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The Price Of Oil - Page 11

Has anyone heard Exxons spokes woman lately? She gave a bunch of excuses why gas was high, but refused to tell us how they can justify their prices when they are set to make a record profit for the third straight time! I wish they would just be honest and say "You have to have it, we have it and we are greedy, so you will have to deal unless you can find something better!". At least I could accept that in place of this baloney!

Oil Price The

Konquererz, in all fairness, it is not solely the oil executives fault. If anything, the bulk of the blame has to go to the those who speculate about oil futures and subsequently drive up the price of barrels of oil. A simple example is this.
Our favorite oil executives purchase a barrel of oil for $30 a barrel. They pay the expenses of getting the oil refined, transported, etc so that we, the consumer, can pump it at the gas stations. The price is currently $2/gallon at the pumps. While this barrel of oil is being refined and distributed, speculation of impending problems in oil rich nations causes the price of oil to jump to $50 a barrel, not by these executives, but by the futures market. Meanwhile, the barrel at $30 has not been exhausted, so the prices at the pumps seem to be stable.
Now the barrel at $30 is exhausted, and the oil executive has to buy another barrel, now at $50. Guess what? The people who are responsible for distribution and transportation decide to charge the oil executive more money. There are other costs involved as well which subsequently go up as well. Now the price at the pumps has to change to reflect the increase in cost. The price now jumps to $2.25/gallon.
As for the profits these executives are seeing, most of it is stock worth, and really not cash profits. Stock in gas companies will go up with increasing oil prices, but as we all knows, stocks are also futures based.
Now, I am not saying these companies and their executives are devoid of fault. Also realize they are under a lot of pressure from congress in such mandates as providing ethanol based fuel. This is not a cheap process. Yes, there is a little bit of price gouging possible going on, but let's put some blame on these speculators in the futures market that have increased the price of oil from $40 to over $70 a barrel in less than a year.

The Price Of Oil History & Civil Business Politics

I think the oil companies have a lot to answer for. What annoys motorists is when you have collusion that drives up the pump price.

For example: Just recently in Sydney petrol prices jumped 10c per litre (which is massive) in literally a few hours. It didn't just occur in one petrol station, but at every petrol station across Sydney, except a few independents. This happened in broad daylight and shocked motorists. There was no change in the price of oil that encouraged such a massive rise.

Station operators run a very thin profit so where would the rise come from? Answer: Oil companies.

Oil companies know the market is very susceptible to tensions in the Middle East and take full advantage of this. I think the oil cartel OPEC is also very unhealthy for this market. Whenever you have a single desk monopolising supply it stifles competition, which in this case has inflated the value of the product.

OPEC's share of the world oil market

I do take your point about traders, they are another cog in the system.

The reality is we have to invest in new technology that doesn't rely on oil or buy a good push bike.

Page 11 Oil Price The

Here in Michigan, the home of the auto industry, this is a huge discussion. Our incredibly foolish governor, Jennifer Granholm, has started up a petition to call on Congress to enact a "windfall" tax aimed specifically against the oil industry. Besides the fact that it is illegal to create laws directed at individuals, this is really stupid.

Everyone likes to bash the oil industry. After all, they are profiting from the high prices, right?

But who ARE the oil companies? Yes, there are some executives who are making lots of money. But who actually owns most of the stock? This is a question that Ms. Granholm refuses to recognize.

This week it was shown that the government employee union pension funds in the state of Michigan own over 12 MILLION shares of Exxon. Common people who own mutual funds own massive amounts of the stock. So, the major owners of the oil companies that everyone wants to blame for everything are the 401(k)s, the union pension funds, the retirement accounts, and, in general, the common people.

That is who is really profiting.

So, Ms. Granholm, and the other Democrats who are pushing hard for a "windfall" tax, are NOT trying to work for the common good. What they are doing is that they see a whole lot of money out there that they can't get their greedy little governmental hands on, and it is killing them.

Another side of it is that the government, especially state government, is the major beneficiary of high oil prices. Many states have gas taxes based on a percentage of the price of a gallon of gas. The US government has something like $0.50 or more tax on each gallon.

If government REALLY wanted to help the consumers deal with this, they would suspend these taxes. But they aren't interested in providing relief. Only in making political points.

Another aspect of government interference is that the Environmental Protection Agency, along with various state and local agencies, require special mixes of gasoline in many areas. These special mixes drive up the prices of gasoline in many areas. Here in Michigan, it is easy to see the effect of these things, since different mixes are required in different counties. So, when you cross a county line, you may see an immediate difference of up to $0.10 per gallon.

I am not saying that the oil companies aren't profiting. They certainly are. But I don't believe that government has any right to get involved in any way. The market will right things over time. In fact, government interference has brought much of this about, by refusing to allow new refineries to be built, new oil wells to be drilled, refusing to allow drilling in ANWAR, and various other interferences.

Besides - isn't this exactly what the Democrats and other liberals WANT? They push for the Kyoto Treaty to be enacted, which would greatly increase the price of gasoline. They enacted all these taxes in order to punish people for using gas guzzlers. They are constantly blaming the auto industry for our engineering, and seeking to punish us more (even President Bush is trying to get into that act). This is what they WANT. They got it. Now they scream about it, purely because they can blame evil business and the Republicans.

Finally, one more point. The US auto industry is hovering on the edge of destruction. President Bush is seeking to increase the CAFE standards, which will cause more financial loss to the auto companies. We are already doing everything possible to produce more fuel efficient vehicles. We get blamed for building gas guzzling SUVs, yet that is what people want to buy, even with gas prices high. Yet we will see, I predict, much higher CAFE standards enacted within the next few weeks. This is, again, a political move. Never mind that it will hurt many, many people, and could easily bring depression to several Midwestern states.

It is all politics. The market is being damaged, because everyone wants to get on the bandwagon to get government to solve problems that government has indirectly caused or contributed to greatly.

Oil Price The

You make a good point about the number of refineries in the US, Nighthawk. I was surprised to hear about the low number of refineries here, and that the last ones were built in the 60's. It is common sense that lack of refineries will also drive costs up for the oil companies, not to mention having to transport crude oil to these refineries. The environmentalists are to blame for this, as they have stifled the government through heavy lobbying from even considering increasing the number of refineries in the US. There really are a lot of people who factor into the high price of gas at the pumps, but only the oil executives take the brunt of the blame.

The Price Of Oil

Now, why is Congress voting against a bill to increase the number of refineries in the US? Is this because of the environmental lobbyists? It doesn't make sense.

https://www.cnn.com/2006/POLITICS/05/03/oil...s.ap/index.html

The article does mention that a bill was passed to fine gas companies $150 million if they are found price gouging. This doesn't help any, in my opinion.

The Price Oil - Page 11

I have heard a lot of interesting information over the last couple of days about the oil companies.

The CEO of Exxon-Mobil was apparently interviewed on TV yesterday, and he relayed some startling statistics. Exxon-Mobil announced an $8 BILLION quarterly profit last week. This has fueled all sorts of Democratic proposals for "windfall" profit taxes, fines, and other ways to "make the oil companies pay" for the high prices of gas.

However, Exxon-Mobil has explained that only 30% of their profits come from the US. They are truly a multi-national company, with commercial activities in about 200 countries.

One of their major sources of revenue in the US is their own oil wells. With the price of oil so high (driven NOT by the oil companies, but by the futures markets), Exxon-Mobil has made most of their 30% of their profits not from gasoline sales, but from their oil wells.

I have heard some breakdowns of where each dollar paid for gasoline goes. I can't find a reference for it, so these are rough numbers from memory.

.57 - crude oil
.24 - refining
.11 - federal taxes
.08 - direct revenue to the oil company

So, who really profits from gasoline sales? The Federal Government! Not the oil companies. Out of their $.08 per $1.00, they have to pay all of their structural costs, including research and development, payroll, etc.

There are also a lot of other factors that cause rising gas prices, including oppressive environmental regulation, price caps, and severe restrictions on domestic oil production and refining. Everyone likes to blame the big corporation. But the corporation isn't the problem. Most of the problem is government.

The Price Oil Politics Business Civil & History - Page 11

I'm sorry, I keep hearing people stick up for the oil companies and try to make a reason why this isn't mostly their fault, thats it the liberals fault, or the governments fault, or this person or that persons fault, or even the fault of the environmentalist (which is the reason the oil companies give). These arguments are nice for speculation, but while we pay these high prices, companies like Exxon are setting profit records. Prices go up and up and they make more and more money. Its a direct one to one correlation that cannot be made in any other area. Bottom line is that raising barrel oil prices, raising of eco requirements simply create a fertile ground for them to raise prices and take advantage of it. The record setting profits prove that they are simply using these excuses you are giving to mask their own price gauging efforts. You don't hike your prices up to make RECORD SETTING PROFITS for the final 2 Quarters in 2005 and profits almost 2 billion more Q1 this year than last while the country pawns jewelry to pay for gas. Its unethical business wise and that is why people are upset. Don't blame the ecologist, don't blame the people who want cleaner better fuel for high fuel prices. Its not the governments fault, its not because there aren't any new refineries, we haven't had any new refineries in thirty years. If you want to find true blame, look to the people profiting most from these oil prices, the oil companies. Don't want to believe it? Fine, but they are the only ones making the huge profits, nearly 2 billion more Q1 2006 than Q1 2005.



Edited: konquererz on 5th May, 2006 - 12:30am