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Originally Posted by RJ
Not that I doubt you, but I have to wonder how they could lose money selling a product that most of us can't do without. How many years ago are you talking? Also, how did they have losses comparable to today's profits when they were paying $15 PB? I'm assuming that the crude is their greatest cost, is that correct? Or does getting it here and refining it cost more? It just seems like if they were losing money it was probably their fault. But again, I don't know jack about it, I'm just making some general assumptions.
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Sorry for the confusion. I'm probably talking too much about refining, since it relates directly to gasoline pricing.
Oil companies also, of course, also drill for crude which they then sell on the open market. Say they have a field that they've been producing from for some time. They've already invested the capital (rigs, drills, etc) to produce from that field. So, say the price of crude is at $15/barrel. Their costs exceed that. However, now say that crude is trading at $70. As you can see, the profit then becomes considerable.
I don't remember the exact timing of the last bust, but I believe it was in the late 80s and early 90s.