Oil Industry

1462 Words Aug 14th, 2006 6 Pages
Brittany Butler and Nick Schuchardt
MBA 633
Position Paper

The Oil Industry: "Why Companies Are Not Getting a Fair Shake"

Within the last two years, the oil industry has increased the price of oil causing gas prices to rise to $3.00 a gallon today. It was only a few years ago that the price of gas was $1.00 a gallon. There have been many complaints against the oil industry on price gauging and monopolizing the industry. Oil companies are reaching sales up to $100 billion and they are seeing profits in the $10 million range. These are the facts that we receive from the media and the government to portray a negative image on the oil industry. The oil industry does not seem to be getting their fair shake and peoples perception
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The public eye votes for the Senate, House, and President. In light of the recent complaints about gas hikes and oil company 's sales topping into the $100 billion range, the politicians are placing blame on the industry and reacting to the news so they look good.
Investment in Refineries Oil companies will invest in refineries if and only if they perceive future profits to be made from them. Drilling for oil is risky and the risk will be taken if the reward is greater than the risk. The real reason no new refineries have been built for almost 30 years is simple: any oil company that wants to stay profitable isn 't going to invest in new refineries when they know there is going to be less and less oil to refine. The last domestic refinery built was during President Ford 's term in office. Oil companies have been burned before and must make investment decisions based on the realities of the market, not the political push.
Decision Making Oil companies seem to utilize the "analytical style" to decision making. Drilling for oil and creating refineries is an extremely risky and costly business. Just like any other businesses who analyze their market to see if a new product will be successful, oil companies have the right to do the same thing. Why create a refinery when the costs outweigh the benefits.
Environmental Factors
29% of the country 's domestic oil comes from the Gulf of Mexico. This had a

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