Bye bye oil speculators...
- Thread starter Larry Gude
- Start date
B
Bruzilla
Guest
I think your story shows the other side of the story as well. You have to price your posies on a very delicate balance: you need to make enough money to stay in business, but you can't make your posies too expensive as customers won't buy them. They'll buy other flowers or decide not to use flowers at all.
Now, imagine some event happened and suddenly everyone in the country had to have posies. Without posies they would go broke, lose their homes, suffer financial disaster. In short, they had to have posies in order to live. The increase in demand would cause you to have to invest in ways to meet the demand, thus resulting in a higher price, say $30 a flat. But at some point, those investments get paid off, and your expenses drop. Do you now lower your price? Of course not. And how long would it be before you or other suppliers said "you know... people just gotta have these. There's no substitute. I'll bet if we charge $50 a flat, they'll still pay. Think of all the money we'll make!" And that's where the oil industry is today.
Back in 1973, when the oil companies saw that Americans would pay higher prices than was previously thought, the game was on.
B
Bruzilla
Guest
You buy electricity don't you? Water (assuming you don't have a well)? These are must buy items that are thoroughly regulated in most states and that are mandated to sell on a not-for-profit or non-profit basis. Think about what your water or electric bill would be if the companies providing the product were free to charge whatever they wanted.
B
Bruzilla
Guest
The answer to your first question: Me. Anyone who really knows the market wouldn't be wasting their time trying to make pennies talking or writing about it in the media. They would be busy making money from the market, so in reality they know nothing more than I do.
To your second question, where are these shortages? Where have you heard about shortages anywhere? China, Japan, Australia, pick a country. No one is reporting shortages, yet we're supposedly behind demand by 30 million gallons of gas every day. You can argue that they are happening but we just aren't hearing about it, but that's a bugus notion as well. A shortage anywhere would be a huge story, and the action lines would be:
Gasoline shortages in Albania result in long lines at the pumps.
then
Gas shortages in Albania... Could the same thing happen here? Our experts will tell you.
then
Fears of US gas shortages drive oil prices to new record.
If there were any shortages anywhere, we would be hearing all about it.
To your last point, yes, there is a bubble, but what is the risk? How likely is it that people are just going to stop buying oil? When was the last time you saw a huge dip in the price of oil where it stayed down? Oil is one of the safest investments in the market right now, which is why it's attracting so many dollars from the currency and housing markets, which is what's driving up the price.
Pete
Repete
The electricity I use if generated in a US plant that burns US coal and delivered by lines that run down US roads. I do have a well but if I didn't I would be buying US water pumped form a US well with US electricity and supplied by US pipes.
So the US government needs to pass a law that gas can only cost X and not care how they do it? Or would it be better if the US government sent a sternly worded memo to OPEC that said "EFF YOU! we will now only buy oil at $70 a barrel and if you don't like it TOUGH NOOGIES!"
MMDad
Lem Putt
MMDad
Lem Putt
You can't hear about it if you don't listen:
China faces diesel, gasoline shortages - Worldnews.com
Gasoline Shortages In SE China Spur Rationing For Truckers
B
Bruzilla
Guest
No, that option was tried in the 1970s and didn't work. All the oil companies did was reduce production until the country screamed uncle. Price controls have always been a failure and always will be. That's why pumping more oil in the US won't work either as OPEC will do exactly what the oil companies did in the 1970s... decrease production until they get their way.
All we need to do is exactly what smart folks did with the electric and water distribution, i.e., require it be sold at cost or with a markup used for investment to offset costs. For example, SMECO works on a not-for-profit basis. They sell electricity at a price that's above cost, which is technically profit, but that money is used to invest in various revenue-generating interests, with the revenue being used to offset costs and which lowers prices overall.
I also think that the government should require US refiners to offset prices for products refined from domestic oil. There is no reason that a gallon of gas refined from oil pumped in Ohio or Texas should cost the same as that refined from oil pumped and shipped from Nigeria. We need to quit the obsurd insistence that oil be bought on a global market, and instead require US refiners to procure oil from domestic sources, at domestic rates, first. And if imported oil is needed, the prices get rolled into the overall price. This is how electricity works. Most electric companies generate their own, but when they need more they import it from other generators. This results in higher costs, but the costs are averaged out with the domestic power. The electric folks don't get to say "it costs us .25 to generate a KWH of power, and it costs is .75/KWH if we have to buy it from the next state, so let's charge .75/KWH for every hour we sell." If they generate 75% of their power locally, and 25% is imported, that additional cost gets averaged out. That's how oil should work.
B
Bruzilla
Guest
Wow. Arrogance, thy name is Bru. Do you even know who Boone Pickens is?
Nope... don't much care either.
B
Bruzilla
Guest
That's not a shortage of oil, that's a shortage from refiners. Big difference there! If the refiners were inable to obtain oil to refine due to the supposed shortfall you described, that would be different. But the oil is available to the refiners, and the shortage is on their production side. That's the same deal we saw post-Katrina. When oil refineries closed, and production fell, that caused increased supply and demand issues in the southeast, but no shortages elsewhere.
MMDad
Lem Putt
You should check out his book:
"The First Billion is the Hardest"
Let me know when you've earned your first billion. Maybe I'll start listening to you. Not likely, but who knows?
B
Bruzilla
Guest
Whatever works for you.
Pete
Repete
OK, it is widely accepted as fact that the profit on a gallon of gas is 8 cents a gallon. If they capped the profit on gas through regulation to say 4 cents, the the resulting savings to the US consumer would be 80 cents per 20 gallon fill up.
Lets say the refiner is also making a profit but lets call it 10 cents a gallon. Through regulation they are capped at 5 cents profit. So now the resultant savings is $1 to the consumer for a 20 gallon fill up. Add that to the 80 cents and you save $1.80 per 20 gallon fill up.
I am still not seeing how regulation and or nationalization of oil is going to reap much benefit.
Larry Gude
Strung Out
Hold...
...up.
Gas stations make about 6-8 cents/gallon or about 2% or less.
The government(s) take triple or more that.
The oil companies make in excess of 10%, or, at today's $3.33 a gallon, $.33, probably less that than the taxes.
The person who owns the oil coming out of the ground is, in Saudi, making a profit of whatever over about $12 a barrel which makes 42 gallons of gas.
In the US break even is something between $25-30 a barrel.
Now, the gas stations earns 8 cents, gross, before his costs.
The government gets theirs net.
The oil company makes a net profit of about 10% after refining and delivery.
Anyone who owns the oil coming out of the ground is making at least 300%.
If the government owned the land and the oil that came out of it and paid someone to do the job, gas would be around, oh, $1.50 a gallon. Call it $2.
So, on 20 gallons, we're talking $40.
This is not allowing for declining global output. I'm just illustrating some people are getting super rich. Like Iran. Saudi. Anyone who has it in the ground. And is pumping it. This includes domestic production, obviously.
...up.
Gas stations make about 6-8 cents/gallon or about 2% or less.
The government(s) take triple or more that.
The oil companies make in excess of 10%, or, at today's $3.33 a gallon, $.33, probably less that than the taxes.
The person who owns the oil coming out of the ground is, in Saudi, making a profit of whatever over about $12 a barrel which makes 42 gallons of gas.
In the US break even is something between $25-30 a barrel.
Now, the gas stations earns 8 cents, gross, before his costs.
The government gets theirs net.
The oil company makes a net profit of about 10% after refining and delivery.
Anyone who owns the oil coming out of the ground is making at least 300%.
If the government owned the land and the oil that came out of it and paid someone to do the job, gas would be around, oh, $1.50 a gallon. Call it $2.
So, on 20 gallons, we're talking $40.
This is not allowing for declining global output. I'm just illustrating some people are getting super rich. Like Iran. Saudi. Anyone who has it in the ground. And is pumping it. This includes domestic production, obviously.
Pete
Repete
I have heard over and over again the take on a gallon of gas is 8 cents. :shrug: Gas stations cannot be raking it in because of all the competition. The tax is what it is and there is nothing that can be done about that. I can't imagine refiners are really raking it in either. The price of a barrel of crude is public info. It keeps going up and up. Can you actually blame the Saudi's or Iranians from cashing a check people are falling all over themselves to give them?
So the answer is to invade OPEC countries and own their oil?
I am not getting how the US Government can control a commodity that is not domestic. What do we pump ourselves.....50% of our daily demand? So the US government say "You get no profit! Even though Saudis and Yemeni get $120 a barrel, you get $35 a barrel and you will like it!"?
I can see regulating electricity, water and so on and having co-ops and PUC's but I do not see how you can regulate something we have no control over at all.
If the OPEC nations are gouging up then I say we all get together (an impossibility) and tax the living shiat out of them, see how they like it when a Coke costs $9. I could also see restricting commodity trading licences to people who can actually store the oil they are buying. this would weed out the opportunistic jerks who buy 2 million barrels of oil but don't have the first ounce of storage capability.
Past that I don't see how we can regulate the cost of gas.
B
Bruzilla
Guest
Larry, here's where I get lost. For foreign oil, the government that owns the oil (in most cases) gets paid the market rate for that oil from the oil companies who own the tankers. The tankers bring the oil to the US, and the oil companies sell the oil at price plus fees to the refiners. The refiners refine the oil and sell the products to the oil companies who then sell it to jobbers and their own dealers. So the oil companies make a profit at the point of sale, plus any profits from delivering the oil to the refiners and price increases while the oil is enroute.
But what about domestic oil? The oil companies don't pay anyone for that oil. They get it and sell it direct to the refiners. Right now that means they're making the full $125+ per barrel, plus fees, for every barrel of oil they pump and sell... which is about 60% of the oil used in the US. That's gotta be a TON of money, yet when you total up reported profits vs sales, you come up with about 9 percent. Where's all that money they are making from domestic oil production being reported at? The only thing I can figure is they are treating paying themselves for the oil as an expense the same way the expense paying the Saudi government for it, so all that money shows up as expenditures and costs of doing business and is never reported as profits.
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Larry Gude
Strung Out
No...
...you're totally right there. The conversation is an academic exercise from the standpoint we find ourselves in; a dependent position supply wise.
That's a separate question, though.
Through increasing domestic supply, pursuing alternatives, such as more nuke for electric thereby freeing more coal to liquefy, natural gas, hybrids, etc and etc, we have within our power to alter the energy market balance to put ourselves in a strong position domestic production wise, thus a stronger position globally. We are 1/4 of the market, the biggest single user. That's power. Or can be if we wish to yield it.
So, two questions;
Should we regulate energy, all energy, as national security interests and, two, will we pursue policies that put us in a position to do so effectively?
There's a sound case for the first and, perhaps, growing public sentiment for the second though 'green' sentiment and the idea that high oil prices allow green alternatives an opportunity mutes much of the public desire for action. The thing is, unless we secure, or make stronger our position in terms of foreign dependence AND nationalize all energy policies, then market forces, some with ill intent, can knock the knees out of green simply by blowing supply out of balance and collapsing oil prices and killing the money needed for alternatives. The whole argument is whether or not stable energy cost is better than highs and lows.
See, California had this blow up in their face a few years back precisely because they were so dependent on energy produced, transmitted and delivered from outside of California. They are the nation in miniature in many regards. They tried to dictate policy over things they didn't control or have enough leverage to do so.
...you're totally right there. The conversation is an academic exercise from the standpoint we find ourselves in; a dependent position supply wise.
That's a separate question, though.
Through increasing domestic supply, pursuing alternatives, such as more nuke for electric thereby freeing more coal to liquefy, natural gas, hybrids, etc and etc, we have within our power to alter the energy market balance to put ourselves in a strong position domestic production wise, thus a stronger position globally. We are 1/4 of the market, the biggest single user. That's power. Or can be if we wish to yield it.
So, two questions;
Should we regulate energy, all energy, as national security interests and, two, will we pursue policies that put us in a position to do so effectively?
There's a sound case for the first and, perhaps, growing public sentiment for the second though 'green' sentiment and the idea that high oil prices allow green alternatives an opportunity mutes much of the public desire for action. The thing is, unless we secure, or make stronger our position in terms of foreign dependence AND nationalize all energy policies, then market forces, some with ill intent, can knock the knees out of green simply by blowing supply out of balance and collapsing oil prices and killing the money needed for alternatives. The whole argument is whether or not stable energy cost is better than highs and lows.
See, California had this blow up in their face a few years back precisely because they were so dependent on energy produced, transmitted and delivered from outside of California. They are the nation in miniature in many regards. They tried to dictate policy over things they didn't control or have enough leverage to do so.
Larry Gude
Strung Out
B
Bruzilla
Guest
In that case they are making a hellavalot more profit than 9%.