For the oil whiners... good read

[Cryptic]

The Truth About High Gas Prices, Or How I Learned to Relax and Pay $67 to Fill Up My SUV (http://www.thetruthaboutcars.com/the-truth-about-high-gas-prices-or-how-i-learned-to-relax-and-pay-67-to-fill-up-my-suv/)

By William C Montgomery
May 19, 2008

Why is gasoline so damn expensive? The mainstream media has rounded up the usual suspects. They demonize oil companies (for excessive profits), lambaste environmentalists (for blocking domestic drilling and refining), and sock it to speculators (for fear mongering over supply). Simply put, the current crisis is a speculative bubble whose impact to American consumers is exacerbated by domestic economic conditions. I fully expect crude oil will trade below $80 a barrel in the not too distant future. Meanwhile, let’s tackle this one myth at a time.

Oil companies are easy targets for the public’s gas-price-related ire. ExxonMobil recently scooped second on the Fortune 500, with annual earnings of $40.6b. Chevron slipped in at number three, with $18.7b of profit. Surely these under-taxed wicked corporations screwed unwitting customers to amass these ill gotten gains profits.

Here's a politically inconvenient truth: most of the oil companies' profits are the result of volume, not market prices. ExxonMobil, Chevron, et al make in the neighborhood of 10 cents per gallon– whether gasoline costs $1.50 a gallon or four bucks. Big Oil’s making big bucks because there’s record worldwide demand, especially in India and China.

And let’s not forget history. The oil companies we know and despise today are the result of a devastating supply glut during the early ‘90s. That “crisis” pushed these companies to the brink of extinction. Record losses spurred Exxon to merge with Mobil, and Chevron to merge with Texaco. During the same time frame, Conoco and Phillips combined and British Petroleum gobbled up Amoco. The mergers lowered overhead expenses by eliminating redundant exploration and administrative overhead expenses.

The second myth is that supply shortages are sending U.S. pump prices skywards.

While demand is certainly at an all-time high with the emergence of the insurgent Chinese and Indian economies, supply is also plentiful. Have we passed “Peak Oil?” As far as the oil future’s market is concerned, it doesn’t matter. Even the greatest pessimists concede that known reserves will last at least another fifty years. More optimistic (and realistic) estimates stretch hundreds of years hence. Either way, the delivery dates of oil contracts being traded today are days, not decades, from now.

On a more immediate level, fuel shortages are a fiction. I’m not aware of a single gas station that’s unable to refill its fuel tanks or factory unable to obtain required petrochemicals or plastics. To the contrary, in April, U.S. stockpiles grew nearly 12m barrels. Iran is now storing crude in old tanker ships floating in the Persian Gulf because they have run out of space in conventional storage tanks. The world’s positively awash in oil.

How about this one: America needs more refineries; the greenies are blocking our energy independence.

Although no new refinery plants have been built in the U.S. in a generation, there’s no shortage of refining capacity. Oil companies have retooled to improve the refining capacity at existing sites. Currently U.S. refineries are operating at only 85 percent capacity. Go figure.

The corollary to this erroneous supposition: domestic drilling would alleviate high prices.

Should Uncle Sam allow ExxonMobil to tap ANWR? As far as today’s oil prices are concerned, it really doesn’t matter. Even if there were pumps in the protected Alaskan field pumping at full capacity right now, crude oil trading in global markets would continue largely unfazed. If we pumped more, the rest of the world would simply pump less to prevent a glut. OPEC makes these kinds of adjustments every time they meet.

So here’s the truth about high oil and thus gas prices: the pain at the pump is the result of a weakening dollar and strengthening speculation. During the last year the U.S. dollar has fallen 14 percent against the Euro, nine percent against the Chinese Yuan, and 15 percent against the Japanese Yen. In other words, it takes more dollars to buy the same goods on the world market.

The other culprits, speculators, are taking their money out of the falling stock market and collapsing real estate investments and pumping them into the red hot commodities market. Buying oil futures has become intensely popular, driving prices heavenward despite an ample supply of product.

Who are these opportunistic speculators that are causing you so much grief every time you fill up your SUV? You. Most of us have pensions, insurance holdings, or various investment funds in our 401K that hedge losses in the commodities market-– usually without the knowledge of the ultimate beneficiaries, you and me.

Market fundamentals don’t support the current high oil prices. As surely and as predictably as the technology bubble burst after a decade of market excess, world oil prices will come tumbling down, as investor dollars flood back into revitalized stock and real estate markets. When will this occur? That’s the trillion dollar question.


Another article by Ben Stein that kinda coincides with the one above
Exxon Mobil Needs a Hug (http://www.nytimes.com/2008/03/02/business/02every.html)
Published: March 2, 2008




So first thing tomorrow, cancel your 401k and Mutual fund accounts

[Mr Twigbert]

huh............

[07ROUSHSTG3]

Very good read. The Ben Stein one was good too, that guy should be president IMO.

[07ROUSHSTG3]

huh............

it says quit your bitchin :goof

[Karps TA]

So first thing tomorrow, cancel your 401k and Mutual fund accounts


I love this arguement.

So basically I should happy that I might have some extra money in my 401k 30 years from now when I retire, in return for having less money in my pocket now.

And maybe 30 years from now the market collapses and I lose all the money too. Or maybe I die way before then.

I'd rather have the cash now.

I also love when rich people like William Montgomery - who is making more money off of high oil prices then almost anyone not wearing a sheet on their head, tells me I shouldn't ***** about oil prices. Goldman Sachs has been one of the drivers of high oil prices, and keeps predicting higher prices leading the way for the market. That guy probably spends more on socks a year then any of us spend on gas.

[DRK]

we need to take fuel off the commodities market and pay the rest of the world a flat rate for it. High gas prices solved. Tumbling stock market solved.

[Prince Valiant]

we need to take fuel off the commodities market and pay the rest of the world a flat rate for it. High gas prices solved. Tumbling stock market solved.
Except you think that they have to sell it to us for whatever price we want to pay for it?!? They probably would sell some at whatever price that may be, but alot more would then go to china/india/all other countries in the world and guess what?

We'd have shortages.

Seems someone failed economics version 1970's time and time again.

[Prince Valiant]

I will disagree with Montgomery's claim that we are only operating at 85% refining capacity...not because it's totally incorrect, but it neglects why we are operating at that 85%.

He is correct that while a new refinery hasn't come along in 30 some odd years, and we ARE operating at probably 200% of what those refinery's were capable of 30 years by becoming more and more efficient...all true; what he neglects is the effects of having 30-60 some odd "blends" of fuel and how the refining capacity always has to shift to meet market demands for those fuels...and is why we rarely ever see 100% capacity.

I wholeheartedly agree that the MAJORITY of the current prices are due to speculation...much like we saw in the housing market. It's a bubble that's due to burst too.

That doesn't mean we shouldn't still be tapping known reserves that are both cheap and easy to pump from, such as ANWR...which would also leave us in a better posistion, albeit 5-10years from now (when we'd actually start seeing the fruits of our labor).

Due to the rapidly escalating prices per barrel of oil though, I predict that b/w now and next summer, there will be a bubble burst in which you'll see the price of oil go back into the high 60-80 dollar/barrel again that it was not too long ago.

Stien gave me good sig material...he always does.

[07ROUSHSTG3]

dont worry once hillary is president we will have a "gas tax holiday". that will surely help......right?......i mean, if she says it will help we should beleive her!

[84hurst]

This article DOES NOT explain the high prices. If Exxon is only making 10 cents for every gallon, gov't makes, what, a buck in taxes or something like that, who makes the other profit? I understand there is cost involved, drilling, refining, shipping, etc, but with the amount that is being produced, cost isn't going to be $1-2 per gallon. Who makes the other profits? Do you guys understand what I'm saying?

[Moparjim]

http://www.msnbc.msn.com/id/24757944

Or a hundred other articles much like it, for every one that defends the oil companies and our government.

Oil was $28 a barrel when Bush was elected, and he was bashing Clinton for allowing it to get that high... Its now over $128 a barrel, Exxon Mobil has made over $40 billion a year the last few years - a publicly traded company mind you, profits after making many many executives rich as well. Their last CEO retired after around 5-6 years with the company and on top of the millions upon millions he made while employed there, he got a roughly $200 million retirement package, something like $80 million of it in CASH, and a $6 million dollar a year pension. Keep in mind that if you were to make $100K a year (a very nice salary to most people) for an entire 30 year career of working, you'd have made only a paltry $3 million...

Meanwhile why do we keep burning gasoline in this country? Forget about hybrids, electric, or any of the other MYRIAD of viable alternative energy sources for a moment and consider even something as simple as diesel. Everytime the government talks about raising CAFE to a measly 35 MPG or so, you have the automakers, government officials, etc. popping out of the woodwork claiming "its impossible, it will cost billions, it will put the automakers out of business, we will need NASA technology - fuel cells, hybrids, lithium ion batteries blah blah blah". Meanwhile, those same automakers are selling diesel cars all over the world, current production models, no future tech that get 50-60-70 MPG even. My company alone, Chrysler, sells a 300C with the 3.0L diesel that gets 45 MPG plus, a Smart diesel that gets SEVENTY MPG, a Patriot with a 1.9L diesel that gets 45-50 MPG, the list goes on - in Canada, Europe, EVERYWHERE BUT HERE. Not to mention those cars can be made burn damn near anything - biodiesel, E85, waste vegatable oil - oh wait maybe just maybe thats why we don't want them here... We'd rather pay farmers to let land sit there than cut our dependance on oil and the revenues and TAX revenues they generate. The oil companies cry about hydrocracking versus whatevercracking and how they'd have to change refineries, etc. Give me a break! We are all SUCKERS and as long as we continue to be addicted to and fork over the cash at the pump - making these people RICH, the oil and auto industry along with our government AKA our dealers will continue to bleed us dry while merely dabbling in other forms of fuel just enough to keep the green lobbiests happy and thinking they are doing anything about it.

[Al]

Who are these people who one stock in oil?! It is not "you".

There is a very small percentage of the population that owns very large quantities of stock. They are making a relatively large amount of money considering their own fuel expense is low.

Here is a good question:
How much stock would I need to own in exxon in order to earn back my money that I spend in fuel?

[Smokey1226]

My idea- Make every single vehicle on the road Diesel. Cleaner enviornment, cut the use of Oil HUGE, begin to start blending large amounts of BIO Diesel, WIN WIN

Not that hard, Government back R&D for Vehicle makers to make the switch and we all win? No loss in jobs because those same people will have to make the new Diesel motors or copy the VW diesel motors.

And if you want gas.....you'll pay big $$ for it.

[Moparjim]

Oils $133, plus another link:

http://articles.moneycentral.msn.com/Investing/CompanyFocus/BigOilsBigProblem.aspx

These two links I posted are just TODAYS articles lol. Theres half a dozen per week at least with similar info.

[Moparjim]

On the price of oil per barrel, just why has is risen so high - almost fivefold in just eight years. Supply and demand they say - again I call bullshit. Oil use has risen at a decent rate over that span, but nowhere near doubled even let alone fivefold. So why are we letting oil producers and OPEC set the price of oil, and refuse to increase their production like Saudi Arabia just did. Guess what - most of these countries have two resources - oil and SAND. They rely on and trade with the west for everything - food, medicine, manufactured goods, technology, even water and the ability to get their damn oil out of the ground since the west provides all the equipment. We have all the leverage, we should be setting the price we are willing to pay... How about we embargo food and tech? Again, as long as people are getting wealthy the status quo continues.

[Karps TA]

OPEC isn't even selling all the oil they are making from what I've read. That's why they aren't increasing capacity. Besides they are selling oil at the price the "market" is saying it's worth.

The fact that we started a war in the middle of where most of our oil comes from is the biggest reason for the high prices. Not too mention how we've flooded the world economy with our reckless spending. So when the dollar is only worth $.50 it's pretty easy to see how a $60 barrel of oil now costs $120.

More then anything else we need the US Dollar to be worth something more then toliet paper.

[Smokey1226]

The fact that we started a war in the middle of where most of our oil comes from is the biggest reason for the high prices. Not too mention how we've flooded the world economy with our reckless spending. So when the dollar is only worth $.50 it's pretty easy to see how a $60 barrel of oil now costs $120.

More then anything else we need the US Dollar to be worth something more then toliet paper.

+1

[Prince Valiant]

There is a very small percentage of the population that owns very large quantities of stock. They are making a relatively large amount of money considering their own fuel expense is low.Incorrect. Some 65% of the population has some form of retirement account that features stock (huge considering the percentage of the US is under 25 y/o). Most are in the form of "mutual funds" which are types of funds that feature ownership of vastly different companies, etc to "diversify" and thus protect against sudden drops in sectors of the economy.

And Jim, you make the mistake (as many continually do) in thinking anyone "set's" a price. That's not how markets work...it's very rare (it does happen on free market's) that someone says it'll cost "X". Oil is a freely traded commodity on a free market. You can go there and say I'll pay 28 dollars a barrel....and guess what? No one will sell you one. Go in and say you'll pay 150, and they'll sell you however much you want.

But to say that the "demand" hasn't gone up tremendously is wrong as well. Both India AND China has been experienceing double digit economic growth for the past 10 years...and at a double digit growth, that means that their economy doubles every 6 or so years! That's huge. Consider that these two countries hold very nearly half the worlds population, that's a huge boon of prosperity to nearly MOST the world. Car ownership rates have skyrocketed in either country. 10 years ago, china was mostly bike traffic...now they have tremendous traffic jams. India as well.

That kind of growth also fuels another petro product....ashpalt! Again, both countries are developing and building roads the like the world has ever seen.

There is plenty of evidence to support that demand hasn't gone up just a little...but alot! Heck, even 10 years ago, assuming a 5% growth in energy demand yearly means that the US has increased it's demand by nearly 75%.

And we KNOW why cars like the 300, smart, patriot diesels don't come here...CARB. The all knowing california air resource board keeps making it more and more difficult to sell these cars here, and since california itself is the world 5 largest economy, that's a huge part of the US car buying public...not to mention the 4 other states that tied themselves to carb.

And karp...just keep drinking the kool-aide man :rolleyes:

[Karps TA]

Which flavored kool aid is that? You're saying the dollar hasn't dropped in value? Or do you think having a war in the mideast is why gas is so cheap?

Teach me oh great one of knowledge who beleives he is the only one who knows anything about politics, and economies. :D

[DRK]

Except you think that they have to sell it to us for whatever price we want to pay for it?!? They probably would sell some at whatever price that may be, but alot more would then go to china/india/all other countries in the world and guess what?

We'd have shortages.

Seems someone failed economics version 1970's time and time again.

:rolleyes:

[Prince Valiant]

Which flavored kool aid is that? You're saying the dollar hasn't dropped in value? Or do you think having a war in the mideast is why gas is so cheap?

Teach me oh great one of knowledge who beleives he is the only one who knows anything about politics, and economies. :DThis quote is incorrect:

The fact that we started a war in the middle of where most of our oil comes from is the biggest reason for the high prices. Explanations abound ad nauseum. I shouldn't have to review them even within the same thread for you :rolleyes:


You're saying the dollar hasn't dropped in valueAnd show me where I say it hasn't? As a matter of fact, I distinctly recall in many threads as mentioning it as a factor to increasing prices (usually to counter your "Evil oil execs are coluding "setting" prices with saudi cabals to train us that 3.59 gas is really cheap, to fuel their 50 billion dollar salaries that stupid stock owners stupidly pay these CEO's who are SO stupid compared to me whom btw I'd give everyone a 100,000/year job for some arbitrary reason" vein of arguments) But again, your rantings on the matter as to their cause: ("Not too mention how we've flooded the world economy with our reckless spending.") is hopelessly wrong. It doesn't even begin to encompass the reason for a falling dollar, and neglects the fact that many currency's are also falling.

So yeah, pick your poison man.

[Karps TA]

SO you think the war has nothing to do with the prices of oil being high? It's purely a coincidence that since the start of the Iraq war we're paying just about double for gas?

Heck I had hoped we were going to get cheaper oil once we got Iraq under our belt. Hell it's the primary reason why I was for the war when it started.

Yes I think oil execs are greedy. Much like I think nearly every exec in this country, as well as career politicians are greedy. It's the nature of the position. I do beleive that oil companies are enjoying these high prices, cause it fill their pockets quite well. And to say different would be naive.

You continue to put your faith that the people in charge are legit and always looking out for the little guy's best interests. If that makes you feel safe and warm, that's great.

[Moparjim]

Incorrect. Some 65% of the population has some form of retirement account that features stock (huge considering the percentage of the US is under 25 y/o). Most are in the form of "mutual funds" which are types of funds that feature ownership of vastly different companies, etc to "diversify" and thus protect against sudden drops in sectors of the economy.

And Jim, you make the mistake (as many continually do) in thinking anyone "set's" a price. That's not how markets work...it's very rare (it does happen on free market's) that someone says it'll cost "X". Oil is a freely traded commodity on a free market. You can go there and say I'll pay 28 dollars a barrel....and guess what? No one will sell you one. Go in and say you'll pay 150, and they'll sell you however much you want.

But to say that the "demand" hasn't gone up tremendously is wrong as well. Both India AND China has been experienceing double digit economic growth for the past 10 years...and at a double digit growth, that means that their economy doubles every 6 or so years! That's huge. Consider that these two countries hold very nearly half the worlds population, that's a huge boon of prosperity to nearly MOST the world. Car ownership rates have skyrocketed in either country. 10 years ago, china was mostly bike traffic...now they have tremendous traffic jams. India as well.

That kind of growth also fuels another petro product....ashpalt! Again, both countries are developing and building roads the like the world has ever seen.

There is plenty of evidence to support that demand hasn't gone up just a little...but alot! Heck, even 10 years ago, assuming a 5% growth in energy demand yearly means that the US has increased it's demand by nearly 75%.

And we KNOW why cars like the 300, smart, patriot diesels don't come here...CARB. The all knowing california air resource board keeps making it more and more difficult to sell these cars here, and since california itself is the world 5 largest economy, that's a huge part of the US car buying public...not to mention the 4 other states that tied themselves to carb.

And karp...just keep drinking the kool-aide man :rolleyes:

I was oversimplifying by saying we "set" the price. We could indeed basically "set" the price by charging more for everything we provide, as others said increasing the value of the dollar, etc. Oil demand has NOT grown sharply, that is a fact. Your 75% or so is about right. You can read the reports of monthly production, sales, etc. and production and thus logically usage since you can't use oil that wasn't produced has actually been down a bit as of late. CARB is part of the problem, since apparrently hemp sandal wearing ex hippies have no logic. Up until the recent bluetec/urea type diesels, they were unable to meet the latest most stringent NOX particulate limits which CARB just lowered. We are talking parts per million here, and we aren't talking CO2, or CO. What do you think the social and evironmental positive impact of drilling, refining, storing, shipping, trucking, etc. say 40-50% less gas/diesel is versus those few parts per million most recent limits. Not to mention, I am unsure why my company as well as every other still refuses to make the cars - just don't sell them in CARB states. They sure used to do it, make a federal and California version of cars and trucks. It can't be that much of a hassle lol they already are all producing and selling these vehicles everywhere else. Better yet, again, why are we letting CARB dictate anything- let em walk and carry everything in their hemp sandals if they like - wouldn't be long before they'd have to cave.

[Prince Valiant]

SO you think the war has nothing to do with the prices of oil being high? It's purely a coincidence that since the start of the Iraq war we're paying just about double for gas?Since the start of the iraq war, iraq has increased it's oil production by some 35% since pre-invansion days. So no, it's not really a factor.

There are periods in the past and undoubtedly the future where their may be some volatility due to events in iraq, however, NOW isn't one of them.


Heck I had hoped we were going to get cheaper oil once we got Iraq under our belt. Hell it's the primary reason why I was for the war when it started. While stability in the region, and thus oil supplies was indeed a reason, getting the price "cheap" was not.


Yes I think oil execs are greedy. Much like I think nearly every exec in this country, as well as career politicians are greedy. It's the nature of the position. I do beleive that oil companies are enjoying these high prices, cause it fill their pockets quite well. And to say different would be naive. Again, it's not their "greed" that fuels these prices (again, based on the primitive presumption of "price setting"-"fire employee's to get high stock prices"-"charge whatever we want people are obligated to pay whatever we charge" mindset :mad: ;)). This is where you are WRONG WRONG WRONG. I mean, there is no begining nor end to where you get it wrong. I won't discount that oil execs are NOT "greedy"...I do always say that it's not the benevolence of the butcher that I find an 18 ounce ribeye on my plate...but the fact I paid him 20 bucks for it and he profited very nicely from it I too(did I get gyped? No!)

You continue to put your faith that the people in charge are legit and always looking out for the little guy's best interests. If that makes you feel safe and warm, that's great.Show me where I put "faith" in these "people"? There is no faith involved with anything I do except for religion. Every position I take is based on knowledge whether it be of markets (of which my opinions of politics come from), medicine, cars, whatever.

[Moparjim]

I think the guy with the Insight is probably the last guy who's opinion on gas prices we should listen to! :goof

[Prince Valiant]

I think the guy with the Insight is probably the last guy who's opinion on gas prices we should listen to! :goofI hedged my bets...you KNOW where I think oil prices will be for the next few years :rolf

[pnad]

I have a dumb question.

The price of oil is $132 per barrel. Does the entire WORLD pay that price?

Has the cost of gas and/or diesel doubled in other countries in the past 24 months?

[Prince Valiant]

I have a dumb question.

The price of oil is $132 per barrel. Does the entire WORLD pay that price?

Has the cost of gas and/or diesel doubled in other countries in the past 24 months?When buying, yes. What cost is passed to the consumer and thus what they pay at the pump is another thing altogether...people make much of Middle eastern or some latin american countries paying less than a $1/gallon...but that because it's ultimately paid for by their government (it's oil they don't sell, but oil they could have made money on...so there IS cost to them in terms of revenue lost). In Iran, there were some "protest" (as much as would be allowed) because the price of gas was reaching the 0.70/gallon mark.

The US does subsidize some of the cost...so the prices COULD be higher at the pump (since it's subsidized with our tax dollars, we still really pay all the cost).