Posted on 08/06/2008 1:50:12 PM PDT by rocksblues
When I say that they “own” the oil, I mean they either own it in the conventional sense, or they contracted to buy it at lower prices. In the US, you can purchase oil rights. You don’t actually own the oil, as most people understand it, but they do have a right to remove it, and that is just as good.
You don’t make money in any business by selling at the same price you bought. If they are making money, it’s because they are able to sell it at a higher price than they paid for it. Of course, no one is going to sell you oil at less than the market price, so as a practical matter, the reason why they are making so much money is that they already had the rights to a lot of the oil they are selling long before they sold it, and they acquired those rights at a time when oil was cheaper.
The main point I would make, though, that a lot of folks don’t think about is that the oil they bought at low prices eventually runs out, and they’ve got to go out and buy more oil at higher prices. When that starts to happen, we’re still going to have high gas prices, but the oil companies aren’t going to be making the vast sums that they are now making. If you want to talk about pain, that’s when the pain actually will start.
Why? Because there's been a huge worldwide demand shift (which will continue for at least 2-3 years, btw) away from motor gasoline and toward diesel. In the case of the ChiComs and Euroweenies, this shift is due to -- ta daaa! -- you guessed it, goobermint decree.
Gasoline refining, this year and next (at minimum) is one of the worst possible businesses to be in. Check the share prices of the big refiners, Valero, Tesoro, and so forth. Gee, they're all at/near 52-week lows.
I wonder why... < /sarc >
Take the wholesale price (front-month RBOB futures, Sep 2009 at the moment) of motor gasoline, call that A. Then, take the wholesale price of WTI crude on NYMEX, divide it by 42, and call that B. The wholesale profit margin, aka the 'gasoline crack', will equal A - B, in cents per gallon.
The writer's smokin' some SERIOUS weed if he thinks that the gas crack is anywhere near 33 cents right now. Try 12 cents, putz. (I haven't looked tonight, but I guarantee you I'm closer than he is.)
Sheesh.
Proof twice, post once. Proof twice, post once....(muttering at self...)
“So the government makes 3 times the amount that big bad oil companies make. And the Democrats plan is to tax them more!”
The really sad thing about this is that people believe that taxing the “big oil” companies will reduce the price at the pump. They also believe that if “big oil” spends more money on alternative fuels that the price at the pump will decrease.
Well, we can certainly pee on the writer's leg about the information in his piece, but before we get carried away, try stopping a hundred people on the street and asking them how many gallons there are in a barrel of oil.
The main stream media has made that information a very little-known factoid.
And if you don't know that factoid, your opinion on gasoline & oil prices becomes just about worthless.
My point is that those hundred people you stop will have VERY strong opinions on gasoline and oil prices, but 98 of them will fail the barrel test - and therefore, unlike many Freepers, they can't crunch the numbers to arrive at a reasoned opinion on the matter.
Which is exactly the point that the media and the politicians want them at...
What makes you think that the mainstream media has any idea what the correct answer is? Or that it is relevant to the discussion?
With the media, we are dealing with manifest unwitting ignorance. Not only of the facts...but of what facts are relevant.
American oil companies buy over 75% of the oil they refine on the open market.
Nationalization of their overseas reserves and the inability to develop new reserves in the USA have resulted in a constant decline in the reserves Big Oil controls.
Of course they don't, for the most part, and furthermore - they don't care.
The media is pro-tax, and is in bed with our unlimited government.
All you have to note is the dogs that aren't barking when new taxes, fees, and assessments are rammed through the various legislatures in the middle of the night.
All you have to observe is the note of wonderment in the various press releases:
"Well, GOLLEE! Lookit thet! A new fee on this-r-that! It musta fell from the sky, er sumpin! Well, JUST DANG! Guess we'll all be having ta pay it till we don't anymore." - ace reporter for The Daily Blab
25365!!!
“American oil companies buy over 75% of the oil they refine on the open market.”
As I said in an earlier post, they buy all of their oil. The issue is WHEN did they buy it? Did they buy it last week at high prices, or months or years ago at low prices? You don’t make money buy selling stuff at the same price you buy it at. The reason they are making so much money is that they bought it earlier, at the lower prices, and now the prices have gone up. That’s what I mean when I say they “own” it.
Not "own" in any traditional sense of the word. There's no oil production I'm aware of that doesn't involve the payment of royalties to underlying governments. Also in many cases the oil companies don't own the mineral rights.
As for "so much money" the oil company are making, any such judgment has to be put into a meaningful context. Eleven billion dollars is a lot of money, but 120 billion dollars is a lot of sales.
Providing the nominal dollars without the context is incomplete to the point of being misleading.
This was the subject of one of those conspiracy movies (which, shamefully, I haven't taken the time to see.) GM leased the cars so that there would be no misunderstanding who actually owned them.
When you're a car company, you have to think like a lawyer, because you're such an inviting target. Car companies are required to provide parts for vehicles for ten years...and the parts for those cars were proprietary. You couldn't buy them at NAPA.
Imagine the whining when batteries stopped working and needed to be replaced. Imagine the bad press GM would have gotten about that.
Those vehicles were not fully developed products, nor were they meant to be; they were used for research purposes.
It's led me to what I call Gogeo's third law of human nature: When one's intellectual framework requires one to ignore reality, conspiracy theories are the only theories that make sense.
Or, to put it more simply: When you're a moonbat, conspiracies are the only workable explanation.
Unless the writer tells how much gasoline a gallon of crude produces, this information is meaningless...
Well, no. It may not be complete, but it's hardly meaningless.
But, if they already "own" it, they wouldn't have to buy it, would they?
It's true that virtually none of the crude Big Oil refines has been purchased on the spot market. Instead, most of it has been purchased on a long-term contract. But even the long-term contract will be subject to the market price -- via either escalator clauses or simply the expectation of the probable price of the next contract.
The only oil they truly "own" is their own proven reserves. And, currently, production from their own wells accounts for less than 25% of their refinery output.
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