"Big Oil"

[Chris_]

With 94% of the world's oil supply locked up by foreign governments, most of which are hostile to the United States, the relatively puny American oil companies do not have access to enough crude oil to significantly affect the market and help bring prices down. Thus, Exxon Mobil, a small oil company (14th largest), buys 90% of the crude oil that it refines for the U.S. market from the big players, i.e, mostly-hostile foreign governments. The price at the U.S. pump is rising because the price the big oil companies charge Exxon Mobil and the other small American companies for crude oil is going up.

This is obviously a tough situation for the American consumer. The irony is that it doesn't have to be that way. The United States--unlike, say, France--actually has vast petroleum reserves. It would be possible for American oil companies to develop those reserves, play a far bigger role in international markets, and deliver gas at the pump to American consumers at a much lower price, while creating many thousands of jobs for Americans. This would be infinitely preferable to shipping endless billions of dollars to Saudi Arabia, Russia and Venezuela.

http://www.powerlineblog.com/archives2/2008/05/020589.php

[Chris_]

Chris -
Can you explain why ALL American companies buying crude oil and paying for it, then refining it can still have the huge profits they have and still blame it on the price per barrel.  Stations here raise their prices sometimes two and three times a day, [i.e. 2:15 PM yesterday $3.71 per gallon at one station, went by again at 2:45 PM, prices $3.78 - third trip about 6 PM, $3.81 per gallon that was one station - all others in area averaged $3.79 by the evening] and they sure don't have that many deliveries.  And why do all the stations in the area stay within 2-3 cents of each other constantly, they all don't get deliveries at the same time.  How about posting the profits of the companies, along with the costs of crude oil, also throw in the salaries of the top execs.  Yep it's all just from the cost of crude.

[Rebel]

Chris -
Can you explain why ALL American companies buying crude oil and paying for it, then refining it can still have the huge profits they have and still blame it on the price per barrel.  Stations here raise their prices sometimes two and three times a day, [i.e. 2:15 PM yesterday $3.71 per gallon at one station, went by again at 2:45 PM, prices $3.78 - third trip about 6 PM, $3.81 per gallon that was one station - all others in area averaged $3.79 by the evening] and they sure don't have that many deliveries.  And why do all the stations in the area stay within 2-3 cents of each other constantly, they all don't get deliveries at the same time.  How about posting the profits of the companies, along with the costs of crude oil, also throw in the salaries of the top execs.  Yep it's all just from the cost of crude.

The average profit margin is about 8.5%, Rusty. That's dismal when compare to other industries. Instead of looking at the actual dollar amount, you have to look at the margin. Everything is relevant. Those billions they're making aren't going into the pockets of the CEO's, they're going to stockholders, retirement accounts, research and development, and other acquisitions.

[Rebel]

http://www.conservativecave.com/index.php/topic,7588.0.html

[Rebel]

http://ncaabbs.com/showthread.php?tid=299592

Check out Gniner's debunking of some fallacious arguments.

[Chris_]

Understand where all the splits are - just seems very strange that once or twice a week deliveries get raised two or three times per day.

[Rebel]

Understand where all the splits are - just seems very strange that once or twice a week deliveries get raised two or three times per day.

Prices keep rising.

[Chris_]

Looks like Occidental Petroleum and Exxon are the big players in the US, but 4% for Murphy and 5.9 for BP?  If I was a stockholder, I might be moving my money somewhere else.

http://fpc.state.gov/documents/organization/103679.pdf

[Chris_]

Exxon's CEO earned $21.7 million in compensation last year.  That's $59,452.00 per day. 

Exxon produces 2,747,000 barrels of oil per day.

If you paid the guy nothing at all the price of a barrel of oil from Exxon would drop by 2 cents.


http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20080410&id=8470682
http://biz.yahoo.com/e/070508/xom10-q.html

[Chris_]

I ran across this article yesterday and posted it in another thread.

http://www.engdahl.oilgeopolitics.net/Financial_Tsunami/Oil_Speculation/oil_speculation.HTM

In the most recent sustained run-up in energy prices, large financial institutions, hedge funds, pension funds, and other investors have been pouring billions of dollars into the energy commodities markets to try to take advantage of price changes or hedge against them. Most of this additional investment has not come from producers or consumers of these commodities, but from speculators seeking to take advantage of these price changes. The CFTC defines a speculator as a person who “does not produce or use the commodity, but risks his or her own capital trading futures in that commodity in hopes of making a profit on price changes.”

The large purchases of crude oil futures contracts by speculators have, in effect, created an additional demand for oil, driving up the price of oil for future delivery in the same manner that additional demand for contracts for the delivery of a physical barrel today drives up the price for oil on the spot market. As far as the market is concerned, the demand for a barrel of oil that results from the purchase of a futures contract by a speculator is just as real as the demand for a barrel that results from the purchase of a futures contract by a refiner or other user of petroleum.

This all may just be another stock market bubble driving up prices.  I didn't see anybody complaining when 1500 sqare foot houses in Santa Barbara were selling for half a million dollars, but now that the artificially inflated real estate prices have caused the market to collapse on itself (sort of), people are upset.  Same thing happened in '99... Mark Cuban sold Broadcast.com for $6 million to Yahoo and now the guy owns a baseball team.  If it weren't for the tech bubble, the guy might still be a bartender and we wouldn't have that shitty Brian DePalma movie.

[Rebel]

Exxon's CEO earned $21.7 million in compensation last year.  That's $59,452.00 per day. 

Exxon produces 2,747,000 barrels of oil per day.

If you paid the guy nothing at all the price of a barrel of oil from Exxon would drop by 2 cents.

....and the company would fold. No one is going to take on the responsibility of running a huge corporation for no compensation.

[Chris_]

Really; this old fart understands about profit vs. compensation etc. etc... What I have trouble with is raping the public, and when prices are raised about 9% in three hours on the same truck load delivered, and they tell you in advance that "we think" prices will go up in two weeks when the holiday weekend arrives - well in my feeble mind that's boardering on gouging.

[Lacarnut]

I ran across this article yesterday and posted it in another thread.

http://www.engdahl.oilgeopolitics.net/Financial_Tsunami/Oil_Speculation/oil_speculation.HTM

In the most recent sustained run-up in energy prices, large financial institutions, hedge funds, pension funds, and other investors have been pouring billions of dollars into the energy commodities markets to try to take advantage of price changes or hedge against them. Most of this additional investment has not come from producers or consumers of these commodities, but from speculators seeking to take advantage of these price changes. The CFTC defines a speculator as a person who “does not produce or use the commodity, but risks his or her own capital trading futures in that commodity in hopes of making a profit on price changes.”

The large purchases of crude oil futures contracts by speculators have, in effect, created an additional demand for oil, driving up the price of oil for future delivery in the same manner that additional demand for contracts for the delivery of a physical barrel today drives up the price for oil on the spot market. As far as the market is concerned, the demand for a barrel of oil that results from the purchase of a futures contract by a speculator is just as real as the demand for a barrel that results from the purchase of a futures contract by a refiner or other user of petroleum.

This all may just be another stock market bubble driving up prices.  I didn't see anybody complaining when 1500 sqare foot houses in Santa Barbara were selling for half a million dollars, but now that the artificially inflated real estate prices have caused the market to collapse on itself (sort of), people are upset.  Same thing happened in '99... Mark Cuban sold Broadcast.com for $6 million to Yahoo and now the guy owns a baseball team.  If it weren't for the tech bubble, the guy might still be a bartender and we wouldn't have that shitty Brian DePalma movie.

I did not see anyone bailling out the oil companies out when prices dropped around $10 a barrel when the peanut farmer was in office and wildcatters went bankrupt. The price of oil field equipment has gone thru the roof. The days of finding easy oil is over. Harsh environments and unfriendly governments are the norm. BTW, we import more oil from Canada and South America than we do from the Middle East. 

Blaming the oil companies for price increases will not solve our dependency. Strong measures like new drilling in the Gulf of M., drilling in the outer continent. shelf off the east and west coast , drilling in Anwar, nuke plants, more refineries and alternative energy. Can Ethanol because that cr@p uses almost as much fuel to make it, and makes it more expensive at the pump. Additionaly, billions that could be spent on a natural gas pipeline from AK to the US could be built with that subsidy money. The wells in AK pump most of the natural gas back into the ground because it can not be transported. Most of these idiots in DC do not have an understanding of the oil industry except to bash the top Exec. and tell us how bad big oil is. Until we do these thing, the price of gasoline will remain high.

[Thor]

One nearby gas station, Dave's, raised prices from $3.799 to $3.899 in a matter of a day and a half, even WHEN the price of oil has dropped some $6 from it's highest point. The fact of the matter is that this station is near the local lake and two major highways. No more than two miles away, gas prices were STILL at $3.779 at those stations and haven't risen in four days. (Those are also on a major highway and an alternate lake access route) Needless to say, I refuse to business with Dave's Gas station. While many gas stations only make MAYBE 10 cents per gallon profit (probably less in many cases), it's apparent that a few are engaging in outright price gouging.

[rich_t]

Chris -
Can you explain why ALL American companies buying crude oil and paying for it, then refining it can still have the huge profits they have and still blame it on the price per barrel.  Stations here raise their prices sometimes two and three times a day, [i.e. 2:15 PM yesterday $3.71 per gallon at one station, went by again at 2:45 PM, prices $3.78 - third trip about 6 PM, $3.81 per gallon that was one station - all others in area averaged $3.79 by the evening] and they sure don't have that many deliveries.  And why do all the stations in the area stay within 2-3 cents of each other constantly, they all don't get deliveries at the same time.  How about posting the profits of the companies, along with the costs of crude oil, also throw in the salaries of the top execs.  Yep it's all just from the cost of crude.

The average profit margin is about 8.5%, Rusty. That's dismal when compare to other industries. Instead of looking at the actual dollar amount, you have to look at the margin. Everything is relevant. Those billions they're making aren't going into the pockets of the CEO's, they're going to stockholders, retirement accounts, research and development, and other acquisitions.

100% correct.  The idiots in Congress know this too....  But they keep pointing the finger at Big Oil and making them testify cuz they know it plays well with the uninformed and the sheep.

[Lacarnut]

Chris -
Can you explain why ALL American companies buying crude oil and paying for it, then refining it can still have the huge profits they have and still blame it on the price per barrel.  Stations here raise their prices sometimes two and three times a day, [i.e. 2:15 PM yesterday $3.71 per gallon at one station, went by again at 2:45 PM, prices $3.78 - third trip about 6 PM, $3.81 per gallon that was one station - all others in area averaged $3.79 by the evening] and they sure don't have that many deliveries.  And why do all the stations in the area stay within 2-3 cents of each other constantly, they all don't get deliveries at the same time.  How about posting the profits of the companies, along with the costs of crude oil, also throw in the salaries of the top execs.  Yep it's all just from the cost of crude.

The average profit margin is about 8.5%, Rusty. That's dismal when compare to other industries. Instead of looking at the actual dollar amount, you have to look at the margin. Everything is relevant. Those billions they're making aren't going into the pockets of the CEO's, they're going to stockholders, retirement accounts, research and development, and other acquisitions.

100% correct.  The idiots in Congress know this too....  But they keep pointing the finger at Big Oil and making them testify cuz they know it plays well with the uninformed and the sheep.

The oil companies profit on a gallon of gasoline is around 9 cents. The Federal government rakes in 18 cents per gallon. In other words, the government is making twice as much as the oil companies without any RISK or INVESTMENT. So who is gouging who here? In addition, the government collects billions in oil royalities for the right to drill in the offshore area and on federal lands. Those royalities are payable to the government each and every year. Tack on the enormous amounts the oil companies pay in corporation, withholding, sales and property taxes and it comes to a tidy sum that the feds and states receive.

One piece of good news is that the price at the pump is likely to start coming down somewhat because of a federal investigation of commodity traders manulaping the market. It does not make good sense for the price of a barrel of oil to rise from $90 to $130 in a 5 month period. In the last month or two, usage of gasoline has dropped. So demand has not outstripped supply. The oil companies are not a target in this investigation.

[InfamousAndy]

Chris -
Can you explain why ALL American companies buying crude oil and paying for it, then refining it can still have the huge profits they have and still blame it on the price per barrel.  Stations here raise their prices sometimes two and three times a day, [i.e. 2:15 PM yesterday $3.71 per gallon at one station, went by again at 2:45 PM, prices $3.78 - third trip about 6 PM, $3.81 per gallon that was one station - all others in area averaged $3.79 by the evening] and they sure don't have that many deliveries.  And why do all the stations in the area stay within 2-3 cents of each other constantly, they all don't get deliveries at the same time.  How about posting the profits of the companies, along with the costs of crude oil, also throw in the salaries of the top execs.  Yep it's all just from the cost of crude.

I'll take your challenge.  Beware, we are devling into my entry-level economics courses in college.

First, assume we are analyzing some artbitrary period of time.  We will use a 'day' for simplicity.

Next, you must understand the economic concept of 'Marginal Cost'.  In simple terms, Marginal Cost represents the additional cost incurred for one more unit of ouput.  If Exxon was producing 300 million gallons of gas, and wanted to produce 300,000,001 (Three hundred million and one) gallons, how much more would it cost them?  This is a critical component towards the price of gas.  You see, from the companies perspective, they will only produce 300,000,001 if they are no worse off.  If the markey price is 3.00 USD per gallon, and it costs Exxon 3.09 to produce another gallon, why produce?  They lose money.  However, if the market price is 3.10 USD per gallon, they they ARE better off producing that extra gallon of gas.

Now that we understand marginal cost, we move on to the next point.  Marginal cost is not constant.  The marginal cost of galloon 300,000,001 will vastly different, than say, the marginal cost of gallon 10,000 (ten thousand).  However, their price tends to be consistant for each gallon sold within this time period.  The price is determined by the marginal cost of the last gallon sold.  What does this mean for the consumer and producer?  Lets say the first 100,000 gallons have a marginal cost of 1.09 USD.  The next 50,000,000 gallons have a marginal cost of 2.09 USD.  The last gallons have a marginal cost of 3.09 USD.  What will the producer price too?  What are his profits if he prices 3.10 USD?

This is similar to the situation for gasoline manufacturers in the United States.  They definately have at least 3 tiers of marginal cost.

1.  Drill domestically, refine domestically.
2.  Buy crude internationally, refine domestically.
3.  Buy refined gas internationally.

Which do you think has a lower marginal cost?  Which has a higher marginal cost?  Which represents the bulk of the gas sold?  It sure isn't drill domestically.  Even though the gas companies see next-to-no benefit option 3, they see massive benefits from options 1 and 2 because they will price for option 3.  If they didn't , they wouldn't buy refined gas, and we would have a 70's style shortage & rationing situation.

[Rebel]

[RightCoast]

Understand where all the splits are - just seems very strange that once or twice a week deliveries get raised two or three times per day.

Gas stations are not vast pools of cash, they have to buy gas from their supplier in advance.  If you own a gas station and I sell you gas you have to raise your price at the pump to cover the NEXT shipment - not the gas that is in the ground that is already paid for. 

As world prices go up over the course of the day the price at the pump goes up so the poor slob who owns the station can afford the next tanker.  In theory prices also go down over the course of the day although it seems we only ever see them go up.

[Rick]

I don't see the "its ok, its China" spot.

[InfamousAndy]

One nearby gas station, Dave's, raised prices from $3.799 to $3.899 in a matter of a day and a half, even WHEN the price of oil has dropped some $6 from it's highest point. The fact of the matter is that this station is near the local lake and two major highways. No more than two miles away, gas prices were STILL at $3.779 at those stations and haven't risen in four days. (Those are also on a major highway and an alternate lake access route) Needless to say, I refuse to business with Dave's Gas station. While many gas stations only make MAYBE 10 cents per gallon profit (probably less in many cases), it's apparent that a few are engaging in outright price gouging.

Their price is largely determined by how much it costs them to buy another gallon of gas.  The price of oil dropping doesn't always lower the cost of their gas, as some of the gasoline sold is imported in a refined state.  We do not have the refinery capacity to refine all our oil.  Therefore, falling oil prices may not translate into a lower price-at-the-pump because the foreign refiner has some markup.

[Chris_]

SO, THE LIBERAL DEMOCRATS (ESPECIALLY OBAMA), ENVIRONMENTAL WHACKOS and ALL THE REST OF THE "BRING DOWN AMERICA" CROWD - and John McCain - DON'T WANT US DRILLING IN ANWR AS PART OF OUR OIL INDEPENDENCE??? 
 
READ ON FOR THE TRUE PICTURE..............

 
FIRST… do you know what ANWR is?

ANWR = Arctic National Wildlife Refuge.

….

Now…  A comparison



And some perspective…



NOTE WHERE THE PROPOSED DEVELOPMENT AREA IS…

(it's in the "ANWR Coastal Plain")







THIS IS WHAT THE DEMOCRATS, LIBERALS AND "GREENS" SHOW YOU WHEN THEY TALK ABOUT ANWR

…and they are right… these ARE photographs of ANWR







ISN'T ANWR BEAUTIFUL?  WHY SHOULD WE DRILL HERE (AND DESTROY) THIS BEAUTIFUL PLACE?

…

…

WELL… THAT'S NOT EXACTLY THE TRUTH

Do you remember the map?

The map showed that the proposed drilling area is in the ANWR Coastal Plain

Do those photographs look like a coastal plain to you?

WHAT'S GOING ON HERE?

….

…

 

 

THE ANSWER IS SIMPLE…

 

THAT IS NOT WHERE THEY ARE WANTING TO DRILL!

 

THIS IS WHAT THE PROPOSED EXPLORATION AREA ACTUALLY LOOKS LIKE IN THE WINTER




AND THIS IS WHAT IT ACTUALLY LOOKS LIKE IN THE SUMMER







AS YOU CAN SEE, THE AREA WHERE THEY ARE TALKING ABOUT DRILLING IS A BARREN WASTELAND.

 

 

OH… AND THEY SAY THAT THEY ARE CONCERNED ABOUT THE EFFECT ON THE LOCAL WILDLIFE…

 

HERE IS A PHOTO (SHOT DURING THE SUMMER) OF THE
"DEPLETED WILDLIFE" SITUATION CREATED BY DRILLING AROUND PRUDHOE BAY *…
DON'T YOU THINK THAT THE CARIBOU REALLY HATE THAT DRILLING?




HERE'S THAT SAME SPOT DURING THE WINTER.



HEY, THIS BEAR SEEMS TO REALLY HATE THE PIPELINE NEAR PRUDHOE BAY *…



*The Prudhoe bay area accounts for 17% of U.S. domestic oil production

 

 

NOW, WHY DO YOU THINK THAT THE DEMOCRATS ARE LYING ABOUT ANWR?

 

REMEMBER WHEN AL GORE SAID THAT
THE GOVERNMENT SHOULD WORK TO ARTIFICIALLYRAISE GAS PRICES
TO $5.00 A GALLON?

 

WELL…

AL GORE AND HIS FELLOW DEMOCRATS HAVE ALMOST REACHED THEIR GOAL!

 

 

NOW THAT YOU KNOW THAT THE DEMOCRATS HAVE BEEN LYING,
WHAT ARE YOU GOING TO DO ABOUT IT?