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By Robert Rapier on Apr 28, 2011 with 82 responses

Breaking Down Gas Prices for Whoopi Goldberg

Introducing the “Energy Ticker”

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Whoopi’s View

One story in the news was brought to my attention yesterday by my wife, and it gives me the opportunity to clarify some misconceptions. On the ABC show The View, Whoopi Goldberg went on a rant about gas prices:

http://www.youtube.com/watch?v=8LZ4JyTT4nw&feature=relmfu

In a nutshell, Whoopi is angry that gas prices are so high, and essentially feels like this is simply the oil companies ripping off the public. She points to the latest quarter of oil company profits — expected to be very high — as evidence. She asked ABC News Correspondent Jim Avila to explain the situation to her, and while he did provide some useful information, he also muddied the waters somewhat. He pointed out that fear is largely driving the market, asserting that there is no good reason prices should be where they are. I would be interested to hear someone explain where they should be, and the basis for their answer. Yes, the oil market is being driven higher by fear, but the market isn’t totally disconnected from supply and demand. We are not, in fact, swimming in oil. There are real supply issues, and Russia just issued their own warning that the easy oil is about gone. But the whole issue of tight supplies was completely denied in the Goldberg segment. Further, Avila made mention of “the people who control the prices” which perpetuates the myth that oil companies are sitting back and pulling the strings (more on that below).

Understanding The Hows & Whys of Refinery Operations

But where Avila really muddied the waters was in asserting that refineries are not producing as much as they can. I covered this quite extensively in the post on gasoline myths. Refineries have to be maintained, just as you have to maintain your car. The most popular times to take refineries offline are prior to the summer driving season, and following the summer driving season. So each spring and fall we see refinery utilization fall. (The reason most maintenance isn’t done during the lowest demand period — winter — is because the weather isn’t conducive to maintenance at that time). According to the Energy Information Administration, current refinery utilization in the U.S. stands at 82.7%. Avila commented the refineries aren’t being completely utilized; that there is still 20% capacity left.

That’s wrong on two counts. First, if you look at refinery utilization historically, overall utilization only rises above 90% once maintenance season is over and high summer demand starts to kick in. But utilization is never 100%, because the 150 refineries in the U.S. are never going to be running at 100% capacity at the same time. There will always be issues with refineries that cause production to be curtailed here and there, which is why the practical limit of utilization is around 95%. So there isn’t 20% capacity left. Further, the practical limit during maintenance season is even lower, so it is a fallacy to imply that refiners are deliberately withholding capacity.

Avila rightly pointed out that gas prices always seem to fall much slower than they rise. In fact, this phenomenon has been documented. The reason for that is that consumers are less choosy when prices fall, and retailers don’t have to be as aggressive with their pricing. When prices rise, consumers will drive across town to save a nickel, but when they fall, consumers are just happy that they are going down. Refiners and retailers alike will have more difficulty maintaining profit margins when prices are rising due to consumers being more selective, and they will try to make up for that when prices are falling. When I explained this to my wife, she said “So they are gouging us!”

Correlation Does NOT Imply Causation

That gets into the whole discussion of what gouging actually is. Whoopi captures the anger of many Americans when they notice that they are paying record prices for gasoline, while the oil companies are reaping record profits. When I try to explain to people that oil companies (particularly U.S. oil companies) can’t really do much to influence oil prices, they will invariably ask “Then how do you explain the record profits?” That confuses two issues. To say that they don’t control prices is not the same as saying they don’t benefit from higher prices. Oil companies make a lot of money when oil prices rise. (Pure refiners can actually lose money under those circumstances, because they have to buy oil and may not be able to pass the higher costs along). But they are along for the ride, as opposed to operating the ride. Oil prices are set on the world market by how much people are willing to pay for the oil. ExxonMobil doesn’t raise prices so their profits will go up, their profits go up because world oil prices went up.

To get a better understanding of the difference, presume you bought a house for $100,000 in an area where demand for homes is rising. Three years later, you sell your home for $400,000. Question: Are you a scumbag who made a windfall profit by gouging the purchaser of your home? No, you would say that you sold your house for what the market was paying, and you were fortunate to be in the right place at the right time. You didn’t make money because you priced a $100,000 home for $400,000, you made money because the market had bid up the price of homes. You were a price taker as opposed to a price maker.

U.S. oil companies are the same: They are price takers, and right now oil prices are providing them with big profits. (OPEC is a different story; as a group they wield significant power as price makers). Of course ExxonMobil could decide to sell all of their oil for $20 under market prices, just like you could decide to sell your home for half its market value. What would happen in that case? People would snap up the oil (or the house) and then turn around and sell it for market value. So Exxon would simply forgo profits and someone else would take them.

Conclusion: Whoopi is Clueless

So when Whoopi asks “How can they do this to us? Don’t they know they are hurting the American people?” — I don’t think she understands what “they” are actually doing. They aren’t scheming to see how badly they can rip off the American public. They are producing oil and refining it into fuel and other products, and as a result of much higher prices they are making a lot of money. I know that it feels like we are being ripped off when we see our dollars show up as record oil company profits, but that is far more a function of supply and demand (with some portion due to speculation) than it is a conscious effort by oil companies to extract more money from the public. It is also important to keep in mind that oil companies are in the business to make money, but if they really could control prices then we wouldn’t see the kind of volatility in the market that we have seen the past few years.

  1. By verysoreloser on April 28, 2011 at 7:36 am

    The same excuses for high oil were used again in this article, middle east tensions and global demand. However the Saudis want oil at 80$ per barrel, not 120, because it cuts into their demand when overpriced. They cut production because demand for actual oil is low. Its demand for ‘paper barrels’ by investors that’s high. Low demand equals low global demand.

    Investors are pouring in the oil/gas futures markets based in a hope, rather than fear, that middle east fears will turn their 110$ investment into a 240$ price where they can then sell. They actually want the middle east to blow up.

    This is an antitrust issue pure and simple with investors cornering the oil market, leaving consumers and small business out in the cold. Until its solved and the free market can work properly, no employment or housing recovery. Only concerns that take delivery of commodities should be allowed to be in the futures markets. Especially oil and gas.

    Obama may not be able to help in this regard because he is beholden to investment banks, unions (pension funds), and conservationists. Until investors are shaken out of the market, the Dow Theory of a combined rise of the Dow Industrials and Dow Transports can’t occur because oil prices hurt transportation.

    I hope Bernanke was playing dumb at his press conference regarding high gas prices because he said nothing constructive other than it would be taken care of. That might be trouble for investors who are hurting the economy. They might just get hit back hard by regulations and I doubt anybody is going to care after all of the pain they are causing.

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  2. By dan reilly on April 28, 2011 at 8:19 am

    i stumbled on this P.O.S. website to read trash like “russia states the easy oil is gone” nobody bevieves your crap anymore. i.e. the fake running out of oil reserves. this has been created by the left and the one world government types. the next fake shortage will be water. there is plenty of oil right here in the u.s. you people are full of shit and everyone knows it.

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  3. By Kit P on April 28, 2011 at 9:39 am

    “Conclusion: Whoopi is Clueless”

     

    Two answers come to mind, ‘No Really, did you need help coming to that conclusion?!’ and ‘are you sure’?

     

    We have to ask how much money Whoopi makes in a year on various venues making provocative statements. There is a respected journalist at the NYT that I always enjoyed reading about the middle east. The he started writing about energy and the environment. Now I think he is a complete dufus.  Is Whoopi making record profits?  If Whoopiwithheld her srevices would  anyone notice?

     

    There is nothing sadder than two entertainers interviewing each other about topics that they do not understand.

     

    “which is why the practical limit of utilization is around 95%. ”

     

    That is about the same for for newer power plants. Maintenance is schedules for the spring and fall when demand is low. Availability is a better indicator of performance. Since electricity can not be stored the market is more dynamic. When a region has a large reserve margin, it precludes speculation.

     

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  4. By Jim Colthart on April 28, 2011 at 10:28 am

    Since we are selling about 60% fewer gallons of gasoline (approx. 30M gal/day in 2011 vs. 75M gal/day in 1996) indicating a huge decline in demand, why haven’t prices followed suit.  Allowing for inflation, they should be about $2 per gallon today vs. $1 gallon in 1996.

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  5. By Walt on April 28, 2011 at 12:18 pm

    Robert Rapier said:

    To say that they don’t control prices is not the same as saying they don’t benefit from higher prices. Oil companies make a lot of money when oil prices rise. (Pure refiners can actually lose money under those circumstances, because they have to buy oil and may not be able to pass the higher costs along). But they are along for the ride, as opposed to operating the ride. Oil prices are set on the world market by how much people are willing to pay for the oil. ExxonMobil doesn’t raise prices so their profits will go up, their profits go up because world oil prices went up.


     

    This example can be seen in Valero as reported back in 2008 from their CEO.  They are a pure refiner as I understand, and buy oil from the market, and producers.  They can hedge the risks, but they still face lower earnings during high oil price periods. 

     

    Thu May 1, 2008 8:11pm EDT (Reuters) – Valero Energy Corp’s (VLO.N)
    2008 profits will be hurt by high oil prices, CEO Bill Klesse
    said at the largest U.S. oil refiner’s annual general meeting
    on Thursday.

    “The expectation is we’re going to have lower earnings than in previous years,” Klesse said.

    http://www.reuters.com/article…..2920080502

     

    It will be interesting to see how Valero and other pure refiners weather this storm of high oil prices…now and into the future.

     

    I believe the reason Shell is going to be so amazingly profitable in their Pearl GTL plant is because of their total integration with upstream, midstream and downstream revenues combined.  I continue to believe these “integrated” approaches are worth the additional CAPEX if you have the technical ability to manage all aspects.

     

    I did hear that the refineries are making currently $.60 per gallon margin, and that is high.  Has anyone looked at refinery margins today?

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  6. By rrapier on April 28, 2011 at 12:32 pm

    Jim Colthart said:

    Since we are selling about 60% fewer gallons of gasoline (approx. 30M gal/day in 2011 vs. 75M gal/day in 1996) indicating a huge decline in demand, why haven’t prices followed suit.  Allowing for inflation, they should be about $2 per gallon today vs. $1 gallon in 1996.


     

    Jim, that simply isn’t true. Per the EIA data, in 1996 the U.S. was using 7.6 million barrels per day of gasoline. Here in 2011 we are using 9 million barrels per day. Globally, it is the same. Demand for oil is way up over the past two decades, and excess capacity simply isn’t what it once was.

    RR

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  7. By rrapier on April 28, 2011 at 12:38 pm

    verysoreloser said:

    The same excuses for high oil were used again in this article, middle east tensions and global demand. However the Saudis want oil at 80$ per barrel, not 120, because it cuts into their demand when overpriced. They cut production because demand for actual oil is low.


     

    No. They stated that they cut production because demand for what they tried to supply to make up for the lost Libyan crude was low. But they weren’t offering the same light, sweet crude as Libya, and some refineries probably couldn’t process it. So to say that demand for certain grades of Saudi crude is low is different than saying demand in general is low. All you have to do is look at EIA or IEA data to see that demand isn’t low. Of course it could also be that the Saudis cut production because they simply can’t sustain the higher production levels.

    Its demand for ‘paper barrels’ by investors that’s high. Low demand equals low global demand.

    I agree that traders are helping drive up the price, but I disagree with your assertion that demand is low. We have actual data to show otherwise.

    RR

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  8. By rrapier on April 28, 2011 at 12:45 pm

    dan reilly said:

    i stumbled on this P.O.S. website to read trash like “russia states the easy oil is gone” nobody bevieves your crap anymore. i.e. the fake running out of oil reserves. this has been created by the left and the one world government types. the next fake shortage will be water. there is plenty of oil right here in the u.s. you people are full of shit and everyone knows it.


     

    Dan, for some like yourself this is clearly an emotional issue. For people who treat this as an emotional issue — like yourself and Whoopi Goldberg — it is really pointless to try to argue facts. I could explain that I didn’t make up the story about Russia (you could click on the link to see that it isn’t “my crap”), or I could ask you about your expertise in oil and gas such that you can determine that there is in fact plenty of oil relative to demrand. But then, we would find out that you have no actual expertise and you haven’t studied the data, and we would just be treated to more ranting.

    But should you ever wish to calm down and discuss the issue rationally, we can do that. That is what this “POS website” is all about — trying to explain complex energy issues to sometimes angry people.

    RR

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  9. By savro on April 28, 2011 at 12:47 pm

    Robert Rapier said:

     

    No. They stated that they cut production because demand for what they tried to supply to make up for the lost Libyan crude was low. But they weren’t offering the same light, sweet crude as Libya, and some refineries probably couldn’t process it. So to say that demand for certain grades of Saudi crude is low is different than saying demand in general is low.

    It’s worth taking a look at this article from the WSJ on the subject of Saudi oil production. One line in particular seems to agree with RR:
     

    Saudi Oil Production Doesn’t Add Up

    Other Saudi officials said prior to Mr. Al-Naimi’s comments that production increased by between 500,000 and 600,000 barrels a day at the end of February in response to the Libyan crisis. The kingdom subsequently reduced output by 500,000 barrels a day in mid-March, officials said, but only because of lack of demand for their oil, which is unsuitable for regular refiners of Libyan crude.

    http://blogs.wsj.com/source/20…..-add-up-4/

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  10. By Jim Colthart on April 28, 2011 at 12:53 pm

    Robert Rapier said:

    verysoreloser said:

    The same excuses for high oil were used again in this article, middle east tensions and global demand. However the Saudis want oil at 80$ per barrel, not 120, because it cuts into their demand when overpriced. They cut production because demand for actual oil is low.


     
    No. They stated that they cut production because demand for what they tried to supply to make up for the lost Libyan crude was low. But they weren’t offering the same light, sweet crude as Libya, and some refineries probably couldn’t process it. So to say that demand for certain grades of Saudi crude is low is different than saying demand in general is low. All you have to do is look at EIA or IEA data to see that demand isn’t low. Of course it could also be that the Saudis cut production because they simply can’t sustain the higher production levels.

    Its demand for ‘paper barrels’ by investors that’s high. Low demand equals low global demand.

    I agree that traders are helping drive up the price, but I disagree with your assertion that demand is low. We have actual data to show otherwise.

    RR


     

    Not so, according to US DOE – see this link to the EIA data: http://www.eia.doe.gov/dnav/pe…..01&f=m

     

    It lists daily volumes:

    <!–

    –>

    U.S. Total Gasoline DTW Sales Volume by Refiners (Thousand Gallons per Day)
     
     use back button to return to prior data 
    U.S. Total Gasoline DTW Sales Volume by Refiners (Thousand Gallons per Day)
     
    Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
    Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
      1994 78,440.4 81,012.3 84,100.2 84,217.9 84,502.0 86,025.8 84,243.5 84,283.1 82,176.5 82,460.7 82,151.1 83,673.7
     
      1995 73,468.1 77,422.6 77,084.9 77,624.3 78,786.7 80,217.7 78,090.6 79,691.6 77,735.8 77,803.5 78,648.8 78,750.1
      1996 73,330.4 76,787.0 78,676.6 78,745.9 77,884.9 78,061.4 77,368.7 78,765.3 76,646.3 78,530.0 78,798.9 76,900.7
      1997 73,477.5 75,981.0 76,612.7 77,114.5 75,373.6 75,854.9 75,420.5 75,259.9 72,505.5 73,861.0 74,674.6 75,719.6
      1998 68,733.6 71,387.4 73,187.9 72,946.2 73,289.1 74,591.3 74,974.0 74,347.9 72,848.1 74,404.6 71,583.4 72,998.2
      1999 66,655.9 71,866.3 74,009.5 72,561.9 72,633.6 73,507.1 73,379.2 73,312.9 71,486.2 71,354.1 70,604.9 74,426.5
     
      2000 63,374.0 68,923.1 70,715.5 67,218.0 69,600.9 71,880.2 68,531.2 70,960.6 70,999.1 70,277.1 70,174.9 70,275.7
      2001 64,960.5 68,556.3 69,093.5 69,005.4 67,778.2 66,903.4 64,596.3 68,131.4 65,786.1 67,384.4 66,980.8 69,379.4
      2002 68,347.3 69,399.5 69,637.5 68,174.3 67,503.0 68,048.1 66,176.3 66,955.9 64,445.3 66,417.1 64,208.6 63,084.6
      2003 61,802.8 61,782.3 61,336.3 60,786.8 59,889.8 61,397.1 61,481.8 62,032.8 56,228.0 57,580.3 56,750.0 57,172.6
      2004 55,262.0 56,593.8 55,851.5 55,453.9 56,219.9 53,727.3 54,403.2 54,735.7 54,652.3 54,238.6 52,984.6 53,550.0
     
      2005 48,447.9 50,996.6 51,293.3 50,258.4 49,254.4 50,834.1 49,405.5 49,667.8 47,187.8 45,850.9 45,085.9 46,646.4
      2006 44,155.5 44,839.2 45,454.9 45,265.8 43,974.5 45,546.2 45,058.8 44,037.8 41,470.6 42,983.7 44,223.0 44,689.5
      2007 42,022.0 44,064.6 44,379.0 43,668.3 43,725.0 42,616.1 41,901.2 42,676.7 41,873.2 43,818.5 42,933.3 42,533.5
      2008 40,456.2 42,128.2 42,161.2 41,932.6 41,035.3 40,241.5 38,418.5 38,350.2 38,803.8 38,456.0 37,965.3 38,951.6
      2009 39,376.0 41,127.1 41,513.0 41,701.2 41,853.2 40,676.3 40,050.1 39,730.3 38,812.0 38,752.3 37,385.8 37,860.5
     
      2010 35,284.5 36,732.0 37,357.2 37,069.9 38,085.5 37,631.4 36,104.3 35,354.6 34,332.1 34,102.2 33,170.9 32,669.2
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  11. By Jim Colthart on April 28, 2011 at 12:56 pm

    Link didn’t post properly – here it is again:

     

    http://www.eia.doe.gov/dnav/pe…..01&f=m

     

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  12. By rrapier on April 28, 2011 at 12:59 pm

    Jim Colthart said:

    Not so, according to US DOE – see this link to the EIA data: http://www.eia.doe.gov/dnav/pe…..01&f=m


     

    Jim, you are looking at only one category of gasoline sales. There are many other pieces to that puzzle, but EIA also shows total demand, and you can see from the link I posted that gasoline demand is up — not down — from 1996.

    What you posted amounts to only small sales. The growing number of deliveries by pipeline is completely left out of that data you posted. It would be like using declining deliveries by the Pony Express to show that mail deliveries are falling.

    RR

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  13. By armchair261 on April 28, 2011 at 1:30 pm

    The tin foil hat crowd might want to look at the performance of the US oil industry relative to other industries (Whoopi, would you like to check that out?).

    If the oil industry could raise prices at will, wouldn’t the p/e ratio for the industry as a whole be unusually high? After all, CEO’s could just call a meeting in some secret Idaho lodge and decide to arbitrarily boost profits whenever they were feeling greedier than normal. Investors might think “Wow, unlimited profit potential, you can just name your price! Record profits every year! I want to be in on that!”

    Yahoo.com selected financial metrics by industry: 
    http://biz.yahoo.com/p/sum_ttmd.html

    In a ranking of 215 industries for 2010, the oil industry (“oil and gas drilling and exploration”) ranked
    #116 in p/e ratio
    #113 in ROE
    #48 in ROS ( 10.4% average)

    “Major integrated oil & gas” (Big Oil, roughly) ranked 
    #166 in p/e ratio
    #93 in ROE
    #113 in ROS (Americans, we are told by Obama’s press secretary, would be appalled at the average 5.8% ROS)

    The figures for “refining and marketing”
     #133 in p/e ratio
    #122 in ROE
    #163 in ROS ( 2.6% average)

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  14. By Benny BND Cole on April 28, 2011 at 1:34 pm

    The world is awash in oil…yet the price is rising. The same thing happened on the way to $147 in 2008. There were oil tankers full of oil docked in Malta, nowhere to go, and yet oil was going up in price.

    No, it is not the oil companies doing this. It is happening on the Brent-ICE and NYMEX exchanges. It is speculation, or manipulation. We have ETF funds in oil now. We have Goldman Sachs long on oil. We have enormous sovereign wealth funds that have a stake in higher oil prices. We have several one-trick pony countries–Russia, Saudi Arabia–that need higher oil prices. Yeah, I am going to buy those wonderful Russian automobiles. Saudi televisions are the best.

    The fundamental bear out in the long run, but in the short- and medium-run, the demand for oil is inelastic. That makes it possible to jack up oil prices and get away with it for a year or two. Along with the sad reality that thug states control the bulk of the world’s oil supply.

    We will have to endure another price spike or two—but oil suppliers are paying a dicey game. CNG cars, methanol, PHEVs, much higher mpgs are on the boards and getting closer to fruition.

    Treating customers curtly, with repeated price shocks, oil shortage scares and threats is not the way to build business.

    When I see oil supplies lush and prices rising….I know something is wrong, and I will convert to other fuels when conditions are right. A CNG car is making more sense all the time.

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  15. By armchair261 on April 28, 2011 at 1:54 pm

    Dan Reilly said:

    there is plenty of oil right here in the u.s. you people are full of shit and everyone knows it.

    I work for a very small oil company, and we’re actively looking for new exploration and development projects. If you can point me to inactive leases on these untapped reserves, we’ll give you a 2% royalty on all resulting production. So, if you can increase our production by 1000 barrels per day with just an email and some contact info, you’d stand to earn $2200 per day for a few minutes work.

    I’m serious. After 30 years of petroleum geology experience all over the US, I want to know where all these secret reserves are I keep hearing about.

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  16. By armchair261 on April 28, 2011 at 2:05 pm

    Benny BND Cole said:

    The world is awash in oil…yet the price is rising. The same thing happened on the way to $147 in 2008. There were oil tankers full of oil docked in Malta, nowhere to go, and yet oil was going up in price.


    Benny,

    If you, and I, and journalists, know about tankers laden with oil, you can be sure that traders do too. They know (or at least have as good a handle as anyone) what global crude and product stocks are. What do you think the price of oil would be now if the world wasn’t “lush” with oil, if stocks were significantly lower than they are now?

    The US was lush in dotcom stocks in the 1990′s but prices still skyrocketed. A lot of people felt that high tech stocks were undervalued, despite the astronomical gains, so they kept buying and were reluctant to sell. If this is manipulation, then a lot these folks succeeded in manipulating their portfolios into huge losses by 2000.

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  17. By armchair261 on April 28, 2011 at 2:17 pm

    According to the Energy Information Administration, current refinery utilization in the U.S. stands at 82.7%. Avila commented the refineries aren’t being completely utilized; that there is still 20% capacity left.

    I wonder why Whoopi didn’t ask why the US imported 1.05 million barrels of gasoline per day last week? Strange that Avila forgot to point this out. 

     

    According to a recent Federal Reserve study (Industrial Production Capacity Utilization: The 2011 Annual Revision, released on March 25, 2011)

     

    “…..overall [US industrial] capacity utilization in the fourth quarter of 2010, at 76.2 percent, was 0.6 percentage point higher than previously reported.”

     

    So there we have it. The average US industry is intentionally restricting supply to drive up prices. Who knew that GM was shuttering plants in order to drive up the price of cars?

     

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  18. By Benny BND Cole on April 28, 2011 at 3:17 pm

    Armchair-
    The 1990s dot.com rally and the current futures market for oil are two different things.

    Commodities markets have acted unusually since financial players came to dominate those markets.

    You are right about one angle: Just as speculators could push up dot.com stocks in the 1990s, so they now can push up NYMEX futures prices.

    The difference is that in the case of oil, we send hundreds of billions of dollars offshore.

    The good news is that there is only so many more times oil prices can spike like this. Consumers will alter their behavior.

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  19. By armchair261 on April 28, 2011 at 4:18 pm

    The 1990s dot.com rally and the current futures market for oil are two different things.

    Sure, but they are both examples of herd mentality. People can assign value to commodities based on factors besides current consumption and production data, like anticipation of future trends. There are plenty more examples of such phenomena throughout history. It doesn’t have to mean manipulation.

    Just as speculators could push up dot.com stocks in the 1990s, so they now can push up NYMEX futures prices.

    I think the key concept here is your definition of “push up.” Is it malicious, as in Putin et al? Or can it be ascribed to human nature (see above)?

    Personally I believe that speculator entry into the market is an effect, rather than a cause, of high oil prices. You’re just not going to get a lot of players in commodity futures if the underlying commodity price is stable. There’s no money to be made, so the trading is limited to hedging by the commercial crowd. If volatility increases, then there is more incentive for both commercial and financial folks to buy futures. Which is the cart and which is the horse? When you consider that commodities not traded on futures exchanges have been just as volatile (cadmium, onions, iron ore pellets), I think the speculators are riding in the cart. They may be whipping the horse a bit, but I don’t know how much difference that really makes: 4%? 22% 74%? I see the intuitive appeal of speculator responsibility, and I’m open to be shown wrong, but so far I haven’t seen much convincing evidence that speculation is the engine.

    Also, a lot of other commodities have risen more than oil in the past 12 months – some a lot more. Oil ranks #26 of 66 commodities tracked in indexmundi.com. If oil’s 37% growth is explained by manipulation, to what do we attribute cotton’s 168% increase, or coffee’s 82%: are all commodities growing more than oil also being manipulated?

    If speculators are driving markets, then it seems odd to me that natural gas is falling in price. That says speculators can’t simply step in and force prices up, or else they are intentionally leaving the $100 billion US natural gas market alone. Market fundamentals have to be placing significant constraints on commodity prices.

    And speaking of natural gas, Russia is a major supplier of that commodity to western Europe. Yet although oil is only about 15% off its 2008 highs, the price of Russian natural gas is 43% off its 2008 highs. Oil’s 37% 12 month gain compares to Russian gas’s 20%. So there’s a lot more going on here than Putin’s alleged gaming of markets.

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  20. By Googleknowsmysecrets on April 28, 2011 at 4:41 pm

    Fascinating information RR, but what about Peak oil; is there a probability that it is true? thanks

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  21. By takchess on April 28, 2011 at 5:15 pm

    Robert,

    I haven’t been following the alternative energy /Non- traditional petroleum space for about a year. Has anything interesting/meaningful happened here during the year ?

    Hopefully there is something that you could create a post on it.

    We all understand (or should understand) that Oil will rise and fall on demand and supply and what the market will bear.

    At least there are minimal ethanol troll postings now ……8)

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  22. By mac on April 28, 2011 at 6:00 pm

    We will have to endure another price spike or two—but oil suppliers are paying a dicey game. CNG cars, methanol, PHEVs, much higher mpgs are on the boards and getting closer to fruition.

    Treating customers curtly, with repeated price shocks, oil shortage scares and threats is not the way to build business.

    When I see oil supplies lush and prices rising….I know something is wrong, and I will convert to other fuels when conditions are right. A CNG car is making more sense all the time.

    I remember the time when there were just 6 million CNG vehicles on the road. Then, there were 9 million, and now 12 million.

    In the same vein, Toyota only sold about 17,000 Prius world wide in 1998 but just announced in Feb. 2011 they had sold over 3,03 million and counting, Honda similarly announced they had sold over 610,000 hybrids world-wide. And Ford said they have sold over 100,000 hybrids in the U.S. Nissan has been selling the Altima hybrid in the U.S. since about 2007. I don’t have any sales figures for Nissan hybrid sales world-wide or the “mild hybrids” offered by GM and now defunct Saturn.

    The bottom line ? Hybrid sales, right now, undoubtedly stand at about 4 million vehicles and may approach 5 million by years end.

    Like the great pitcher Satchel Paige once said “Don’t look back — something might be gaining on you.”

    Everyone who is now beholden to gasoline and the oil monolith that produces it, will someday get tired of having of having a gas nozzel rammed up their rear ends by Arab Sheiks.

    The days of the internal combustion engine are numbered. There is no way we are going to put another 900 million of them on roads world-wide.

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  23. By Benny BND Cole on April 28, 2011 at 6:17 pm

    Armchair-

    You raise a lot of good points. Many markets I cannot address–I am not clued into the coffee market, for example although I understand they have had crop issues. As any market can be gamed, maybe many are. I just don’t know. But many of the markets you mention are in fact facing supply-and-demand pulls–but not the oil market. There is plenty of oil.

    Natural gas is flooded–and prices go down. Oil is flooded–and prices go up!

    I have followed the oil market daily for about six years, maybe more less diligently. The size of the market, the value, the inelastic demand, the rise of ETFs, the rise or huge and leveraged private equity funds, sovereign nation funds, etc makes it possible for this market to be gamed.

    If I were Putin, of course I would try to game the oil futures market. He can take both sides of trades as they get higher and higher, and make money on his physical inventory.

    We are in a commodities fever right now, you are right about that. A hyped one? Do oil bulls plant stories in the media, hype shortages, back The Oil Drum etc?

    The exasperating aspect is that oil demand is inelastic in the short run, so it works.

    I happen to think we are only 10 years away from the day we pass through the fossil oil era. These price spikes hasten the day. We will still use oil, but slowly declining amounts every year. The world will be a cleaner and more prosperous place because of it.

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  24. By mac on April 28, 2011 at 6:40 pm

    Ben.

    Sorry, I forgot to credit your quotation…

    mac

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  25. By Optimist on April 28, 2011 at 6:59 pm

    The world is awash in oil…yet the price is rising. & Oil is flooded–and prices go up!

    Where’s the data, Benny? The US seems to have high oil stocks right now, but read together with the low gasoline stocks it suggests that the refiners have some catching up to do. The fact that oil jumps $5 every time somebody mentions the word ‘recovery’ would suggests it’s supply and demand.

    The size of the market, the value, the inelastic demand, the rise of ETFs, the rise or huge and leveraged private equity funds, sovereign nation funds, etc makes it possible for this market to be gamed.

    You are confused, Benny. The size of the market and the many investors makes it HARDER for the oil market to be gamed. Unfortunately, it seems that facts and logic make no dent in your belief that the market is being gamed. As I said before, when the topic is Big Oil, no conspiracy theory is too wild to be true.

    Let me help you out, Benny. Here is a quote from the WSJ: ”But if they’re honest, they’ll agree with the Commodity Futures Trading Commission, which at George W. Bush’s direction launched an exhaustive investigation in 2008. The agency concluded that speculators—otherwise known as traders—were putting downward pressure on prices. The liquidity they provide helps to smooth volatility. In any event, the Federal Trade Commission already polices the gasoline markets for manipulation and anticompetitive practices, including a unit that since 2002 has monitored retail and wholesale data nationwide on a daily basis.”

    If I were Putin, of course I would try to game the oil futures market. He can take both sides of trades as they get higher and higher, and make money on his physical inventory.

    Oh, stop! Produce some evidence or just stop saying it! Otherwise Putin is going to send the KGB to silence you…

    Can we call you Benny Goldberg? Whoopi Cole?

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  26. By 1389AD on April 28, 2011 at 7:02 pm

    Whoopi is not only clueless, but also vulgar, obnoxious, and truly heartless.

    While there is nothing we can do about Whoopi’s mental, emotional, and spiritual shortcomings, there IS something we all can do about Obama’s fuel price fiasco. It starts with putting the blame exactly where it belongs, on Obama and his administration, and keeping it there.

    Gas Pump Activism: Print This Poster!

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  27. By armchair261 on April 28, 2011 at 7:41 pm

    Benny,

    Do you know of any commodities with significantly large global trade where manipulation has been proven at a global scale? The only one I can think of offhand is silver, and the attempt was spectacularly unsuccessful. That’s a far smaller market than oil, and much more concentrated in terms of producers and consumers.

    While there does appear to be a lot of oil around, the current supply/demand situation is only half the equation. What about the future? If buyers are concerned that demand is going up faster than supply, perhaps there is hoarding going on and the stocks reflect that. There are lots of unsold homes in Riverside County right now, but owners don’t want to sell their homes for $10,000, because they believe their homes will be worth more in the future, so they hold on. Could that be driving oil markets? Besides, I don’t know that I would characterize the oil market as glutted right now. According to the EIA World Oil Balance figures, demand in 2008 was 85.78 mmbopd, and as of 3Q 2010, their latest figure, it was 87.50 mmbopd. The IEA estimates 1Q 2011 demand at over 89 mmbopd. That’s a pretty significant gain, and traders might be worried about how long such growth can be sustained. US stocks are high, but not remarkably so; yesterday’s TWIP shows them to be at the upper end of their average range, while gasoline stocks are at the low end of the range. 

    I don’t really buy this idea of gaming markets in the sense of planting hype. Sure, it could be happening, but I don’t think this kind of thing is going to fool very many smart traders, who are taking physical possession. Sellers aren’t always smarter than buyers. The incentives for, and possibilities of, gaming markets are not the same thing as evidence that they’re being manipulated. There are hundreds of industries/nations with powerful incentives to lower fuel costs. Can’t they try to game the markets too?

    I really don’t see why you insist that oil markets are being successfully gamed without evidence, but I agree with you that the world will be a cleaner place once oil is gone. More prosperous though? I’m not sure…. if oil can be gamed, then surely so could BTU’s. or megawatt hours. And if a highly fragmented extractive oil industry is replaced by a concentrated and technology-enabled process driven energy industry, then our energy costs could be even higher in the future as a percentage of GDP. I don’t see why there couldn’t be, for example, a solar equivalent of OPEC based on Chinese technological breakthroughs and vast arrays installed in Middle Eastern deserts. Speculative for sure, but we shouldn’t assume that once oil is gone, all things energy will end happily ever after.

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  28. By armchair261 on April 28, 2011 at 7:57 pm

    mac said:

    —but oil suppliers are paying a dicey game.

    What game are they playing, exactly?

    Treating customers curtly, with repeated price shocks, oil shortage scares and threats is not the way to build business.

    What do you recommend that the oil industry should do to reduce price shocks?

    I can probably speak for at least 13,900 other oil companies in the US when I tell you that our company doesn’t threaten or try to scare our customers, and we have nothing to do with price shocks. But maybe you can supply evidence to the contrary? 

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  29. By Optimist on April 28, 2011 at 9:36 pm

    It starts with putting the blame exactly where it belongs, on Obama and his administration, and keeping it there.

    Wow, it looks like Obama was spectacularly successful in blowing life into the US economy, as seen by the steady increase in gas prices. Thanks for the info 1389AD!

    Seriously, at about the time Obama took office oil prices had fallen to record lows from their previous highs (which the oilmen in the WH were strangely incapable of protecting us from). Where were oil prices going to go from $30/bbl?

    The problem really goes back 50 years. As Jon Stewart pointed out: every president since Nixon spoke about the need for Energy Independence. And every president since Nixon caved in when faced with the choice between Energy Independence and Cheap Gas. Basically, for 50 years US energy policy mounted to little more than: Go beg the King of Saudi Arabia for more oil.

    This cannot end well. Eventually, the King can no longer deliver, even if we assume president Trump knows how to deliver the message and bring home the bacon. Eventually the oil prices start going up and up.

    But hey, don’t let the facts get in the way of good story! Go have fun with those posters! Personally I prefer a poster of the Trump and his hair…

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  30. By OD on April 29, 2011 at 1:16 am

    This cannot end well.

    That does not sound too optimistic. Perhaps I should take all the mad max and bunker talk more seriously. :-)

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  31. By paul-n on April 29, 2011 at 1:42 am

    When people like Whoopi and company blame the oil companies, they are actually half right – they are just not blaming the right oil companies.  Most of the world’s oil production is controlled by State owned National Oil Companies (Saudi Aramco, etc).  Even the US majors like Exxon barely crack the top 10 for oil producing companies.

    So, the America companies are price takers, not price makers.  Saudi and Russia between them control 25% of world production – they are the ones that can control prices if they choose to – and they won;t lose any sleep over causing pain to American drivers.

    So for Whoopi et al who complain about rising prices the answer is simple – don;t buy oil.

    Or at least, halve your (and everyone else’) consumption so the US doesn;t need anymore offshore imports.

    Would have been intersting if she and the anaylst had been asked what they think of relaxing California’s ban on near shore drilling and plunking a few oil rigs off Malibu and Newport beaches.

     

    if you want to ride the train, you have to pay the fare

     

     

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  32. By moiety on April 29, 2011 at 2:58 am

    Paul N said:

    When people like Whoopi and company blame the oil companies, they are actually half right – they are just not blaming the right oil companies.  Most of the world’s oil production is controlled by State owned National Oil Companies (Saudi Aramco, etc).  Even the US majors like Exxon barely crack the top 10 for oil producing companies.

     


     

    http://www.petrostrategies.org….._Sites.htm

     

    I always wondered why these producers did not get more into the refining business and start exporting these products?

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  33. By mac on April 29, 2011 at 12:14 pm

    Armchair,

    If Armchair buys a stock on the NYSE for $25 a share and the stock suddenly catapults to $100, no one accuses Armchair of “windfall profits” Everyone thinks Armchair is a stock market genius.

    A similar situation occurs when P&E oil companies drill with an expectation that a well might be profitable at $25 a barrel. If the price of crude unexpectedly goes to $100/bbl we accuse oil companies of “windfall profits.”.

    Armchair is a genius while the oil companies are “goats Unfair ? Probably so…

    I think what Benny is objecting to is manipulation of crude prices by traders and oil exporting states.

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  34. By rrapier on April 29, 2011 at 1:27 pm

    Moiety said:

    Paul N said:

    When people like Whoopi and company blame the oil companies, they are actually half right – they are just not blaming the right oil companies.  Most of the world’s oil production is controlled by State owned National Oil Companies (Saudi Aramco, etc).  Even the US majors like Exxon barely crack the top 10 for oil producing companies.

     


     

    http://www.petrostrategies.org….._Sites.htm

     

    I always wondered why these producers did not get more into the refining business and start exporting these products?


     

    They actually are. Saudi is building new refineries to capture more of the downstream value:

    Saudi Plans Four New Refineries

    RR

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  35. By Optimist on April 29, 2011 at 1:31 pm

    I think what Benny is objecting to is manipulation of crude prices by traders and oil exporting states….

    …that nobody has proven yet. But, hey, it could happen. And that’s all the proof Benny needs.

    That does not sound too optimistic. Perhaps I should take all the mad max and bunker talk more seriously. :-)

    I won’t say so. Most lilely we gradually move away from oil as prices go up. Then again if we have a president that thinks it’s just about how he phrases his request for more oil, and politicians who thinks it’s their civic duty to ensure voters have gas @$1.00/gal, some careers will end in shame.

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  36. By tw on April 29, 2011 at 1:40 pm

    I think Exxon, or one of their representatives put out a comment yesterday which outlines the facts of the oil company cae: massive profits, massive taxes and massive investment all equal roughly income earned over a long period. Overall profit per gallon was a paltry 2 cents. all other metrics for the industry were in line give or take with other industries.

    Perhaps the celebrity in question could reflect on the high price of misinformation, demogogary, and baseless accusations leveled by uneducated actors, celebrities and politicians. If BS was a fuel, this undistinguished group could definitely provide the country with energy independence.

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  37. By Benny BND Cole on April 29, 2011 at 1:49 pm

    Armchair-
    No, I do not blame domestic oil companies, or any oil companies for oil “shortages” or price spikes.

    I have written here often that productive people, whether investors, management or labor, are never the “problem.”

    I blame the oil monkey-thug states, such as Venezuela, Mexico, Iran, Iraq, Saudi Arabia, Russia, Nigeria etc, for having lousy and corrupt governments, no democracy, no property or civil rights, no contract law, etc. Whether by collusion or sheer incompetence, they have kept 20 mbd off the market. It is an ironic example of ineffectual corruption and incompetence paying off–for them.

    It is exactly the sort of crowd that would engage in gaming futures markets.

    Optimist- You are right to be skeptical without evidence. You are wrong not to be skeptical of the motives of oil-exporting nations. They want higher oil prices, and will employ any means necessary to get there–it is in the interest of their elite groups to have higher oil prices. I assume that would include attempts to game prices higher. Why not?

    We can only hope that China knows the game, and is trying to play the other side of the game.

    As for the Bush Administration, they could hardly author a study that concluded, “Thanks to gaming of the oil markets, among the many failures of the Bushies add that several hundred billion a year has been siphoned out of our economy by artificially high oil prices.”

    Besides, i have already posted here a CFTC report that up to 90 percent of oil trades are controlled by just a few entities, and that a single trader accounted for 10 percent of trades. If you can control that high a percentage of trades, then you can play the game.

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  38. By armchair261 on April 29, 2011 at 3:13 pm

    I think what Benny is objecting to is manipulation of crude prices by traders and oil exporting states.

    Evidence would be useful. Personally, I don’t like to just take things for granted.

    Whether by collusion or sheer incompetence, they have kept 20 mbd off the market. It is an ironic example of ineffectual corruption and incompetence paying off–for them.

    Well, there may be some truth to this. OPEC after all is modulating supply. But incompetence and bad policy is not the same thing as evil intent. And as for why the thug states are not flooding the market? Well, they could perhaps, but I’m not certain that they could dump 20 mmbopd on the market if only they were more on the ball. And if they did, what would it do to the price of oil? If you think US oil imports are high now, or global carbon emissions are excessive, just wait till you see what it would be like after several years of $5-10 oil.
    I guess though that we could level that kind of charge against other industries. If only Indian farmers produced more grain, wheat would be cheaper (it’s up 66% in the past year). If only Brazilians would clear more forest, coffee would be cheaper (up 82%). The list goes on. It is what it is. The laziness, incompetence, poor management, or greed of some foreign governments is a fact of life, and we can’t do much about it: it’s one of the many variables industry and consuming nations have to deal with.

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  39. By paul-n on April 29, 2011 at 4:20 pm

    RR wrote;

    They actually are. Saudi is building new refineries to capture more of the downstream value:

    I have read elsewhere that at least part of the reason for this is that some of their oil (manifa or safaniya?) is very heavy and with high vanadium content, such that no refiners can process it, and their only option is to build their own refinery.  

    Your take on this?

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  40. By paul-n on April 29, 2011 at 4:26 pm

    I guess though that we could level that kind of charge against other industries. If only Indian farmers produced more grain, wheat would be cheaper (it’s up 66% in the past year). If only Brazilians would clear more forest, coffee would be cheaper (up 82%). The list goes on. It is what it is. The laziness, incompetence, poor management, or greed of some foreign governments is a fact of life, and we can’t do much about it: it’s one of the many variables industry and consuming nations have to deal with.

    Armchair, thank you for this piece of reality.  I wish our various governments, and the consumers in general, would acknowledge this fact.

    What those countries do with their oil is up to them – it is, after all their oil.  they can mismanage it as much as they like.

    The US uses twice the oil per capita of the rest of the OECD, and about 10x of most of the oil exporting countries.  I think for the US, both people and government, to so grossly mismanage their consumption of oil, and then point the finger to other countries for mismanaging their production of oil, is a bit rich.

    If people want to see the reason for high oil prices, they need only look in their driveway(s).

     

     

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  41. By mac on April 29, 2011 at 5:05 pm

    TW said:

    Overall profit per gallon was a paltry 2 cents.
    s
    This sounds like the margins for gas station operators who are basically just able to pay the electric bill with gas “profits”

    While only about 8% of U.S. gas stations (130,000 and counting) are actually owned by the oil companies who fly the “corporate flag”, the fact is that anyone who carries “name brand” gas must sign “franchise agreements” with the major gasoline suppliers.

    The net effect is that individual gas station operators make a paltry few cents per gallon on the “name brand” gas they sell. Individual gas stations certainly, have the option to sell gas at whatever price they want.

    Unfortunately, if individual operators try to get a “piece of the has action”. by raising prices, they face “tank wagon” re-pricing from the oil companies.

    In other words.if any gas station consistently charges higher than normal gas prices, eventually the oil company suppliers will simply raise wholesale prices to that station, irrespective of the general wholesale market.

    The gas concession in convenience stores is leased from major oil companies. Major oil companies therefore control the local gas station whether or not they actually own the property upon which their pumps sit or not.

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  42. By armchair261 on April 29, 2011 at 5:26 pm

    mac,

    You make it sound as if the refining industry is such a sweet deal, with all this control and strong-arming going on.

    Yahoo says that, for 2010, out of 215 industries, the US refining and marketing industry ranked
    #133 in p/e ratio,
    #122 in ROE,
    #163 in ROS (a 2.6% average)

    Valero (largest pure refiner) profits for the last 4 years:
    2007: 4.9%
    2008: -1.0%
    2009: -2.9%
    2010: 1.1%
    1Q 2011 (just released): 0.4%

    This is not an industry Harvard MBA’s are clamoring to get into. It’s no wonder that a lot of refineries are on the block. Imagine what additional capacity would do for Valero’s (or others) numbers.

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  43. By Optimist on April 29, 2011 at 6:10 pm

    You are wrong not to be skeptical of the motives of oil-exporting nations. They want higher oil prices, and will employ any means necessary to get there–it is in the interest of their elite groups to have higher oil prices. I assume that would include attempts to game prices higher. Why not?

    Yes, Benny. That’s like convicting you for theft, because @ $4/gal you have a strong incentive to steal gasoline. Incentive is not the same as proof, even if the suspect is evil and/or incompetent.

    And again, @ $115/bbl, they hardly need to resort to foul play. They can just sit back and rake it in.

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  44. By mac on April 29, 2011 at 6:42 pm

    Armchair.

    If crude oil prices were relatively stable then independent refineries wouldn’t get hammered by crack margins. Right ?

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  45. By armchair261 on April 29, 2011 at 6:56 pm

    Mac,
    Your point?

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  46. By mac on April 29, 2011 at 7:21 pm

    Armchair.

    I never said anything about the refining industry.

    I said:

    “A similar situation occurs when P&E oil companies drill with an expectation that a well might be profitable at $25 a barrel. If the price of crude unexpectedly goes to $100/bbl we accuse oil companies of “windfall profits.”.

    I said nothing about refineries (although some of the majors also have refining operations.) I was talking about people who have royalty agreements and deals at the well-head.

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  47. By armchair261 on April 29, 2011 at 9:33 pm

    mac,

    My previous post was in response to your post beginning “Overall profit per gallon was a paltry 2 cents.”

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  48. By mac on April 29, 2011 at 10:21 pm

    Armchair.

    TW said:

    “Overall profit per gallon was a paltry 2 cents”

    I said that I found that hard to believe since that’s about what convenience stores make per gallon peddling gas. The profit figures that I have for oil companies is about 8%.

    Actually taxes, local, state and federal, I think are more than profits from exploration and refinng combined.

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  49. By armchair261 on April 29, 2011 at 11:29 pm

    mac,
    I’m also a bit skeptical on what the 2 cents per gallon represents. Exxon, as with most majors, is not really in the retail business. So I don’t know if they mean a 2 cent margin on what retail sales they do have, or a 2 cent margin on their wholesale gasoline business. The latter seems unlikely. I’m not going to go check their annual report, but I’d guess it’s quite a bit higher.

    On the other hand, Valero’s reported 0.4% margin in 1Q 2011 may mean very tiny profits per gallon indeed.

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  50. By paul-n on April 30, 2011 at 1:03 am

    According to Exxon’s press release, their production was 2.399 million barrels/day.

    This works out to 218 million barrels for the period, so their profit (assigning it all to production) works out to  $48.60 per barrel.  Put another way, if we assume an average cost of $100/bbl for the quarter, then their average cost of productiion is $51.40 per barrel.  Canadian oilsands, for comparison, cost about $60/bbl to produce.

    If you still think they are gouging, consider that Saudi Arabia’s average cost of production is something in the order of $10/barrel.

    If we assume (incorrectly) that all 43 gallons of crude per barrel are equivalent to a gallon of gasoline, then they produced 9.4bn gallons of gasoline for  a profit of $1.12 per gallon of gasoline equivalent.  

    Before everyone says they are being gouged, it should be noted that their production of 2.4mbd is only 12.7% of total US consumption, and not all of their production even comes to the US.

    There are many other companies profiting from the US appetite for oil, and most of those profits are going to Saudi, Venezuela etc.  Exxon is along for the ride, but they are not steering the bus.

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  51. By Jim Colthart on April 30, 2011 at 1:08 pm

    Robert Rapier said:

    Jim Colthart said:

    Not so, according to US DOE – see this link to the EIA data: http://www.eia.doe.gov/dnav/pe…..01&f=m


     
    Jim, you are looking at only one category of gasoline sales. There are many other pieces to that puzzle, but EIA also shows total demand, and you can see from the link I posted that gasoline demand is up — not down — from 1996.

    What you posted amounts to only small sales. The growing number of deliveries by pipeline is completely left out of that data you posted. It would be like using declining deliveries by the Pony Express to show that mail deliveries are falling.

    RR


     

    Your link goes to rack sales, which are at the wholesale level – title transfers at terminals for further distribution – this could happen multiple times to the same gallon/barrel, I would guess.  Looking at the retails sales data to all end-users indicates a 40% decline.  The EIA data table for these says it is based on the following: Total sales to end users includes sales through retail outlets as well as all direct sales to end users that were not made through company-operated retail outlets, e.g., sales to agricultural customers, commercial sales, and industrial sales.  This is at the following link:

    http://www.eia.doe.gov/dnav/pe…..01&f=M

     

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  52. By rrapier on April 30, 2011 at 1:28 pm

    Jim Colthart said:

    Your link goes to rack sales, which are at the wholesale level – title transfers at terminals for further distribution – this could happen multiple times to the same gallon/barrel, I would guess.  Looking at the retails sales data to all end-users indicates a 40% decline.  The EIA data table for these says it is based on the following: Total sales to end users includes sales through retail outlets as well as all direct sales to end users that were not made through company-operated retail outlets, e.g., sales to agricultural customers, commercial sales, and industrial sales.  This is at the following link:

    http://www.eia.doe.gov/dnav/pe…..01&f=M

     


     

    No, Jim, you aren’t reading the fine print. Your initial link was to DTW sales. That is Dealer Tank Wagon, which is defined as:

    • Dealer tankwagon, or DTW – sales of a truckload or less of product, delivered into storage at a retail outlet.

    Your current link is to retail gasoline delivered by refineries, again leaving out categories. You are only looking at a fraction of retail sales — no ifs, ands, or buts. I can assure you that our total gasoline demand today is much higher than it was in 1996. Most refiners have gotten out of the retail business, and I suspect this is what you are seeing. There is in fact another category that you could have linked to in that same series called Monthly U.S. Total Gasoline Wholesale/Resale Volume by Refiners, and it shows higher volumes.

    Simply put, the EIA shows clearly total gasoline demand, and it shows it has climbed a lot. When you start to go into the different categories of data, you aren’t getting the whole picture, which the EIA already clearly broke down. I know the EIA categories can be confusing, as I have had to contact them multiple times for clarification. But we can look at many other lines of evidence supporting the same conclusion. For instance, you can see that the net inputs to refineries have gone up since 1996. Where do you think all of that gasoline is going if they have seen a 40% decline in demand?

    RR

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  53. By rrapier on April 30, 2011 at 1:42 pm

    Paul N said:

    RR wrote;

    They actually are. Saudi is building new refineries to capture more of the downstream value:

    I have read elsewhere that at least part of the reason for this is that some of their oil (manifa or safaniya?) is very heavy and with high vanadium content, such that no refiners can process it, and their only option is to build their own refinery.  

    Your take on this?


     

    Could be a factor in some cases, but I have heard many times that the Saudis are tired of seeing others capture the value chain of their crude oil. Why not capture that value at home and create jobs and profits? That’s the long-term trend, and it doesn’t bode well for the U.S. refining industry.

    RR

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  54. By Jim Colthart on April 30, 2011 at 4:48 pm

    Robert Rapier said:

    Jim Colthart said:

    Your link goes to rack sales, which are at the wholesale level – title transfers at terminals for further distribution – this could happen multiple times to the same gallon/barrel, I would guess.  Looking at the retails sales data to all end-users indicates a 40% decline.  The EIA data table for these says it is based on the following: Total sales to end users includes sales through retail outlets as well as all direct sales to end users that were not made through company-operated retail outlets, e.g., sales to agricultural customers, commercial sales, and industrial sales.  This is at the following link:

    http://www.eia.doe.gov/dnav/pe…..01&f=M

     


     
    No, Jim, you aren’t reading the fine print. Your initial link was to DTW sales. That is Dealer Tank Wagon, which is defined as:

    • Dealer tankwagon, or DTW – sales of a truckload or less of product, delivered into storage at a retail outlet.

    Your current link is to retail gasoline delivered by refineries, again leaving out categories. You are only looking at a fraction of retail sales — no ifs, ands, or buts. I can assure you that our total gasoline demand today is much higher than it was in 1996. Most refiners have gotten out of the retail business, and I suspect this is what you are seeing. There is in fact another category that you could have linked to in that same series called Monthly U.S. Total Gasoline Wholesale/Resale Volume by Refiners, and it shows higher volumes.

    Simply put, the EIA shows clearly total gasoline demand, and it shows it has climbed a lot. When you start to go into the different categories of data, you aren’t getting the whole picture, which the EIA already clearly broke down. I know the EIA categories can be confusing, as I have had to contact them multiple times for clarification. But we can look at many other lines of evidence supporting the same conclusion. For instance, you can see that the net inputs to refineries have gone up since 1996. Where do you think all of that gasoline is going if they have seen a 40% decline in demand?

    RR


     

    I don’t see increasing volumes of gasoline going to retail customers – which includes not just the local stations, but the bulk users if the definition the EIA gives with that chart is correct – so I have to conclude that the impact of softening demand at the retail level is offset by artifically-maintained price levels. Even looking at your link to refinery outputs, current volumes are siginificantly less than peak years in the 1990s.

    I would expect some decline in demand, given the steady increase in fleet average mileage per gallon, which although offset by growth in population has probably  been more than enough to fuel the increasing number of vehicles on the road. And average annual mileage per vehicle continues to fall in a softer economy with fewer discretionary dollars for vacations – just look at the southeastern and southwestern US tourist industry this past winter.

    We are also supporting high prices through the volume of exported fuel – do you have any data on how much of the refinery output proportionately goes into the U.S. domestic market? My guess is that number has shrunk appreciably.  For example, I know that Canada has closed several eastern refineries and imports finished fuel via pipeline from NJ and by tanker from Beaumont/Galveston.

     As  to net inputs to refineries, the mix of outputs has varied considerably – more diesel and jet fuel, as well as more raw stock that gets converted to other uses than transportation fuels – chemicals, plastics, etc. 

    In any case, my underlying point would be that traditional economic fundamentals – weak demand=low prices, strong demand=high prices – are laregely irrelevant to undertanding the US domestic gasoline market over time.

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  55. By rrapier on April 30, 2011 at 6:19 pm

    Jim Colthart said:

     

    I don’t see increasing volumes of gasoline going to retail customers – which includes not just the local stations, but the bulk users if the definition the EIA gives with that chart is correct – so I have to conclude that the impact of softening demand at the retail level is offset by artifically-maintained price levels.


     

    But your conclusions are based on looking at a partial data set. As I said, the EIA data can be confusing. You can satisfy yourself and won’t have to continue to rationalize your incorrect conclusion by simply writing to the EIA and asking them if gasoline demand in the U.S. is higher or lower than in 1996. I have shown you the actual numbers on that, which reflects total demand. You have chosen to go sifting through sets of data that don’t include total demand, which is why you are coming to the wrong conclusions.

    I would expect some decline in demand, given the steady increase in fleet average mileage per gallon, which although offset by growth in population has probably  been more than enough to fuel the increasing number of vehicles on the road.

    You are again trying to rationalize an incorrect conclusion. What data do you have to show that fleet mileage today has increased enough to offest the increases in population? Please present actual data. in fact, you can see here that CAFE standards have only increased marginally, while population has increased by around 50 million people.

    Even looking at your link to refinery outputs, current volumes are siginificantly less than peak years in the 1990s.

    I don’t know what you are looking at, but on an annual basis you can clearly see that refinery inputs today are higher than at any time in the 1990s. Another interesting data point is that gasoline imports are more than double their levels in the 1990′s. Odd if demand is going down, don’t you think?

    We are also supporting high prices through the volume of exported fuel – do you have any data on how much of the refinery output proportionately goes into the U.S. domestic market?

    Yeah, the EIA has those numbers. Almost all of it does. In recent years, there has been an increase in high sulfur diesel exports as our sulfur standards have tightened, but well over 90% of the refinery output stays in the U.S.

    In any case, my underlying point would be that traditional economic fundamentals – weak demand=low prices, strong demand=high prices – are laregely irrelevant to undertanding the US domestic gasoline market over time.

    Except that your underlying point is undermined by the fact that the EIA clearly shows gasoline demand is higher today than it was in 1996. I actually wrote to the EIA on this point one with a question on “Product Supplied” which is the link I provided that shows a steady increase since 1996. They said that “Product Supplied” is equal to demand plus inventory changes. It can’t be any more clear than that. You can write to them and satisfy yourself. Since inventory changes on an annual basis are small relative to product supplied, that number is going to be a very good measure of actual demand. And it shows 7.9 million barrels per day in 1996 and 9.0 million barrels per day in 2010.

    RR

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  56. By paul-n on April 30, 2011 at 6:30 pm

    In any case, my underlying point would be that traditional economic fundamentals – weak demand=low prices, strong demand=high prices – are laregely irrelevant to undertanding the US domestic gasoline market over time.

    I have to disagree here.  Traditional economic fundamentals are what it is all about.  The simple fact is that demand is very inelastic with regards to price.  Basically, people will pay whatever it costs.  

    However, demand is more elastic with regards to employment/general economic activity – i.e. the recession is what reduced fuel demand over the last few years, not high pump prices.

    Of course, you can’t just look at the domestic market.  Given that gasoline is produced from a world traded commodity (crude oil) you need to then look at what is driving that market.  And again, it is really supply and demand – and, especially, demands from other countries, like China, India and Brazil;

    Definitely some serious demand going on there from ChIndiaZil.  So even if US drivers cut back, does it really make any difference to the world crude price?  It may have some short term impact on domestic gasoline prices and stocks, but the refiners are getting pretty good at exporting product that is not being sold domestically.

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  57. By Wendell Mercantile on April 30, 2011 at 6:30 pm

    In a nutshell, Whoopi is angry that gas prices are so high, and essentially feels like this is simply the oil companies ripping off the public…

    It’s her privilege to be angry, but the primary reason for high profits is the huge volume.

    Even if I were to make a profit of only $.02 per unit, whenever I sold a billion units of that product I would have a profit of $20 million. And the oil companies sell far more than a billion gallons of gasoline to American drivers each year.

    The second point Whoopi needs to understand is that the oil companies couldn’t sell those billions of gallons of fuel if American drivers weren’t so eager to buy them.

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  58. By rrapier on April 30, 2011 at 6:36 pm

    Paul N said:

    So even if US drivers cut back, does it really make any difference to the world crude price?  


     

    I would agree 100% with that point, but also would point out that it is only in the past couple of years — with world oil prices very high — that U.S. drivers actually did cut back. Jim’s point of lower demand relative to 1996 is simply incorrect. The recent cutbacks are due to very high prices, and high prices are indicative of strong demand (which as you show is global).

    RR

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  59. By Benny BND Cole on April 30, 2011 at 7:27 pm

    When I speak of thug states not producing oil, I refer to simple boobery and corruption, in addition to the collusion by OPEC.

     

    Venezuela is an example. Chavez has nearly wrecked the oil industry there, by unprincipled behavior towards oil companies (and his own population), including violation of contracts.  Russia the same. Mexico is a mess.  Iran is a nuthouse.  Iraq maybe getting better, but terrible.  Libya a fruitcake. Nigeria run by cheap mobsters.  Saudi Arabia wants to maximize revenues by any means necessary, including collusion on world oil markets. The beat goes on.  (Until recently, it looked like Libya was getting better–then poof). 

     

    All together, I roughly guess that 20 mbd is sitting on the sidelines in these nations.  No, it does not mean tomorrow we could go up by 20 mbd.  I mean that if these nations had a modicum of law, property rights, fair play, contact law, etc. there would be another 20 mbd of production. Scarcity as a result of thug-state-ism pays off. 

     

    As of now, Peak Oil is an artifice of crackpot-nations. 

     

    I expect that such one-trick pony countries (they never developed real economies, any of them) would do anything to keep oil prices up, including manipulation of oil exchanges.  They have money and motivation.  For them it is patriotism.  

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  60. By jcsr on April 30, 2011 at 8:35 pm

    I thought Whoopi Goldberg was pretty mild compared to Mitt Romney saying we should hang the President.

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  61. By mac on April 30, 2011 at 9:05 pm

    High Gas Prices ?

    Here’s a quote from a CNN report.

    “But while “drill baby, drill,” continues to be a popular refrain for administration critics and some Democrats hailing from oil-producing states, the argument’s relevance to gas prices has recently come under greater scrutiny. A growing consensus of energy experts and analysts have lately come out against the idea that increasing the balance of domestically produced energy could yield significant relief to consumers struggling with high pump prices.

    “This drill, drill, drill thing is tired,” said Tom Kloza, AAA’s chief oil analyst responsible for calculating gas prices, to CNN Money. “It’s a simplistic way of looking for a solution that doesn’t exist.”

    As the CNN article points out—and as we’ve pointed out here several times in the past—the interconnected nature of global energy markets means that while any increase in oil production technically results in downward pressure on world prices, the effect of increasing domestic production wouldn’t be so much to lower prices in the United States, but to lower prices everywhere—meaning that American consumers would feel only a small fraction of the theoretical relief.

    But since OPEC and other major producers tend to tie export levels to price, the reaction to more American oil on the market would likely mean cuts in production in places like Saudi Arabia, Kuwait, and Venezuela. The net result? A barely-significant increase in the amount of oil available for purchase and little to no difference in the price of gas at the pump.

    Then there’s the matter of how long it will actually take to get the currently off-limits oil. The EIA estimates that it would be ten years (after congressional approval) before the first barrel of oil produced at ANWR hits the market, and peak production from offshore sites would reach just 500,000 extra barrels per day by 2030. While that would be a relatively significant increase in daily U.S. production—which currently hovers slightly below 10 million barrels per day—the impact that those new offshore areas would have on U.S. gas prices would likely be just a few pennies per gallon.”

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  62. By Kit P on May 1, 2011 at 9:49 am

    From CNN:

     

    “Then there’s the matter of how long it will actually take to get the currently off-limits oil. The EIA estimates that it would be ten years (after congressional approval) before the first barrel of oil produced at ANWR hits the market,”

     

    Of course more than 10 years ago, THE NATIONAL ENERGY POLICY, May 2001, recommended that we open ANWR and it was being hotly debated in congressional. Domestic energy oil production creates job and income to the treasury.

     

    It is a silly argument to say that a source of energy is small and takes to long to build. The same gang who are against opening ANWR think that cellulose ethanol and a million solar panels on the roof’s of California houses is the solution.

     

    I do not see a problem with doing both but I am still waiting for the later.

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  63. By Wendell Mercantile on May 1, 2011 at 12:30 pm

    You make good points Kit P.

    Had we started drilling in ANWR ten years ago, we would have oil flowing from there now, and we need to start now to have oil flowing from there in ten years.

    The claim that ANWR would make only a small difference is true, but as you point out, it is also a bogus argument. If there was a prohibition against things that made a small difference, no one could ever put solar panels on their roofs or a residential-scale wind turbine in their back yard. A great truth is that small things add up. Let’s do all the small things and enjoy their cumulative effect: ANWR, solar panels, small residential wind turbines, et al.

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  64. By Benny BND Cole on May 1, 2011 at 12:50 pm

    OT, but with all the shale gas we have….wow. I have a friend of a friend working on natural gas to gasoline technology.

    Swiss company outlines methanol-to-gasoline option for Alaska North Slope gas to state legislature
    1 May 2011

    Methanol-to-gasoline process flow diagram.
    At a recent hearing of the Alaska state legislature’s House Resources Committee, Deo van Wijk, chairman of Swiss company Janus Methanol AG (formed in 2007), outlined a potential approach to converting North Slope gas to gasoline via the combination of a new methanol production technology (GigaMethanol) and the Methanol-to-Gasoline (MTG) process developed by ExxonMobil Research and Engineering (EMRE).

    Under van Wijk’s concept, a plant would produce methanol from natural gas on the North Slope using the proposed GigaMethanol technology. The resulting methanol would be blended with crude and transported via the trans-Alaska oil pipeline to Valdez, where it would be extracted from the oil and processed via Methanol-to-Gasoline technology into gasoline.

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  65. By GDKeys on May 1, 2011 at 3:03 pm

    Opening ANWAR would be a good thing if there was some upfront assurance that the oil would be used wisely.

    I am disappointed in Ms Goldberg’s stance here. But as ugly as she appears in this matter, I still favor her, having heard she once took the very unpopular stand of defending brother Mel when her peers were trashing him on another episode of the vagina perspective.

    Actually, Whoopi pointing at oil companies isn’t that much different than Bush pointing at WMD in Iraq. I guess it is not that unusual for humans to point at peripheals instead of where problems really reside.

    Even tangents are only 90° off. Greater skew can be found closer to home with subsets prone to chronic infantilism, coked-up contrarianism, and too-clever-by-half arguments that point to bicycling as a cause of global warming, or slower driving as leading to higher demand (and gas prices).

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  66. By mac on May 1, 2011 at 4:56 pm

    Wendell,

    First of all let me congradulate you on walking to work (3 Miles). You are indeed “A man among men” I used to walk to the local Stop & Go but recently bought a bike. It’s a lot faster and I can carry more merchandise on the bike.

    Armchair once asked me if I was OK with off-shore drilling. I said that I was. If they want to drill off the West Coast, East Coast, western Fla: or other areas such as Anwar, perhaps we should allow the oil companies to do so.

    Personally, I think it’s like “peeing into a hurricane” But, by all means, go ahead…..

    As the CNN article points out, the net effect may be that it only reduces gas prices by pennies. Since OPEC, particularly the Saudis, can control the classic supply/demand equation by simply cutting production, any additional production brought on line from other sources is subject to the “Saudi veto”

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  67. By paul-n on May 1, 2011 at 6:25 pm

    Of course more than 10 years ago, THE NATIONAL ENERGY POLICY, May 2001, recommended that we open ANWR and it was being hotly debated in congressional. Domestic energy oil production creates job and income to the treasury.

    Whatever else we may say about government policy, I think there are usually some smart people behind at least parts of it.  In the case of the ANWR, I’ll bet they had one eye on the Trans Alaska Pipeline, which needs to have a minimum flow of about 3-400kdb to keep operating.  Alaskan production had already been declining for over a decade in 2001, and now is getting close to the limit of pipeline viability.

     

    I’m sure they viewed ANWR as a way to keep that pipeline, going, and if it had gone ahead, and was coming online today, the pipe would probably have another ten years.  now, its future is uncertain – and this in itself is limiting exploration and investment in Alaskan oilfields

    Besides ANWR, there are other areas up there that have been restricted for access.  

    And the ones that they have been exploring, including some near-offshore, have an annoying habit of producing lots of gas and not much oil.

     

    Anyone who thinks increasing domestic production will bring down prices is deluding themselves – it will just be noise in the price signal.   But domestic production does create domestic jobs, and keeps money here instead of going to KSA etc, and given that there is $1.3bn per day flowing out on oil imports, that is worth pursuing.

    I think we can go one step further and say that almost any increase in domestic (or Canadian) production can ONLY happen if prices remain high – there simply is no cheap oil left on this continent.  We can have more home made, but only at today’s prices or higher.

    Given that we are likely stuck with higher prices anyway,might as well keep as much of the money and the jobs here by producing as much oil/biofuel as is practical and safe – for both man and environment.

     

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  68. By mac on May 1, 2011 at 7:47 pm

    Paul N said:

    Anyone who thinks increasing domestic production will bring down prices is deluding themselves

    I agree……

    “Drill….. Baby…… Drill”

    The only people who stand to make money are the multinational oil companies at the consumers expense.

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  69. By rrapier on May 1, 2011 at 9:01 pm

    Paul N said:

    Anyone who thinks increasing domestic production will bring down prices is deluding themselves – it will just be noise in the price signal.   But domestic production does create domestic jobs, and keeps money here instead of going to KSA etc, and given that there is $1.3bn per day flowing out on oil imports, that is worth pursuing.

     


     

    I would add to that; while I agree that increasing domestic production won’t do much to impact prices now, we may be in the midst of a severe supply crunch in 10 years. In that case, a small amount of incremental production could be the difference between $200 a barrel oil and $300 a barrel oil. In the bigger picture, it is like the little boy with his finger in the dyke, but I suspect we will need every bit we can get.

    RR

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  70. By armchair261 on May 1, 2011 at 9:21 pm

    Mac said:

    The only people who stand to make money are the multinational oil companies at the consumers expense.

    Absolutely false.

    1) Independent oil companies drill about 94% of US wells, from a study by IHS Herrold. There are about 14,000 oil companies recognized by the DOE, in its 2007 report “U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves 2006 Annual Report ,” Table A4. Crude Oil Production by Operator Production Size Class, 2001–2006

    In this report, companies ranked #11 through 13,820 produced 50.3% of US Production. #21 through 13,820 accounted for 40%.

    2) The increased activity would create a lot of quality jobs. Those workers would inject cash into their communities.

    3) The resulting revenues would be a windfall for state, local and federal governments, in the form of royalty payments and taxes.

    4) The costs of finding and producing oil represent cash injected into the economy. Exxon’s $11 bn profit in 1Q 2011 on $114 bn revenue means that Exxon injected $113 billion into the economy: apart from taxes… service companies, employees, steel mills, raw material vendors, drilling companies, and on and on. Some of that cash would go to foreign sources, sure, but a lot would remain in the US.

    5) Every barrel of oil produced domestically means one less barrel imported, with implications on US balance of trade, and if volumes are significant enough, the strength of the dollar and therefore interest rates.

    Having said all that, I don’t believe that unlimited drilling could ever hope to replace US crude imports currently hovering around 9.2 million barrels per day. Would they have a price impact? How many angels could dance on the head of a pin? A result much higher than anticipated certainly could. Prudhoe Bay was producing 25% of US domestic oil in the late 1980′s. That would have to be significant in 2025, no matter what a present day researcher’s algorithm might predict about future price impacts. The one thing we can safely say about these long range models is that they’re going to be wrong.

    Production from North Dakota has soared by about 250,000 barrels per day in the past 5 years. Has it had a price impact? Well, you tell me. Prices are still high, and yet, if an announcement were made that 250,000 barrels were to be removed from the market, I think traders would take note.

    I think the domestic drilling debate focuses too much on volumes of oil and gasoline price impact only. We need to consider the beneficial side effects: jobs, trade balance, government revenues, etc., and weigh them against our environmental priorities.

    Finally, a word about ANWR. Let’s not forget that the numbers bandied about are only poorly constrained estimates based on the nearest wells and a very sparse 2D seismic data grid. No one really knows what’s down there. ANWR could, after years of exploration, yield no commercial oil. This was effectively the case for the NPRA on the western side of the North Slope after years of government and industry drilling programs, and the first Chukchi Sea wells have turned up nothing commercial after around 20+ years of drilling (but a small number of wells). Or, ANWR could turn out to have much more oil than anyone imagines. Consider tiny Kuwait. Its Burgan Field is the second or third largest in the world, and yet ANWR is four times the size of Kuwait.

    So I think we’re kidding ourselves by trying to calculate ANWR or “drill-baby-drill” price impacts. The uncertainties in geology, price, future demand, other future supply, alternatives contribution, and the odd black swan or two will defeat any algorithm we have today.

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  71. By mac on May 1, 2011 at 9:42 pm

    1) Independent oil companies drill about 94% of US wells, from a study by IHS Herrold.

    So what ?

    I doubt they have have well-head agreements and basically are just sub-contractors. The people with the royalty agreements and leases are the ones that make the money.

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  72. By armchair261 on May 2, 2011 at 12:42 am

    I doubt they have have well-head agreements and basically are just sub-contractors. The people with the royalty agreements and leases are the ones that make the money.

    “So what?” Didn’t you just say that the only ones who’d benefit “are the multinational oil companies?” I think the fact that 94% of US wells are drilled by independents is quite relevant and refutes your claim. I don’t quite understand where you’re coming from here.

    This 94% comprises independent companies whose paid employees subcontract drillers and scores of other service companies; all of these people in turn pay income taxes and they patronize local businesses. So all of this increased activity would pump a lot of cash into the economy. No operators have a zero cost of goods sold, which you seem to assume.

    The “people with the royalty” agreements could be farmers, ranchers, families, governments, or even schools. Many (most?) leases are generations old, and mineral rights have been passed on to descendants. It’s not unusual to see leases with literally dozens of cotenants (partial mineral rights interest holders) spread out all over the country.

    For the life of me I just don’t see how it could possibly be true that only multinationals would benefit from more drilling. I don’t think you’ve ever drilled a well, am I correct?

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  73. By paul-n on May 2, 2011 at 1:27 am

    The only people who stand to make money are the multinational oil companies at the consumers expense.

    C’mon Mac, you can’t be serious.

    Given that we agree it won’t make any difference to prices, how then is domestic production “at the consumer’s expense?”

     

    I doubt they have have well-head agreements and basically are just sub-contractors.

    If the company gets the oil out of the well head, they then have a product that is sold at a high % of the prevailing crude price – and is not necessarily sold to a big oil co either – it may go straight to a refiner.

    One of the reasons why so much conventional (onshore) production in US and Can is done by small co’s is that they are often drilling small prospects, or old fields, with low production volumes.  The big boys just aren’t set up for that.

    As Armchair points out, the majority of production is now by the smaller companies – this is the exact opposite of, say Saudi Aramco, and we should be very happy about that – many players prevents gaming of the market. 

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  74. By JohnDJohnson on May 2, 2011 at 5:01 pm

    If the American government got into the oil business, as it is in the electrical energy business, perhaps we would not have so much fluctuation in prices.
    After all, we already know how much oil Americans use…so why not just allow the government to buy it all and resell it to us Americans. Problem solved.
    The government could buy it, regulate it and even tax it.
    The goverenment could handle oil similar to the way the government handles electricity being sent to our homes.

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  75. By Optimist on May 2, 2011 at 5:18 pm

    Great idea, John D!
    Let’s see: in the current market, if the government had to buy oil at $115/bbl, it would have a choice: it could either sell gasoline at $4.00/gal to pay for the oil, or it could sell gasoline at $1.00/gal and use the our tax $$$$ to pay for the difference. That way we can get the tax payer to subsidize our driving. Only fair. I mean, isn’t that would the Federal Government is for? Farmers: don’t answer that!

    The only problem is that at $1.00/gal there would be a lot more SUVs on the road, and demand for gasoline would be much higher than it is today. So the government would have to buy more oil, driving oil prices up even more. But hey, there is plenty of idle money in the Federal Budget, right. It’s not as if anybody else needs the money…

    I have an even better idea: why don’t we get the government to buy everything and sell it to us much cheaper that those capitalist pigs would do. You know, like that happy place that communism used to be…

    Thanks, John D, that would all.

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  76. By Optimist on May 2, 2011 at 5:35 pm

    I expect that such one-trick pony countries (they never developed real economies, any of them) would do anything to keep oil prices up, including manipulation of oil exchanges.  They have money and motivation.  For them it is patriotism.

    By this rationale every corn farmer in the US is a “one-trick pony” who would do anything in his power to manipulate corn prices. Afterall, he’s just looking after his family.

    Read this slowly, Benny, because you seem to have severe difficulty with comprehension: just because someone benefits from high prices, and is making money hand-over-fist, it does not follow that he is manipulating world markets. Even if he is known to be a really, really naughty boy.

    You have no proof of your theory, so you just keep repeating it ad nauseam. Please stop!Embarassed

    Also, you have not even suggested a credible theory how one would bid up oil prices, even you did have access to unlimited funds.

    You are the only one-trick pony, Benny, and it’s getting pretty old.

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  77. By Rick on May 4, 2011 at 12:23 pm

    Funny, you didn’t mention Peak Oil in this post. Whoopi is clueless – she’s become a tool of the MSM. But, despite the profits, the root cause is Peak Oil.

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  78. By paul-n on May 4, 2011 at 2:02 pm

    The root cause is not peak oil at all.  We won’t really when (if) oil peaks until, by definition some time afterwards.  The real problem is the rest of the world, particularly China India and Brazil, are using more and more oil .  And those countries can outbid the US for it – and that is what we are seeing happening.  

    Whether production has peaked or not is irrelevant, it is the ever increasing demand that is causing ever increasing prices – Whoopi and the rest of the country just need to get used to that fact – or get off the road

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  79. By Trelayne on January 23, 2012 at 9:30 am

    Wow!! You really believe we all have the brains of titmice, doncha.

    When the price of crude oil goes up (which, you allege US oil companies don’t control) US oil companies declare record profits. Why? Because they keep their profit margins the same. Get it ? Higher price; more bucks in their pockets.

    However, they do actually control by choice, their profit margin, so, rather than making a CONSCIOUS DECISION not to rip us off, and to LOWER their profit margin…you guessed it! they opt for more bucks in their pockets…screw us!

    Given that the American tax payer subsidizes the oil industry solely for the pleasure of being screwed by the same. Neither we, nor Whoopie are stupid.

    And, we’re tired of bending over….get it. We think big oil can do without the 11+billion subsidy. OR>>>>>>they can lower their profit margin, create more jobs and end the recession. Yes, Virginia, its THAT simple!!!!!

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  80. By rrapier on January 23, 2012 at 12:21 pm

    Trelayne said:

    Wow!! You really believe we all have the brains of titmice, doncha.


     

    It really depends. I certainly think some people don’t have a clue, and there is evidence from your post here that you may fall into that category. 

    When the price of crude oil goes up (which, you allege US oil companies don’t control) US oil companies declare record profits. Why? Because they keep their profit margins the same. Get it ? Higher price; more bucks in their pockets.

    What you (and Whoopi) fail to understand is that it isn’t the gasoline that is making them the money. They make very little profit on gasoline. Why do you think refineries keep shutting down? They make money on the physical price of oil. When it goes up, they make more money (and yet still have tiny profit margins compared to Apple and Microsoft). If they could control the price, it would stay up and wouldn’t be so volatile. And no, anyone who knows the first thing about any of this knows that it is physically impossible for tiny players like U.S. oil companies to control the global price of crude.

    However, they do actually control by choice, their profit margin, so, rather than making a CONSCIOUS DECISION not to rip us off, and to LOWER their profit margin…you guessed it! they opt for more bucks in their pockets…screw us!

    When they sell oil on the world market at world prices — the same price everyone else is selling for — how are they ripping you off?

    Given that the American tax payer subsidizes the oil industry solely for the pleasure of being screwed by the same. Neither we, nor Whoopie are stupid.

    To the extent that you pay any subsidies to the oil companies, it is so we will continue to produce domestically even when the profitability is marginal. Said subsidies come back to the government many times over as tax revenues.

    We think big oil can do without the 11+billion subsidy.

    Please break down that subsidy for me. A recent CNN story called it $4 billion, with the majority being a tax credit enjoyed by every other U.S. manufacturer. In other words, it wasn’t an “oil subsidy.” But by all means, here is your chance to convince me that you are not — as you say — stupid.

    RR

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  81. By herm on January 23, 2012 at 2:32 pm

    Can oil produced in the US be exported to other countries?

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  82. By rrapier on January 23, 2012 at 3:27 pm

    Herm said:

    Can oil produced in the US be exported to other countries?


     

    It can, but we export very little oil in any case. We are still very large net importers of oil. What has been in the news a great deal in the past year was the fact that the U.S. had become a net exporter of finished products. In essence, we are importing oil from Mexico and exporting gasoline back to them.

    RR

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