Interesting thread on gas prices and oil companies

The Oildrum has a good post: Record Oil Company Profits and High Gas Prices: A Connection? Go read the whole thing. But this section strikes me as the most relevant:

So, if there is gouging, where is it happening?

My opinion is that the gouging, if any, is going on at a very local level, no higher up than the local gasoline distributors. The most opportunistic way to maximize your cash would be to buy this week's gasoline for $2.50 a gallon, and then if something (like high oil prices) allows you to, mark this shipment of $2.50 gas up to $3.00. [Keep in mind that some states regulate the maximum profit on a gallon of gas.] Normally gas markup is about a nickel a gallon or such. The convenience store makes much more on food—the gasoline is the draw to get them into the store to buy cigarettes or candy or a coke, which have much higher profit margins.

The people who control the final price at the pump are the retailing companies or independent store owners. And these guys are more than happy to put it off on the oil companies, as they are very removed from them!

I know—as clear as mud. But it is the "free economy" at work...

Why are oil companies making record profits?

Because the wells they are producing from today were drilled in past years, where they used $15-25 per barrel as their estimated selling price for the oil. Thus when the market got tight, they have cheap oil going at a higher price. Why? Simple—demand is high.

Now this higher priced oil is filtering back to them in the form of higher priced goods, so the profits decline slowly over time as higher priced energy enters the economic mill. But right now, they are making a lot of money.