Posted on 06/02/2008 11:54:19 PM PDT by TheThinker
Faced with a national outcry over the high price of gasoline and soaring profits for energy companies, the oil and gas industry is waging an unusually pricey campaign to burnish its image.
The American Petroleum Institute, the industry's main lobby, has embarked on a multiyear, multimedia, multimillion-dollar campaign, which includes advertising in the nation's largest newspapers, news conferences in many state capitals and trips for bloggers out to drilling platforms at sea.
The intended audience is elected officials and the public, with an emphasis on the latter. The industry is trying to convince voters -- who, in turn, will make the case to their members of Congress -- that rising energy prices are not the producers' fault and that government efforts to punish the industry, especially with higher taxes, would only make pricing problems worse.
"We decided that if we didn't do something to help people understand the basics of our industry, we'd be on the losing end as far as the eye could see," said Red Cavaney, the institute's president.
Despite the efforts, Democratic congressional leaders this week again proposed an energy plan that would strip oil companies of billions of dollars of tax breaks and impose a tax on windfall profits. Also, the Democratic presidential candidates routinely pronounce "big oil" as if it were a one-word epithet, said former Oklahoma senator Don Nickles, an energy lobbyist.
Still, the oil lobby thinks it has made significant progress with consumers and will make even more as it continues to spend heavily on public relations. Allied industry groups such as coal and natural gas are also increasing their efforts to curry favor with the public, hoping to improve citizens' sometimes poor opinion of them.
(Excerpt) Read more at washingtonpost.com ...
The public scoffs at this explanation, claiming that big oil execs and shareholders are profiting unfairly.
The real disconnect occurs because the public confuses drilling for a commodity and producing a product. Since oil companies don't benefit nearly as much from economies of scale, where production costs drop as production activity increases. Oil companies can't lower prices because the cost of oil recovery doesn't necessarily get cheaper and sometimes actually climbs.
The record profits the oil companies are enjoying originate from selling record amounts of gas, not from higher profit margins on each gallon. Those profit margins are far from the highest amongst other U.S. companies.
Since Republicans are thought to be in bed with the oil companies and probably are more than Democrats, it stands to reason that high gas prices will hurt Republicans' chances in the fall. The public needs to be educated.
Actually, the record profits come from selling crude on the open market. The refining operations are not earning much, and are in some cases breaking even or losing a little. It just so happens that Exxon, Chevron, Shell, BP, ConocoPhillips, and others have extensive worldwide extraction divisions. Yet, together, they control less than 12% of the world’s oil. The rest is held in the hands of governments and despots.
“The public needs to be educated.”
One problem in the rise in oil prices is the development in 2007 of “supersized” oil commodity purchase instruments which have enabled institutional investors like university endowments, foundations, and pension funds to buy large positions in oil, as well as other commodities like food.
See a lively thread from last week which went into the new situation with commodities in considerable detail:http://www.freerepublic.com/focus/search?m=all;o=time;q=quick;s=Now%2C%20a%20Commodities%20Conundrum
“The public needs to be educated.”
One problem in the rise in oil prices is the development in 2007 of “supersized” oil commodity purchase instruments which have enabled institutional investors like university endowments, foundations, and pension funds to buy large positions in oil, as well as other commodities like food.
See a lively thread from last week which went into the new situation with commodities in considerable detail:http://www.freerepublic.com/focus/search?m=all;o=time;q=quick;s=Now%2C%20a%20Commodities%20Conundrum
Thanks for the ping!
The domestic oil industry will lose this effort, it is quite simply impossible to reconcile “we aren’t gouging anyone” with “record profit made in first qtr” no one believes it, and it’s gotten to the point I won’t even bring it up.
[Chevron, Shell, BP, ConocoPhillips, and others have extensive worldwide extraction divisions. Yet, together, they control less than 12% of the world’s oil. The rest is held in the hands of governments and despots.]
Yes, and the point I rarely hear made is that American oil companies are not allowed to drill for oil or build refineries in America thereby causing a shortage of oil for Americans.
It is the politicians fault for pandering to the greenies and leftist stupid peoples who beleive such things as global warming, etc.
Fine. But what made the price of gasoline suddenly jump to over four dollars a gallon?
Fine. But what made the price of gasoline suddenly jump to over four dollars a gallon?
A lot of their PR problem is their fault. Instead of spending multi-millions of dollars on an ad campaign that is two years too late, the oil companies could have donated that money to a charitable fund to help low income Americans heat their homes the past two winters. The Kennedys wouldn’t have had to accept Hugo Chavez’s charity in MA because US oil companies would be taking care of “the poor.”
Or the oil companies could have issued gas cards providing free gas for families whose husband or wife is serving with the military in Iraq and Afghanistan. This would have generated far more good will for them than paying some expensive ad agency now. Southwest Airlines is a prime example of how much Americans appreciate a company that is caring and kind to our military.
But there is no group with less media savvy than oil men, and with gas at $4/gal., they will get no bang for their big PR bucks at this stage of the game. These days, children of oil execs probably lie when someone asks what their fathers do for a living.
It has to be one or the other. Given that I still believe in elasticity of demand, it's hard to believe that sales volume has increased dramatically in the face of a doubling of gasoline prices, unless there's a big jump in overseas sales that I don't know about. I keep hearing about increases in demand overseas, but never hear numbers.
I also don't understand why, if the demand for oil overseas has been increasing steadily, why we've had a sudden jump in gasoline prices at the pumps, instead of a gradual increase. If the oil companies have raised their prices, I don't have an issue with that, since it is a free market, after all. Of course, the oil companies are an oligopoly, so they can pretty much raise their prices in concert without actually colluding.
I'm not saying there is a nefarious plot. I just don't understand the economics of the oil price boom, and I understand the economices of most industries pretty well. I'm sure there are good reasons for the increases in gasoline prices, it's just that I don't understand what they are. Any insight you can provide would be welcome.
You, like many, just don't get it.
If I make widgets, and earn 10% profit on a hundred ... I make 10% profit.
If I sell 200 the next year at 10% profit ... I make "record" profits, but I am still making 10% profit.
It's really not that hard to understand, once you get past the B/S Congress and the rest of the socialists pour down your neck.
You, like most economists (of sorts) do not “get” it either, this is a business issue with political repurcussions.
The oil industry receiving tax breaks while making record profits on record prices is dissonant to the average person, it does not compute at a gut level.
That means the US Voting public wishes to put a foot in “Big Oil’s backside and the deeper it goes, the happier they shall be, politicians are in the business of making voters superficially “happy” even if politicians are the ones doing the screwing of the gas buyer
And BTW Mr. Mason, if you actually “read” my post, instead of using a partial sentence to revert to a talking point, you would have discovered that “I” was trying to explain what you posted, and the audience just is not there for it.
Still catching up with crude prices?
Yeah. You’re right. My real question is what made crude suddenly jump so high? Or who?
The companies are not profiting bit time from selling gasoline at high prices but rather from selling extracted crude on the open global market. That’s all there is to it.
Not to hard to find.
International Petroleum (Oil) Consumption
http://www.eia.doe.gov/emeu/international/oilconsumption.html
Oil Market Report, International Energy Agency
http://omrpublic.iea.org/
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