Crude Economics(In the L.A.Times no less!)

Los Angeles Times ^ | April 29, 2006 | JONATHAN WILLIAMS

[kellynla]

AS GAS PRICES top $3 per gallon, politicians are cashing in big — by throwing bombs at the U.S. oil industry.

As in every crisis, Washington is suffering from a predictable case of "do something" disease. Products of the ready-to-eat microwave culture, Americans want an instant solution to high energy costs, and this lends itself to grandstanding and election-year maneuvering by politicians of all stripes.

Numerous lawmakers, from Senate Minority Leader Harry Reid (D-Nev.) to Sen. Arlen Specter (R-Pa.), are lining up to support a new federal windfall profits tax, with the aim of redistributing profits from "greedy" oil companies.

But lawmakers could benefit from a history lesson. The last time this country experimented with such a tax was the Crude Oil Windfall Profit Tax Act of 1980. According to a 1990 Congressional Research Service study, the tax depressed the domestic oil industry, increased foreign imports and raised only a tiny fraction of the revenue forecasted. It stunted domestic production of oil by 3% to 6% and created a surge in foreign imports, from 8% to 16%.

Politicians calling oil companies "greedy" is more than a little ironic. Tax Foundation studies have shown that state and federal treasuries profit handsomely from oil industry sales. The average American motorist pays taxes of 46 cents a gallon on gasoline, of which 18.4 cents a gallon goes to the federal government. States and localities pocket the rest.

[Ursus arctos horribilis]

Whistling past the graveyard and fiddling while Rome burns ain't gonna change the facts.

In just a few years, China will be using the amount of every barrel of oil that is produced in the world today. Every day China is locking up long term contracts around the world with America hating unstable regimes.

There is no magic wand to be waved for some immediate mythical alternative fuels, either we drill for and refine our own petroleum reserves now, or we will literally die on the economic vine, and sooner rather than later.

[FreeKeys]

"greedy" oil companies

---

---

The 20 largest oil-producing countries produce about 57 million barrels/day, about 87% of world production of crude oil.  More than 84% OF THAT (73% of the world's total) is produced by countries whose GOVERNMENTS (read: politicians) have a say in the price of oil whether the government actually owns the oil companies or not. 

The USA produces 5.4 million bbl/day.  The U.K. produces 1.8 mb/d  Canada produces 1.6 mb/d.  So these 3 countries, where governments DON'T set the oil price, as huge as they and their oil companies are, produce only 8.8mb/d altogether, or only 14% of world production.  Thus they're swamped by the rest of the world's oil-producing countries.

Even if the "BIG OIL"companies in these free-enterprise countries could arbitrarily and unilaterally raise the price of crude, which they CANNOT, they'd be undercut IMMEDIATELY by the rest of the world's producers, which are, all together, SIX TIMES BIGGER.

So let the idiots yell and scream about "BIG OIL" all they want.  All they're doing is admitting (loudly) in public, in the most humiliating way possible, that they and the rest of their favorite pundits and politicians don't know what in hell they're talking about.

(stats provided courtesy of http://www.gravmag.com/oil.html#producers )

-- from THIS PAGE

[jazusamo]

Bill O'Reilly is a big fat idiot.

I've seen several segments of O'Reilly on this subject and you are right on. He knows less about economics than me and I don't know anything about economics, he's only playing to his audience for ratings.
j

[kellynla]

Yep, I've posted a few articles in the past week and the D.O.E. has been the source of all of them.

While Americans & America has been sitting on their hands for the past thirty years Brazil has gotten off the foreign oil addiction entirely. And as much as I dislike France, they are generating 75 percent of their electricity from nuclear!

[Ursus arctos horribilis]

Feds take 13% royalty from onshore leases, and a 17% royalty from offshore leases. This means that for every 100 bbls of oil produced in Gulf of Mexico, Uncle takes 17 bbls.

[Ursus arctos horribilis]

Agree, BO' is a total nitwit when it comes to oil and market forces.

[jazusamo]

Thanks for the post, it's spot on. LA Times or no. :-)

[CBart95]

Grizzily Bears make lousy Scenarists. The Scarry Story you just terrified us with is ridiculous.

Turning China into a world wide threat is idiotic. Citing our leadership as blind ,deaf and dumb is childish.

It just ain't going to happen that way pal. You are buying into the end-of-the -world hysteria that seems to always be available to ignorant individuals who live in constant Fear.

Disabuse yourself of these silly scenarios and try to figure out just who is perpetrating them on gullible types like you and many others. (At least you have plenty of company in your fear and trembling.)

A powerful presence such as China does many awesome things and no matter how illogical or insane they might appear, don't for a moment really believe they ever do stupid inemicable initiatives to their long term goals...of which they have many and clearly defined.

Having people like you in a panic is undoubtedly a source of considerable amusement to them for sure.
You are performing exactly like the frightened child they know you to be.

[spunkets]

"Cavuto's question of the 9 cent a gallon profit vs the almost 50 cents in taxes."

Exxon's profit is ~7%. Even assuming 9% leaves that as 2.7 cents/gal vs. 50 cents tax.

[Ursus arctos horribilis]

Over the cliff of delusional tip toe thru the tulips with your lemming mentality of dancing betwixt the rain drops is the true reason we are headed for hell in a hand basket.

[jazusamo]

I really can't argue the figure, I don't know. The 9 cents a gallon was what was put out on his show and I've read several threads here that quoted 8 and 9 cents a gallon profit. That does seem high to me because there's an awful lot of gallons sold daily.

[spunkets]

I did a search and this one was the easiest find. It says 11%. There was some other threads that posted various raw numbers from different sources-sales and profits. That's where I got 7%, some got 9-10%. Still 11% of $3.00 is 3.3 cents. Seems the 9 cents should be 9%. Gas doesn't cost $1/gal. Most news stories attempt to obfuscate and overwhelm with huge profit numbers. None mention sales and few give an accurate, if any mention of what the profit/gal is.

[Right Wing Assault]

Still 11% of $3.00 is 3.3 cents.

No, it's 33 cents.

[BootJack]

1st post for a long time lurker. (election 2000)

I was wondering when this "9 cents a gallon" figure was going to be brought up.

9 cents/gal profit would only be 3% profit.

And I keep hearing this 9 cents/gal repeated on all the shows.

So much for credible news reporting.

[Rte66]

" ... US oil just isn't relevant anymore. ..."

Maybe not to you or to the world, but it sure as heck is to *me.*

[Toddsterpatriot]

US oil just isn't relevant anymore.

We only produce about 5.5 million barrels per day. Third largest producer in the world. No longer relevant?

[spunkets]

Thanks, that was a stupid mistake. 11% of $3 is 33 cents. I didn't notice that the 3.3 cents I posted was less than 9 cents-fever.

[Right Wing Assault]

9 cents/gal profit would only be 3% profit.

Welcome! If you compare the 9 cents to the pump price, it's 3% of the cost but if you compare it to the cost to produce it, that's where they get the higher %. In other words, you want to compare their profits only to the cost to drill for the oil and turn it into gas. Transportation, markup for dealers, taxes, etc. should not be part of the profit equation. So while the profit might be 3% of your cost, it might be 9% of their cost.

[BootJack]

Thanks. That makes more sense.

Shamefully retreating back to lurker mode.