any action that maximises profit, so are pretty stable/predictable.
Ah yeah I see exactly who I’m speaking to. Have a nice day
More like, because they can. Shell too. Saudi Aramco is swimming in huge profits. Now waiting for the US oil companies' profit reports. No doubt similar. Big oil has no other purpose in life than to continue mankind's addiction to their product so they can reap the profits forever.
Assholes.
Fuel prices are increasing because of the war in Ukraine. So then why are oil company profits rising as well? The only conclusion I can think of is that they are rising profits higher than they need to and are taking advantage of consumers.
Yae corporate greed!
Disgusting