Cynical Nation

Now I'm getting pissed!

Let the damn price of gas get high enough that we're finally forced into conservation and alternative sources.

How many times have we heard that there won't be any real change until that happens?

Mr. President: Please get out of the way and let the market work this out. Don't just kick this can down the road like every president before you.

Man wouldn't it be funny to hear Pres Bush try to explain the futures market to us?

Great graphic by the way.

Also, i'm so sick of the damn corn subsidies. Corn-gas is gay.

I concur with ortho that corn-gas does go in for the man-loving.

Barry said:
I've been saying for some time now that the Republican Party is no longer a conservative party, but a populist one.

You forgot the most important charecteristic of the republican party of today: A CORRUPT ONE.

Bush is caving to pressure from the GOP Beltway crowd who are desperately afraid that the Dems will score with an issue, no matter how fatuous.

Frankly, I am sick and tired of all the politicos from both sides in DC. They play their asinine games fully aware that the oil companies cannot manipulate futures prices of crude.

Want to haul the oil barons (again) into congress?

Fine.

Then ask some related questions such as:

a) why have we developed no refineries in 30 years?

b) why do we have so many gas blends that are being developed for different areas of the country? (sidebar thought: do you think that ethanol would be so highly touted if Iowa wasn't allowed to have first crack at voters?)

c) why, when we have more reserves than Saudi Arabia, do we allow environmentalists to stop our exploration and development of same?

d) why don't we ask every state as well as the federal government, all of who are complaining about the cost of gas to us poor slobs, to get their goddamned hands out of our pockets with their taxes on every gallon we pump? In NYS, that totals over 60 cents/gallon.

It's the least these pompous jackasses can do.

Just don't hold your breath waiting for it to happen.

They actually closed down refineries after the big mergers in the late 1990s. And there is less refining capacity now than there was 20 years ago.

Congress will never be able to prove it, but I truly believe these newly created private oil giants are operating as an oligopoly. They keep supply tight and let the commodity markets do their dirty price work for them. Any hint of a supply disruption (which rarely materializes) sends the price up.

y'know if we'd only go ahead and nuke iran, we could just get this all over with real quick.

i mean...people have summer vacation plans and shit!

panic!

Actually there is more refining capacity now than 20 years ago, despite closing refineries.

The ones that stayed open are more efficient and have been modernized.

Here is more on that:
http://rociburden.blogspot.com/2005/10/role-of-refineries-in-america.html

Isn't there a more basic question?

Why are the oil barons making record profits? They basically buy the oil, refine it, and sell it to us, right? So when the price goes up, they raise their prices to compensate.

So how did Exxon displace WalMart in earnings? Was it some new technological innovation?

No, it was gouging.

According to you morons, cartels and monopolies should be ALLOWED to fix prices and gouge consumers, because then they would get some competition, right?

I mean, your neighbor would just go out and buy an oil refinery, right, and start competing!

Either you are mentally retarded, or you are mindless Dittoheads.

Both is most likely.

But here is the key... they aren't fixing PRICES, they are manipulating SUPPLY.

The result is the same, except that it's perfectly legal.

Actually there is more refining capacity now than 20 years ago, despite closing refineries.

When I researched this issue last fall, the EIA data I found showed that capacity today is slightly less than it was pre-mergers.

Could you post your fact source? Thanks.

CRB,

the data is included in the link I referred you to.

Look at slide 35 in the katrinaslides link.

Roci, from the EIA:

http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/Ref_image_Crude_runs.htm

Anon,
EXXON has record earnings because they do not just buy oil. They have wells too. When the world price in oil rises, the price they can sell their oil rises too. It is a global market. In fact, about 1/2 of America's oil consumtion is domestically produced. The companies that produce it are making a profit as a direct result of the high prices. American oil companies also get profits from their overseas wells and operations for foreign owned facilities. Again, global prices result in higher profits.

CRB,
Your data and mine appears to be consistent, the past 20 years is 1985 to the present.

In 1985, capacity was about 14.5 mill BBL which increased to 17.25 million by 2005.

In increase.

You would be correct if you said we have less than we did 30 years ago.

But here is the key... they aren't fixing PRICES, they are manipulating SUPPLY

Who is "They"?

How can you prove that when supply has increased every year?

Roci,

You are techically correct, but splitting hairs, IMO.

Current capacity is 17.33 MM bbl, US capacity peaked in 1982 at more than 18 MM bbl.

So change "20 years ago" to "24 years ago" and my original statement still stands.

The point being that the excess capacity that existed in the early 1980s has been eliminated. It's a smart business strategy, but it's still a form of market manipulation by the private oil companies. And the fewer the number of players, the easier it is to maintain the status quo.

"Why are the oil barons making record profits? They basically buy the oil, refine it, and sell it to us, right? So when the price goes up, they raise their prices to compensate.

So how did Exxon displace WalMart in earnings? Was it some new technological innovation?

No, it was gouging." (anonyMOUSE)

CONGRATULATIONS Mouse! That is perhaps the most moromic thing ever posted on the internet...at worst, it's right up there with the most moronic.

U.S. oil producers can and do process oil from U.S> sources at a cost of about $20/barrell.

Bill O'Reilly wrongly thinks it's "outrageous" that the oil cartel (NOT "Oil Barons," but the "Oil Cartel") should be able to sell oil they can process for $20/barrell for over $70/barrell (world price) "during wartime."

Bill O'Reilly is WRONG, but at least he's not as moronic as you are.

The cost of production NEVER dictates the market price of ANY product or item.

If it did, a house I bought for $136,000 eleven years ago and probably cost around $6,000 to build back in 1950, wouldn't be worth over $600,000 today.

It's all about supply and demand and how markets drive pricing. House prices are higher in some areas because more people want to live their and that bids up the price.

It's no more "immoral" for an energy company to sell oil it processes for $20/barrell at the current world price of $70/barrell, than it is for me to sell a house I bought relatively recently for $136,000 for over $600,000.

The price of oil today is driven by a supply that though rising, simply hasn't been able to keep up with the incredible surge in worldwide demand, fueled largely by the massive industrialization in both India and China.

Sure, that's coupled with our own artificially imposed shortage at home, an agenda adroitly driven by the corporately controlled, so-called "environmental movement," that has hamstrung new refinery projects, nixed nuclear power and short-circuited new drilling both off our coastal waters and in the Arctic National Wildlife Area, an agenda that has happily resulted in record profits for the oil cartel, just as the oil cartel and their corporate shills in the enviro-movement wanted all along.

Selling a product, ANY product at the going market or world price, is NOT gouging, except to an idiot.

Anyone who says so, should be forced to sell their own home, for the original price they bought it...better yet, the original price it was built for, adjusted for inflation and with adjustments for upgrades and improvements, instead of the market price, which would, in most cases, be more than double, often even triple, or more that price.

There may be some individual gas stations that are engaging in price gouging, but that's not what is the cause of the high prices.

It's also important to remember that the oil business is NOT a free market. And I am as big an advocate for free markets as there is.

And as much as it pains me, I have to admit that Charles Schumer is actually on the right track with this. He is asking the right questions, and I'm interested to see where it leads.

That is largely correct Clarke.

The current high oil prices are NOT due to gouging at all, certainly not on the Corporate level. They ARE due, primarily to a skyrocketing world demand for oil, led by China & India, coupled with a self-imposed, artificial shortage in domestic production via an ill-advised "enviro-agenda."

Schumer is RIGHT to look into breaking up the mergers that the previous administration allowed, including the merger of Exxon-Mobil, which occurred on December 1st, 1998 and BP-Amocco which occurred the same year!

Of course that was also the same administration that had a VP sell off federally owned oil fields to Occidental Petroleum, an oil Company the Gore's owned over 500,000 shares in.

Politicians in BOTH Parties have been in "Big Energy's" pockets for over three decades.

Let's see genius. Big Oilmen Bush & Cheney take office, gas is about $1.25 a gallon.

Hmmm, how can they fix that?

Well, first they need to destabilize the oil supply. I know, a war! Plus they got to give billions to Halliburton, which charged $2,000 per quart of cooking oil delivered in Iraq (under full military escort).

No Halliburton employee died during this "hazard pay" excercise in theft. The soldiers got an extra $50 a week. Halliburton got $2,000 per quart of cooking oil. That's how Republicans support the military!

9/11 wasn't the reason to invade Iraq, the destabilization of the oil supply was the reason.

OK, but what else can Bush/Cheney do? Hey, I know, ship all American jobs to China and India! Let them make everything! Wow, look at their energy demands soar now! Time to empty out those American pockets!

Every policy of monkey puppet Bush has been crafted to help Big Oil rape America.

Glad I'm here Mouse...and I'm ready to help, if you're open to it.

The "WAR" (against globalized Islamo-nazism) was already ON, so far as our enemy had been angaged against us throughout the 1990s. At least a dozen U.S. targets were hit by the Islamo-nazis during that decade.

It's only that WE engaged THEM after 9/11/01 that has you confused. The war was on, well before we engaged the enemy.

The world's supply of oil has been increasing dramaticlly over the past two decades, while our own domestic production has been hampered by petty environmental concerns, so we've been importing more oil every year.

China and India now account for what was the entire world's demand just twenty years ago!

So world DEMAND has outstripped an increasing world SUPPLY.

Ya follow?

So when DEMAND is greater than the SUPPLY, "speculators" (investors in the commodities markets) bid the price of oil UP.

The world price of oil is now hovering around $70/barrell, still less, adjusted for inflation, than it was in 1980.

The wars in the Mid-East, the destabilization in Nigeria and the Communization of much of South America have NOT really dampened world SUPPLY.

The MAJOR CAUSE of the rising cost of oil has been the INCREASING DEMAND by industrializing nations, like India and China. India and China BOTH began their rapid industrialization back in the early 1990s, when U.S. outsourcing began in earnest - GATT was expanded by a Democratic Congress in 1991 and NAFTA was passed by a Democratic Congress and signed by a Democratic President in January of 1994.

Nothing's going to change that world dynamic. India and China are going to keep on industrializing and that's to the good, despite the short term impact on world oil prices, as enumerated in my earlier response.

We're going to have to simply abandon much our misguided environmental agenda and harvest more of our own domestic supply, build more domestic refineries and make more of our electricity from nuclear power and coal.

Hope that helps straighten out some of your misconceptions.

But that's the thing, JMK, world supply has kept up with world demand. But with fewer players now, there is less chance that any of them will over build capacity, leading to a glut and lower prices.

In otherwords, there is much greater control over the supply side of the price equation than there was 10 years ago.

"In otherwords, there is much greater control over the supply side of the price equation than there was 10 years ago." (CRB)

Now THAT's very true, but that's NOT the fault of the oil companies alone....it WOULD be if ONLY we had a Free Market in the energy sector.

Government controls who enters that field. CRB & JMK couldn't start their own oil company tomorrow, no matter how much venture capital they had, not WITHOUT a slew of government waivers. licenses and permits that they wouldn't get.

Government has allowed the cartelization of the oil industry. In fact, the major mergers which cemented that cartelization were approved back in 1998.

The reality is that government makes more money off a gallon of gasoline than do the big oil companies.

Exxon-Mobil's profit line is appx 9 cents per gallon, while the Fed's is around 50 cents a gallon...and that's NOT "our money."

When government takes in money from a business that's not "the people's money," it's government's.

The political class are motivated by the very same thing that motivates those in business - avarice.

We have an artificial domestic shortage caused by the political class's "capitulation" to a radical environmental agenda. That agenda has decreased our domestic supply and in the face of stronger world demand, driven up the price of oil.

When that happens, those in government who helped bring that about try and act surprised - "How did THIS happen?!"

As if they didn't know.

It can certainly be argued that BOTH Parties have been complicit in this, but not one more than the other.

Gore sold federal oil fields to Occidental Petroleum, a company the Gore's were heavilly invested in, on the cheap and that administration approved and encouraged the mergers of Chevron-Texaco, Exxon-Mobil and BP-Amocco.

This administration has done nothing to revers those things and open up the energy market, but the cartelization of the oil industry was complete well before 2000.

Exxon-Mobil's profit line is appx 9 cents per gallon

I believe the gas stations themselves make 9 cents for every gallon sold. Exxon-Mobil makes much more than that. It doesn't cost them anywhere near $70/bbl to drill, pump and transport crude, or $2/gal to refine it into gasoline.

Government controls who enters that field.

True to a certain extent, although the capital costs needed to start a rival oil company is even more prohibitive, especially when upstarts are forced to compete against the giant private oil companies and their existing economy of scale.

Which is why I characterize the oil business as an oligopoly, and not as a true free market.

Clarke, the consolidation of the oil industry via the mergers of the 1990s created an even more cartelized industry.

That's one major problems we face with that industry, another is that any new upstarts, regardless of the venture capital available, can be, in effect, barred from that market by the government simply not granting them certain environmental waivers, permits, etc.

Oil companies here certainly make much larger profits on domestic crude pumped out of the U.S. soil for about $20/barrell, while the world market price for oil is over $70/barrell, but, again, selling oil at the world's market price, is never "gouging," in fact, anything less would simply be bad business on the part of these companies.

We COULD easily increase the world's supply by merely opening up new drilling of America's coastal waterways, in the Arctic National Wildlife Refuge, etc., but there is no way we can enact legislation that could force oil companies to sell oil (even oil extracted from domestic sources) for less than the prevailing market price.

the consolidation of the oil industry via the mergers of the 1990s created an even more cartelized industry.

I agree. ;-)

http://www.cynicalnation.com/2005/08/oil.html#comment-30020

But the problem is that it's much harder to break up a company than it is to stop it from being created through mergers in the first place. So that horse has already left the barn.

Last year when I made the blog entry linked above, I was toying with the idea of a "US Oil" entity, basically a government owned oil and refining company that would increase supply when the private companies couldn't (wouldn't) in response to increased demand and inflated market prices. A sort of market counterbalance to the current oligopoly and an additional revenue source for government.

Of course, 2 seconds later I realized how stupid an idea that was, considering how the government screws up everything it touches. ;-)

It IS a frustrating problem, though we DID break up AT&T and the oil industry does rely on government waivers, permits, etc.

In fact, that's a major reason why a government-run oil company wouldn't work, aside from the fact that government employment, being "employee driven," as opposed to ""consumer driven," almost always results in LESS WORK for MORE PAY, the government is in collusion with the major oil companies - reaping windfall tax revenues when oil profits are this high.

Exxon-Mobil reportedly paid 47% of its earnings in taxes last year.

It's a dilemma a long time in the making.