Prices have doubled in a year. Has demand somehow DOUBLED in a year, too? Does anybody here really believe prices are in 'equilibrium'?
Posted on 04/27/2008 11:37:41 AM PDT by Kenny Bunk
The Left has one thing right. The oilcos are screwing America.
What they have wrong is the method they allege. The Left trots out its marxist litany of greed, monopoly, speculation, oppression of the poor, etc. and inf nauseamque. That's where they're dead wrong.
Here's exactly how we are being screwed, Left, Right, and Oilco:
The United States is the world's third largest oil producer, pumping from established wells that were bought and paid for many times over, and operating steadily with what amounts to federal subsidy in the form of tax incentives and depletion allowances, etc. etc.
That oil, produced in the US, costs perhaps $25 per barrel to produce (and that is a very generous estimate). Once produced it is then "sold" to the oilco's refining company (an independent entity, of course) at the world price.
The refining company passes that on to the consumer. Business as usual. Except that the oilcos are now making up for a few lean years with an unholy vengeance. They are not wrong. They are operating legally and these huge profits are completely legitimate. Of course, they need a lot of money to buy the foreign oil they need to meet domestic demand from their foreign operating companies, too. Tidy profit there.
Of course, the leaders of the Left know this, and purposely obscure the actual issues with a cloud of truly boring marxist rhetoric, which by now every literate person on Earth knows as well as they do.
The Right has done very little to address these wrongs. When in the majority, there was no concerted effort to increase domestic production, which requires massive investment from the oilcos. Ditto, the tragic case of our refining capacity. The oilcos have been spared the expense of investing in sorely needed refining capacity increases by a complacent Right, and a shrill "environmentalist" Left. Members of both camps have no problem accepting huge contributions from their friends in Big Oil. The oilcos have no problem with these artificial restrictions. They limit supply and allow massive price increases, without real investment.
In 7 years of the second Bush Administration, not one (1) new nuclear powerplant has come on line. Even more shocking, considering the guy I voted for twice (no, not in the same election)is an oil man, is that not one (1) uno, ein, new refinery has come on line. Yeah, they have boosted production at, and enlarged existing refineries ... not quite the same thing. What the hell happened to the plan to put new refineries at closed military base sites?
So right and Left are complicit with Big Oil in strangling supply at the domestic refining level, and at the domestic production level. The subsequent rise in oil costs has severely dented our economy, and we haven't seen the worst, by a long shot. This is simply an inexcusable situation.
Simple. We need oil. We'll need it for at least the remainder of this century and longer. Thank goodness there is plenty of it! The oil companies have to be incentivized one way or another to plow back a substantial portion of their profits into more exploration and production, (we know where it is already ... test wells is what I mean to say), increased production, and above all in an increase in refining capacity.
What we are doing is allowing our domestic oil companies behave as if they were OPEC mmembers. Folks, it ain't their fault, and as businessmen, more power to them. We need leaders that are capable of changing the domestic oil playbook. McCain just announced that if FL and CA don't want to develop their offshore oil resources, that's fine with him. OK, FL and CA, stop using oil. He didn't ask anyone in Maine, where exploitation of the fields in our Gulf could put our poverty-stricken potato-exporting backwater back on the economic map. And somebody please explain to the technically benighted Left that offshore oil drilling doesn't mean pollution. Scotland and Norway are as clean as ever. And Beverly Hills is a producing field ... has been pouring royalties into movie star pockets for nigh on a 100 years! Look polluted to you?
Now immediately, alternative energy people are going to be jumping down my throat ..."Wind Power, Hydrogen, Hydro, Carbon Foot Prints, methanol, ethanol, bio-fuel, ..... Gotta get off our addiction oil, etc. etc." Fabulous. Let's use the oil we have as we transition to all these brave new worlds. What are we supposed to do? Starve in the dark, while our Chinese and Indian graduate students cook up something over in their lab at OSU or MIT?
Answer number 1: use domestic oil to meet domestic needs. It's not an overnight answer, and we have just wasted 7 years. Let's get this on our priority list as citizens and force action from our elected officials.
Just FYI: It is AGAINST the law to drill off the Atlantic coast. It is AGAINST the law to drill off the Pacific coast. It ia AGAINST the law to drill in ANWR. All the choice US drilling spots are ILLEGAL. New US refineries? AGAINST the law!
Marker
And how did that come about? Did Democrats and Republicans have anything to do with it?
You’re not too familiar with the petroleum industry are you....If you can produce a barrel of oil for $25.00 domestically then you need to share your expertise with the oil companies. Refineries have expanded, however, one of the largest expansions, BP’s Whiting, Indiana refinery, was brought to a quick halt by the two US Senators from Illinois. BTW, less than 40% of the producing wells in the USA are owned by the large multinational companies.
If you pass a law to make it illegal for me to do my job, (but in reality my job is “essential” for America's well being) how is it that I'm screwing America by obeying the law?
This sounds more like how the environmental movement is screwing America, not big-oil. They'd be happy to bring a few new refineries online if they were only allowed to.
Yes. That's what I am talking about.
Now in regard to "$25 barrel," oilco accountants evidently study with film industry accountants. I am sure that they could "prove" that they were losing money on every last barrel they produce.
Less than 40% of the producing wells in the USA are owned by the large multinational companies.
OK. Who buys the oil, and for how much?
We have a huge problem here PW. Let's figure out how to solve it. You know, think outside the old box? We both know this country's production can be greatly increased. How? Laws and policies that are harmful or that are outmoded can be changed. What's missing is leadership. Looking right and left. None around.
Little bit of Kenny, Lots of Bunk.
Must be magic law, if it wasn't passed by democrats and republicans.
Wrong. As good businessmen, oilcos are very happy not to have to make this huge investment. Big increases in supply lower profits. They are also very happy to fund foundations that support environmentalist wackos.
Point is, this is a very strange and dirty deal all around. Nowhere do I maintain that this is the oilcos' fault. They don't make the law. They just follow it and do the best they can. Can't blame'em for that, now can we?
Je suis bien touché la!
John D Rockefeller was light years ahead of what is going on now. His oil company was broken up and many competitors have appeared all over the world, although Rockefeller is still used to scare children. The process has gone so far that the oil business is fractured into atomic pieces. Not much else needs to be done to vaporize what little remains.
Well, if it ain't magic, how come we can't change it?
Which was precisely how, if you were an oil-company manager in the 90's, you got fired.
The incentives in the '80's and '90's were all about keeping down finding and development costs by not spending on finding and spending as little as possible on developing. Budgets were starved, budgets were attacked repeatedly by F&A types wielding analytical tools, staff were bagged and tagged and set out by the curb to reduce G&A. In one case I know about, the "Jack Welch" cure was applied: geologists and geophysicists were fired en masse on Tuesday, and on Wednesday consultants were brought in to replace them, because as consultants, their contractual rates could be applied to specific project costs and receive more favorable tax treatment than general and administrative costs represented by salaries. Plus: No employment taxes, no withholding, no retirement cost, no health cost (unless it were negotiated with the consultant; but usually not). Perfect employee: no taxes, no expenses other than his salary, which you get to take off your income taxes. Brilliant. Now, if only you could find a bunch more from a low-cost talent source like, say, India......
Rising product prices (determined by open-outcry trading, by the way) have allowed more projects to go forward. But the incentive structure for starving organizations of people and blowing people out as soon after (or even before) age 50 because of ERISA legal requirements remains in place; and Gen "Y" is in no hurry to rush down into the same salt pits that ate their forerunners. Nobody wants to go to college for six, seven years in order to enjoy a 12-year, stretch 20-year, career.
Oil company lobbyists, you need a bigger check book than they have. Are some honest politicians that actually care for the country, but those seem to be in real short supply.
What I am saying is that big oil is not much saddened by that preposterous situation, which our elected leaders have allowed to continue. As sound businessmen, they are playing the hand they were dealt, and playing it well.
So, a weird way, the oilcos and the environmentalist are in a symbiotic relationship. When's the last time you heard an oilco exec publicly state that the environmentalists are very largely unscientific wack jobs?
Read BP's ads. Read as if they are in the frickin' Sierra Club!
As the industry analyst tried (unsuccessfully) to tell O’Reilly, the oil companies do not set the price of oil. O’Reilly kept demanding, “Tell me the name of the one guy who sets the price of oil!” It was the stupidest thing I've ever heard him say, and that's something. The price is set by the commodities market, based entirely on what somebody is willing to pay. If nobody was willing to pay $117 for a barrel of oil, or $3.59 for a gallon of gas, prices would fall. That's supply and demand in a free market.
If you could eliminate the speculators, gamblers, parasites, and crooks in the futures market, you could lower the price of oil a little. If you could eliminate the many taxes on gasoline, you could lower the price a little. If you could increase domestic production, you could lower the price a little, and at least keep the trade deficit lower. But as long as there's a world wide demand for oil, the prices will be as high as the markets will bear. It's a Gordian knot that will only be cut by increased production, decreased demand, and alternative sources of energy, which ties in with decreased demand for oil.
And of course, bribing the dealer has been known to help.
That would, of course, be Kennybunkport. George HW Bush and the one-worlders are everywhere! It's all a giant conspiracty, dontchaknow.
Seriously, were I the CEO of, say, ExxonMobil, I wouldn't lift a finger -- under present-day circumstances -- to bust my chops to produce more oil. Why bother when A) prices are perfectly satisfactory, and B) All I'd get for producing more would be a ration of shjt from the enviroNazis and their fellow-travelers in the goobermint?
Oil industry profits are about 10 or 11 cents per dollar of invested capital, which is not a particulary high return for a business. That means that they have invested 9 or 10 times as much capital as as their yearly profits in order to produce the oil they provide.
It is the scale of the business that is hard for most to comprehend. They make a big profit because they are a huge industry that has made huge investments. If the profits are cut, where will the money come from to find and develop future oil fields, let alone maintain existing ones?
That oil, produced in the US, costs perhaps $25 per barrel to produce (and that is a very generous estimate). Once produced it is then "sold" to the oilco's refining company (an independent entity, of course) at the world price.
For integrated companies like the majors, profits are reported for the entire company including refining subsidiaries.
The refining company passes that on to the consumer. Business as usual. Except that the oilcos are now making up for a few lean years with an unholy vengeance. They are not wrong. They are operating legally and these huge profits are completely legitimate. Of course, they need a lot of money to buy the foreign oil they need to meet domestic demand from their foreign operating companies, too. Tidy profit there.
Please feel free to invest in oil company stock and share in the profit.
By the way, the bulk of profit for most foreign operations goes to the producing country. It is the same here, except at a smaller scale. Our government adds a tax at the pump that exceeds oil company profits per gallon, yet government makes no investment and takes no risk of being nationalized overseas or of drilling dry holes.
I keep remembering that book ghost-written for JFK, "While England Slept." Our fearless leaders, especially the last one, were in dreamland as this situation evolved into the mess it is today.
We have to produce more domestically, no doubt about it, and speed the development of alternatives (I favor methanol in the short term). Also, we need much more efficient personal transport ... say perhaps diesel hybrids ... backed up by increased nuclear power production. The 31.5 CAFE standard doesn't sound all that great to me, when a VW TDI can deliver 50MPG with excellent speed and comfort.
That's short to medium term. And I am not so naive as to think this all isn't going to hurt!
I consider this country’s irrational fear of nuclear power to be our biggest problem. Switching to more diesel engines will help, but diesel is also a fossil fuel, and diesel is currently higher than gasoline. I think alcohol and vegetable oil fuels will play a big part in our automotive future. We will always need petroleum products such a plastics, lubricants, etc., but that’s a minor usage compared to the millions of gallons of gasoline we use every day.
Vous parlez sans la sagesse.
Right - Just ignore these guys (the total will run only about 6 BILLION dollars)...
From: Redorbit.com
ConocoPhillips, BP Plan Alaska Gas Line
JUNEAU, Alaska -- Two of the world's largest oil companies announced plans Tuesday to jointly develop a multibillion- dollar pipeline for moving North Slope natural gas to U.S. markets. Houston-based ConocoPhillips and Great Britain's BP PLC said they plan to spend $600 million in the first phase of the project over the next three years. The plan, dubbed "Denali -- The Alaska Gas Pipeline," is to deliver natural gas via a 2,000-mile pipeline from the energy- rich North Slope in Alaska to a pipeline hub in Alberta, Canada, which has links to numerous other markets. If necessary, the project would also involve building an additional 1,500-mile pipeline to U.S. markets. The pipeline would eventually move about 4 billion cubic feet of natural gas per day to markets, about 6 percent to 8 percent of daily U.S. consumption, the companies said.
Imagine yourself as an oil company. You want to build a refinery at a cost of a billion dollars. You get all the permits, waivers, studies, etc. done at great cost and begin to build. After a year or two of building a major part of the work is done.
A new congress decides that retroactively the permits weren’t legal or something and a judge halts construction.
A couple of years later you’re allowed to continue. But soon as you do a new refinery tax is passed by a hostile Congress, again retroactively, which has legal precedent.
Investors want no part of a drowning pool and sell off their stakes if possible and you, as an oil company, own lots of rusty metal.
Can’t happen? Do you wanna bet a billion? No. And few other people do either.
When a politician says, ‘just wait until November when we have the White House’, it can’t be good for refinery building.
Ive been out of touch for a little while now, but I would be VERY surprised if there wasn't at least a dozen refineries in the process of development. (they may be halted through legal means or whatever)
So I guess what I'm saying is, I think your analysis is seriously flawed.
You have given away the secret plan.
It wasn't Kennebunkport, BTW, I was planning on dredging the river up to Livermore Falls and making it the world's largest oil port. Move over, Dhubai!
Perhaps. But what I get is that many think the obstacles to increasing domestic production and refining are overwhelming an a variety of fronts.
Since increased domestic production is a key ingredient of any future plan to gain oil independence, I cannot see "impossibility" as an alternative to our problem.
I would be VERY surprised if there wasn't at least a dozen refineries in the process of development.
Then you had better plan on being surprised. There may well be plans on the drawing boards, but more than likely they are contingency plans. The increase in the number of refineries has to be driven from the top in order to identify and clear away the many obstacles rightly noted by yourselves and others.
My thesis: The Oilcos, and the Left and Right, have settled down into relationship of sorts, the parameters of which are counterproductive in solving our presnt oil problem.
Bravo!
(1) Glad they could afford it.
(2) This is quite a few years out, which is normal.
My acute frustration here is that all the help ... nuclear power ...more refineries ...increased domestic production ... is quite a few years down the road.
We are 7 years into the Bush Administration. We were told that this would be a priority from Day 1. What is going to happen to our economy as we wait for these projects to come on line?
Peut-être, mais l'espoir de la sagesse ne soit pas içi?
We’re watching this ‘project.’ It is far from beginning. None of the $600 million will be spent in Alaska unless some of the hundred employees happen to live here. $200 million a year is nothing, and then the project might or might not begin. Many houses for sale and nobody buying, but come to Fairbanks anyway for the cheap groceries. Wonder bread $4 a loaf.
Going to be a long (and expensive) four years.
About ten years ago plans were made to build a refinery near Yuma, Arizona. Having spent much time there I dare say a refinery would greatly improve the scenery but that’s another point.
As of today not one shovelful of dirt has been turned, not one! A $3 billion project that is sorely needed and after 10 years no one knows whether it will ever be built.
It’s not money, technology for clean operation, or proper studies and permits that’s lacking, it’s that any group with a lawyer is given veto power by the courts until the accused proves themselves not guilty and even that may not be enough.
The oil companies may be in bed with the left and right but the ugly child of $5 or $6 per gallon gasoline isn’t their spawn. It’s a political problem.
This would be an excellent opportunity for our President to say something.
Again my main complaint:
I am aware that President Bush has accomplished some good work behind the scenes. However, to give the public forum away to enviro-nazis is unforgivable.
la sagesse n’est pas facilement mis en évidence, il faut travailler.
The Regress are the lesser danger, btw. FAR more dangerous is the possibility than some activist judge, in response to some loony environazi lawsuit, summarily orders cessation of work on the refinery.
Forty years ago an oil company wanted to build a refinery in MAINE and the locals said “No!” They didn’t want the “smell” so the refinery was built on the Houston ship Channel. In TX anything related to oil smells like money.
It wasn't that we didn't want the business, but we had to wait for Rachel Carson to die. I reckon you would find the natives a bit more amenable nowadays. We do have a nut environmentalist fringe here. Mostly people who came in from Kennedyland. If you want to build here, talk to me. I'll make sure the hippie wackos get whacko'ed.
Bttt.
Maine is a nice place to visit but I can’t inagine anybody wanting to do business there. Good luck to you.
No! Don't go away. Please. I swear we'll get rid of our socialist state government. Honest. Come back ...we need the mo............
Est-ce-que vou n'avez pas aucune conaissance des methodes osmotiques?
Prices have doubled in a year. Has demand somehow DOUBLED in a year, too? Does anybody here really believe prices are in 'equilibrium'?
Need help on this one. Demand may not have doubled, and it seems unlikely, but overall production may have been limited, putting pressure on supplies. But I don't know that.
Afraid we just ‘cricketed’ this thread.
Est-ce-que vou n’avez pas aucune conaissance des methodes osmotiques?
I made it as far as “osmotiques”, then my google translator quit and went home for the night. But I did enjoy the exercise.
Well, Gulf got caught bribing the Senate minority leader, Sen. Hugh Scott (R-Pa.) back in the mid-70's. Gulf chairman Bob Dorsey had to step down, with his No. 2, various other players in the Gulf hierarchy, and Sen. Scott, who was allowed to retire quietly. I don't recall any prosecutions (this was during the Ford administration, when the RiNO's were firmly in charge and the GOP was indeed the RiNO party, full of liberals and Me-Too'ers, as they used to be called.
Keep in mind that Gulf was controlled back then by Mellon Bank and the Mellon family; they were headquartered in Pittsburgh, the Mellons' home town. So the scandal was a Pennsylvania scandal predominantly, that got mud on the national GOP and the Gulf people elsewhere who had nothing to do with it.
John Tower, a longtime U.S. senator from Texas, was sometimes called "the senator from Texaco", and his colleague was called "the senator from Brown & Root", memorializing the long money-under-the-table relationship established by Lyndon Johnson when he held that seat, which made him the king of the Senate and was the source of what he called the "walking-around money". My personal opinion is that that was the money in the shoebox that came to light during the divorce trial of Sen. Herman Talmadge, when his wife demanded a share of the money in the shoebox. My humble reconstruction is that the shoebox went from Landslide Lyndon, when he was sworn in over Jack's cooling body, to Sen. Richard Russell of Georgia (Lyndon's former mentor, later shine-boy), to "Humman", as Sen. Talmadge was called, after Russell's death. Not exactly rocket science.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.