Probing For Oil, An Investigation of the High Cost of Gas At the Pumps

Since I broke my right ankle in November in an auto accident, I haven’t been able to drive. I’ve been playing Miss Daisy and having my family chauffer me around. But, this week, my daughters had a crisis in Kingsville and I needed to handle it in person, so I broke down and drove for the first time. It was painful. I did feel the pain in my ankle but having to fill up the Blazer and watching the numbers on the pump spin wildly was even more painful.

This week, President Bush called for an investigation of the gas prices. I took him up on it and started the probe. I learned that this gas fiasco didn’t just happen overnight. It isn’t going to go away overnight but we can’t just sit around doubled over with gas pains. We did play a role in the current situation. We have a responsibility to understand what happened, where we could have done better and what we can do now to correct things.

Americans are not being unjust or demanding that we go back to the days when gas was under a dollar a gallon. We just want gas prices to stabalize and be reasonable with us. Our salaries are not increasing to keep up with the rising cost of gas.

Right now we are concentrating all of our anger at oil companies. This week the media has directed our anger towards Exxon Mobile because they have made the highest profits in the history of American companies. Exxon Mobile reported having made 16 billion dollars in six months—IN PROFIT.

Considering that we are pained to have to buy their gasoline at almost $3.00 a gallon here in South Texas, it seems unfair, outrageous and even cruel for Exxon Mobile to be making so much money at our expense. It seems that way, but let’s consider these things:

1. Only 9% of Exxon Mobile’s profit comes from the sale of gas. The government’s regulations have made refinery, distribution and sale of gasoline an almost profitless venture. 2. How much we pay for a barrel of oil is what sets the price of Gas at the pumps. Exxon Mobile (or any other oil company) does not set the price of the barrel of oil. The Organization of the Petroleum Exporting Countries (OPEC) does. For decades, America was their biggest buyer and we got to dictate how much we would to pay OPEC for their oil. Now China and India are big buyers too and OPEC has taken the reigns on marketing their product and they are deciding and mandating how much they will charge now that they dealing with a simple case of Supply and Demand. 3. Exxon Mobile is a huge company that swallowed up other companies. They have their hands into every aspect of the oil business—from extracting oil from the ground in over 25 countries around the world to selling the gas and oil by products. It was President Bill Clinton that signed the authorization that allowed Exxon Mobile to be as big as it is. I don’t think it was a bad move. It makes America the Go-To country in the oil industry. 4. Not many oil companies have the necessary equipment, manpower and knowledge to extract the oil from the ground. Exxon Mobile is making the vast majority of its profits from working for OPEC. OPEC has to rely on Exxon Mobile to harvest their commodity. 5. If Exxon Mobile and other oil companies were not in place to do these jobs for OPEC, then all of this profit would have gone to other oil companies from other parts of the world. Isn’t it better that the American economy have the 16 billion dollars in profits? Exxon Mobile has to pay taxes on the 16 billion and they pay the salaries and benefits of over 90,000 employees—our neighbors and friends and families. 6. In the last quarter Exxon Mobile paid out over 2 Billion dollars to its shareholders. It used to be that rich wheelers and dealers capitalized on the stock market, but now, parts of the 2 billion dollars made it into the stock folders for my sister, my aunt, my uncle and my son. I think we all know someone who deals in the stock market now and Exxon Mobile paid off big this past quarter.

Exxon Mobile has put a lot of money into the hands of a lot people and they in turn spend it right back into the American economy.

But the price of gas is still too high! Well, almost 50 cents out of each gallon is paid to state and federal taxes so we can have safe roads and bridges to drive on. The government could let go of that, but they won’t. They know it’ll take too long for them to get it back from us if ever. We could gather tar and feathers and go after Exxon Mobile and get 9 cents out of each gallon gas lowered or we could ask our government to scale back on the 50 cents out of each gallon they take.

Here’s where more of the real problems are and why the gas is so high: 1. OPEC is meeting a simple Supply and Demand. We wouldn’t need to have their supply and put up with their demand for $70.00 a barrel of oil when it costs them $5-$15.00 to extract it from the ground, if we tapped into our own sources of oil. 2. We need a few more refineries. Some of the environmental restrictions need to be lifted so that creating refineries can be a good investment. 3. We need to stop all of the nonsense of asking the few refiners we do have to produce so many types of gasolines. Some states act like they are ordering from Starbucks. Varying states demand certain blends of gas so they can comply with their own environmental regulations. Some states even demand a Summer blend and a Winter blend. Why can’t we just get back to Regular, Unleaded and Super with ethanol for emissions regulations.

After the next time you go to the gas pumps and that gas pain hits you, go home, look up your Congressman and Senators at the State and Federal level and call them. Whisper this little word into their ears”: ANWAR. Environmental wackos have caused us enough pain with hair-brained ideas that have done nothing but line their pockets. It’s time to take this issue back to a point of common sense. If we don’t, we won’t have anyone to blame about the gas costs, but ourselves.

I’m Jenni Vinson Trejo. Probing For Oil is My Opinion. Thank You for listening.

ExxonMobil makes 9 cents a gallon off every gallon of gas sold. The federal and state governments take most of the rest. But you won't ever hear any one suggest the government could do without that tax revenue. After all, government is viewed as above gouging the public.

(Denny Crane: "Every one should carry a gun strapped to their waist. We need more - not less guns.")

After all, government is viewed as above gouging the public.

Right, and the tooth fairy is real (sharing your sarcasm in a big way).

Of course. I've always noticed the government never gets an obscene amount of revenue. There is no limit to the amount of taxes we are obligated to pay. But there's more than enough rage to go around when some politically disfavored company actually dares - gasp!> to make a profit.

(Denny Crane: "Every one should carry a gun strapped to their waist. We need more - not less guns.")

Good point! In the state of NY, between the fed, state, and local gov'ts, it's over 40 cents going to the taxmen.

Who's gouging?!

I'm not blaming the oil companies, and I certainly don't wan't the gvt to get involved, but in the interest of fairness and accuracy I have to point out this:

http://phx.corporate-ir.net/phoenix.zhtml?c=115024&p=irol-newsArticle&t=Regular&id=828850&

"When it comes to delivering superior return on investments, Tillerson pointed out that ExxonMobil led the industry in 2005 with return on capital employed (ROCE) of 31 percent. "In our view, ROCE continues to be the best overall measure of financial performance given the long-term and capital-intensive nature of our industry. I would be cautious of anyone who tries to deemphasize it," said Tillerson."

You have to admit, 31% is really something for a mature commodity. No?

Even Microsoft doesn't get that.

Can someone give me an accurate breakdown of the composition of a gallon of oil. It is confusing to go back and forth between percentages and cents/gallon unless all of the components are mentioned.

I'll start.

$70/barrel of crude / 42 gallons per barrel = $1.67 at the pump. Assuming $3.00 at the pump, that leaves another $1.33 to go.

Cost to refine = ?
Taxes = ?
Profit = ?
Something else = ?

Thanks

ROCE is an important measure, but the story it tells is how efficient a company invests its own assets. Since Exxon's is higher than Microsoft's, it suggests they are better managers (using just this measure of course). This does not neccessarily translate into better profits. Here is a 2005 comparison:

MSFT XOM
Net Sales 39,788 328,213
Net Income 12,254 36,130
Profit Margin 30.08% 11.01%
ROC 19.93% 31.46%

There are 17 billion recoverable barrels of oil on the North Slope. It will require $100 billion investment to get it out. That money will be provided by the oil companies, probably, if they are allowed to keep their profits.

As an interesting aside, I recently replaced the paper air filter in my pickup with a permanent K+N air filter and my gas mileage went from the low 16's to 19 MPG. Every 7500 miles or so, you take the K+N filter out, clean it with soap and water and re-oil it for re-use.

I was pleasantly surprised.

Well wait for this next SHOE to fall --- the Liberal Democrats will want to come out with GAS STAMPS-- like Food stamps for the "poor". They hate the idea of a 100.00 check for everyone because those who don't need it in their assessment will get it. So it makes sense that they would want to create another entitlement program out of this gas fiasco. -Jenni

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