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Good read. Thanks for the article.David
The chief cause of failure in this life is giving up what you want most for what you want at the moment. -
Thanks for the link - it sure doesn't make it any more palatable, but helps to explain how it works.Scott
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You can't be a real country unless you have a beer and an airline - it helps if you have some kind of a football team, or some nuclear weapons, but at the very least you need a beer. -- Frank Zappa
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I appreciate that. Got into a discussion of the price of gas at work today. no one understood the futures market, etc etc etc.Comment
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That article, while sounding plausible, is not entirely true. Everything about the gas stations themselves is spot-on though. Gas stations make their money off the $1.49 24 oz bottles of soda and $1.29 bags of air with a few chips in them. But as it pertains to everything up the supply chain from them it is kinda true but intellectually dishonest. When you hear that oil companies are only making X number of cents per gallon of gas that is true, at the refinery level. They own the majority of the distribution chain though and everything else involved. Profits on those sectors have went up massively and far outpaced inflation and CPI. In some years 2x-3x.
When people think about oil companies though, they think of refineries. Keep the refinieries making modest profits by paying massive amounts to the other sectors of their companies and you can shield them from public scrutiny. Sleight of hand as it were.
For what its worth, I predicted this run up on fuel prices in '04. The major problem is, there is no competition in this marketplace. We purport ourselves to be a nation of capitalists and we were the main people to push for the formation of OPEC. We removed supply and demand from the equation entirely. Read John Perkins "Confessions of an Economic Hitman" and you will come away with a whole new perspective on OPEC."A fine beer may be judged with just one sip, but it is better to be thoroughly sure"Comment
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In the interest of civil but spirited debate...When people think about oil companies though, they think of refineries. Keep the refinieries making modest profits by paying massive amounts to the other sectors of their companies and you can shield them from public scrutiny. Sleight of hand as it were.
Maybe. I own shares in Valero Energy, which owns refineries and gas stations but doesn't own any production. They were clever devils, buying refineries years ago for pennies on the dollar, fixing them up so they'd use the crude no one else wanted, and then they minted money. Now, however, as gasoline demand in the US is softening while others are fixing up THEIR refineries, Valero is making less money and starting to think about selling those refineries.
There's plenty of competition in the refining and retailing end. ***Politically motivated comment deleted.*** And as I've said before, high prices are going to do OPEC in eventually because now there's a frantic search on for alternatives that will weaken OPEC's leverage over the US even if it doesn't weaken their leverage elsewhere.Comment
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It is easy to explain why the price of gas goes up. Every time a fuel truck pulls into a station to fill them the price is higher. That is because the price of fuel costs more to deliver the fuel. Thus the fuel is higher at the pump. That makes the price of the fuel to deliver the fuel higher, so the price has to go up at the pump. So......
Bill"I just dropped in to see what condition my condition was in."-Kenny RogersComment
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ACtually the fact that OPEC can turn on the spigot, pump as much as they want to for down to $20 a BBL and still make money, is enough to keep everyone from pouring money in expensive ventures that could be guaranteed to pump oil in a few years at $100+ per barrel. If you could guarantee support for $100+ per barrel, then we would be awash in oil in a few years. If not the prospect of having $10B tied up in oilfields and infrastructure designed to make money at $100/BBL when the price is at $70/BBL will give even the biggest oil company a reason to be conservative in drilling. Nobodies ever been fired for not risking $10B but plenty have been fired for risking a lot less and losing.
Oh, I guess you said alternatives, I suppose that can mean things other than petroleum...Last edited by LCHIEN; 05-24-2008, 01:10 AM.
Loring in Katy, TX USA
If your only tool is a hammer, you tend to treat all problems as if they were nails.
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I always hated the term "the little guy" but at no other time in my life did I feel more like the little guy that is getting shafted by forces he can't completely understand or do anything about.
Except maybe in the middle of my colon exam a few years ago...Jeff
“Doctors are men who prescribe medicines of which they know little, to cure diseases of which they know less, in human beings of whom they know nothing”--VoltaireComment
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Loring, you raise a good point. As far as I know, there's not much spare production capacity. Production rates in Mexico, Venezuela and Russia, all big producers, are declining. Same for the US. I think production in Iraq is down from pre-war levels. Iran is also having trouble maintaining production because money that should be invested in maintaining existing wells and drilling new ones is instead being spread around to keep the mullahs in power. Some say the Saudis are pumping all they can, some are saying they could pump 2-3 million barrels a day more, and some say Saudi reserves are overrated.ACtually the fact that OPEC can turn on the spigot, pump as much as they want to for down to $20 a BBL and still make money, is enough to keep everyone from pouring money in expensive ventures that could be guaranteed to pump oil in a few years at $100+ per barrel.
On the positive side, production from the Canadian tar sands in Alberta is on the rise.
The next administration, no matter which party, is almost certain to direct more federal funding to homegrown alternatives. I just hope they're a little more careful than they were with the ethanol mandate.Comment
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LCHIEN
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