Who is making money from the high gas prices? [Archive]

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dwasson

10-31-2005, 01:36 PM

hitchhiker

10-31-2005, 03:28 PM

Halliburton, Exxon, Chevron, etc., of course!

The indictments will be fun to watch after the regime change!

:D

MikesMerc

10-31-2005, 04:09 PM

From: http://taxprof.typepad.com/taxprof_blog/2005/10/gas_taxes_excee.html

Additionally, tax collections on the production and import of gasoline by state and federal governments are already near historic highs. In fact, in recent decades governments have collected far more revenue from gasoline taxes than the largest U.S. oil companies have collectively earned in domestic profits....

Dan...stop it! You're gonna ruin all the fun the oil-conspiracy nuts are having. Remember, complete ignorance of the oil industry and the associated tax structures is needed in order for the oil-conspiracy folks to have something to fret about. No need to rain on their parade:D

http://www.mercurymarauder.net/forums/attachment.php?attachmentid=79 12&stc=1

Mad4Macs

10-31-2005, 05:07 PM

Dan...stop it! You're gonna ruin all the fun the oil-conspiracy nuts are having. Remember, complete ignorance of the oil industry and the associated tax structures is needed in order for the oil-conspiracy folks to have something to fret about. No need to rain on their parade:D

http://www.mercurymarauder.net/forums/attachment.php?attachmentid=79 12&stc=1

Agreed. The lunatic fringe is what's keeping their party in the hole. Don't educate them :lol:

jgc61sr2002

10-31-2005, 05:31 PM

IMO the reason the government doesn't get involved is the higher the gas price the more taxes collected. It's a Win Win situtation. :(

glassman99

10-31-2005, 05:48 PM

Try this from a local Libertarian (Neil Boortz)...he is right on the mark

There has been much wailing and gnashing of teeth in the last week or so over the reports from major oil companies of increased profits. These reports have given many Americans the opportunity to exhibit their total ignorance when it comes to matters economic. For this we can thank our wonderful government schools, where basic education in economics is, for all practical purposes, non-existent.

October survey shows that 72% have an unfavorable opinion of oil companies. In the Sunday "Vent" in the Atlanta Journal-Constitution several of Atlanta's more poorly educated citizens chimed in with their thoughts on oil companies and their profits:

"When do the oil company profits for the quarter become proof of price gouging?"

"Oil company profits show we have been hosed."

Oil company profits can not in and of themselves be proof of price gouging, neither can they be proof that we've been "hosed." Once again the "Vent" serves as a platform from which people can demonstrate their ignorance.

Now .. just what have we read about oil company earnings. Generally, we've read that oil company profits are up. This, if you read the public opinion polls, is evidence of evil. How dare the oil companies allow their profits to go up? Now .. a little test. Ask someone in your office, school ... whatever ... what the difference is between profits and profit margins. See if they can come up with an answer. Simply put, your profits are the money that's left over from gross revenues after you pay the costs of doing business. Profit margins are the percentage of gross revenues that are left over after you pay those costs. I would bet you five bucks against a stale donut that 95% of seniors in our illustrious government high schools couldn't tell you the difference between the two ... and it will be those 95% who are screaming bloody murder about oil company profits.

Now ... for those of you who went to government schools, let's expand on the explanation. Let's say that the total gross revenues for a company for one year equal $1,000,000. That's a million bucks. This company spends $930,000 to bring in that million. The difference between the one million and the $930,000 is $70,000. That's your profit. Divide the $70,000 by the one million and you get 0.07, or 7%. That's your profit margin. Now let's say that the very next year the company sells twice as much product the second year and brings in two million bucks. Let's also say that the cost of making those products doubles as well .. to $1,860,000. How much money did you have left over? Those of you who went to government schools get out your calculators .. the rest of you can figure it out in your head. You have $140,000 left over. That's your profit.

Wait! Your profits have doubled! How dare you? What are you doing, price gouging? These are excess profits -- windfall profits -- and the government ought to step in immediately and take them away from you, you greedy capitalist pig!

Hold on ... before we get carried away with our little price gouging rant here, let's grab those calculators again. Divide the $140,000 in profits by the $2,000,000 in gross receipts and what do we have? Why, it seems the answer is once again 0.07, or 7%! The profits have doubled, but the profit margin remains exactly the same!

The problem here is that, thanks to the hideous education the vast majority of Americans have received at the hands of the government, few people know the difference between a profit and a profit margin. Whey they read that oil company profits have gone up they have no educational basis upon which to balance the fact that oil company revenues have also gone up ... thanks to the increase in the price of crude oil. Revenues go up. Profits go up. It's not really that hard to understand.

Now, as I've said, that explanation is rather simplistic. The tragedy is that most Americans don't understand the concept of profits and profit margins even at that basic level. Someone will now come along and point out that the oil company profit margins have been rising along with the profits themselves. They're right. You see, costs don't necessarily double when revenues do. There are some costs that remain fixed even when the prices for raw materials (crude oil) increase. This will mean that profit margins will also increase, though not anywhere near as much as profits themselves. Is this necessarily a bad thing? Hardly. Just where do you think the energy companies, including the oil companies, get the money they need to explore for new sources of oil, to build new refineries, and to conduct research on additional or alternate energy sources? That money comes from profits. If profits increase due to high demand met by a scarcity of product the oil companies will be in a position to use increased profits to expand production and to search for new sources of oil. If the government seizes these profits, as suggested by Hillary Clinton, then those dollars would not be available for energy company investments into expanding our energy resources.

Hillary's brilliant idea of seizing profits does not come as a surprise to many. After all, Hillary was identified by her college professors as a budding young socialist many years before she achieved fame as Bill's "wife." Hillary's idea is for the oil companies to hand over about $20 billion a year to the government to be used for "research" and to subsidize consumers. The subsidies, of course, would become just another government entitlement that Democratic politicians would use to buy votes. The research? Well, sad to say there are actually people out there who think that the government can do a better job conducting research to insure our future energy needs than can the private sector. The impact of state education is widely felt.

Let's explore Hillary's profit-seizure idea a bit more. Another source of funds for oil companies to use for exploration and the development of additional energy resources would be the money that comes from investors. These investors purchase shares of stock in oil companies because they believe that their investments will appreciate in value and, in some cases, will pay dividends. If the government bows to the paranoia and anti-capitalist ignorance of the state-educated masses and seizes those profits, what then will be the reason to invest in these oil companies?

Look. I'm not trying to hammer the government schools here; but the more I think about it the more I'm convinced that so many of the problems that we face today as a nation are the direct or indirect result of the abysmally poor education most Americans get from their state-operated schools. It's clear that vast numbers of Americans have scant knowledge of the role of prices in the allocation of resources by the marketplace, and the relationship of profits to those prices. Politicians, like Hillary Clinton, exploit that ignorance to enhance their personal political power at the expense of our economic liberty.

Dan

10-31-2005, 06:16 PM

Ok, are we talking politics NOW?

If so, then let the countdown to the end of this thread begin. :)

Best,

Dan

glassman99

10-31-2005, 06:22 PM

Not politics, just the straight scibi

MikesMerc

10-31-2005, 06:38 PM

It's clear that vast numbers of Americans have scant knowledge of the role of prices in the allocation of resources by the marketplace, and the relationship of profits to those prices. Politicians... exploit that ignorance to enhance their personal political power at the expense of our economic liberty.

I've been involved with watching oil (and more specifically deisel fuel) for many years now as part of my job and I've tried to explain some of the how's and why's of the industry to this forum....but to no avail. Most folks simply don't want to know the truth, or take the time to learn how it all works. The knowledge makes the hysteria in the news look ho-hum and takes the fun away from those that like a good conspiracy to worry about. Its a lot easier to blame others for your problems ya know:)

Neat thread none the less. Maybe a few folks will actually decide to learn more about how it all works:)

Dan

10-31-2005, 06:48 PM

I've been involved with watching oil (and more specifically deisel fuel) for many years now as part of my job and I've tried to explain some of the how's and why's of the industry to this forum....but to no avail. Most folks simply don't want to know the truth, or take the time to learn how it all works. The knowledge makes the hysteria in the news look ho-hum and takes the fun away from those that like a good conspiracy to worry about. Its a lot easier to blame others for your problems ya know:)

Neat thread none the less. Maybe a few folks will actually decide to learn more about how it all works:)

Mikes,

Count me in among the few who wish to truly be enlightened. I would LOVE to hear what you have to say as I have no preconceive notions or "religion" on the matter.

For the sake of being PC please PM me. I really would like to hear what your observations are.

Best,

Dan

MikesMerc

10-31-2005, 07:04 PM

Dan, I'll shoot you a PM tomorrow from work along with a few links to some websites that are very informative and helpful to those that actually need to work with the oil based market. You'll find out that there are some very serious concerns to be dealt with....its just not the stuff the media leads you to beleive the problems are.

BTW, I mean no offense to anyone here on MM.net with my comments. Everyone is certainly free to beleive whatever they wish and I make no judgements about anyone based on their politcal or economic orientations. To each, their own and all that :)

Smokie

10-31-2005, 07:13 PM

BruteForce

10-31-2005, 08:42 PM

...For this we can thank our wonderful government schools...

I keep seeing this brought up as some sign of government failure. Where did all them smart guys go to school? Canada? France? :rolleyes:

If water from the fountain of knowledge hasn't been absorbed well by the general populace, I'd first look at the sponges before I'd blame the water supply.

The lack of understanding of basic concepts has more to do with students not wanting to learn what they are presented with than a lack of trying on the part of the educational system. Heck I didn't try and pry apart Economics 101 until I was in my 2nd year of college. It was completely lost on me in high school but not for a lack of teachers trying. It was clearly a lack of motivation on my part to "want" to learn.

duhtroll

10-31-2005, 08:53 PM

Agreed - and just who votes in all those taxes? Hmm. . .

I don't have a problem with profits, is the American way, but it does bother me than when somebody farts in Saudi Arabia the price of gas doubles at my local pump about 5 seconds later......I do have a problem with that.

dwasson

10-31-2005, 10:16 PM

It is interesting to me that corporations get beat up for profit increases when nobody cares when they lose money.

Imagine that XYZ Corp. has a $1million profit this year. Next year the profit totals $100K. That is a decrease of 90%. If the profit the year after is $1million some of you will complain about a profit increase of 1000%.

If you want to limit their profits then it is only right to cover their losses. However, the government can't pick winners and losers that way. So, it's best to leave them alone in all circumstances.

jerrym3

11-01-2005, 09:44 AM

Wouldn't the cost of exploration be factored in as "cost of doing business"? Also, wouldn't the exploration costs result in a lowering of taxes, which is factored in before the final profit figures are determined.

Prices skyrocketed because the supply side of the equasion was supposed to be greatly impacted. Well, here in North Jersey, I haven't seen one gas line as a result of the hurricanes. So, at more than $3.50 per gallon at the high side, where did the extra capacity come from? If they were paying more for their product, as we were all told, wouldn't the higher product cost have diminished the overall profit? And now, with per barrel prices droping, why hasn't there been a huge price drop in direct relation to the huge price increase?

That being said (written), it's a free market. They can charge whatever the market will pay, and we have to pay because we need the product-period.

As a nation, we jumped on the SUV bandwagon, and our government allowed these vehicles to worm around the gas mileage requirements. In effect, we reaped what we sowed.

Now, the light has come on, and better mileage SUVs (crossovers) are being introduced. Even station wagons (shudder, soccer moms may have to drive station wagons?) are coming back.

Seems like, at $3 gallon plus, we got religion now, but, unfortunately, with the oil appetites of other countries growing and growing, our overall decrease in consumption will easily be compensated for by other nations increase in demand.

Dan

11-01-2005, 02:04 PM

We will never run out of the stuff.

Now, whether it remains affordable as supply diminishes is another question all around.

Best,

Dan

gpfarrell

11-01-2005, 08:18 PM

Nobody pays too much for gas.

If it was too much they wouldn't pay it.

The media really should jump on Starbucks... I mean, they have "bucks" right in their name... capitalist pigs... and if a cup of coffee cost 3 bucks imagine what a gallon of that stuff would cost... somebody better tax their profits too... I need protected!

Record profits are also partly a result of inflation... A billion dollars really isn't what it used to be... or so I'm told... I'd like to have my own billion just to see.

When gas was $3.49/gallon here for premium I filled up my Mustang and took it to an open track day... for that kind of money I'm not going to waste fuel on the roads!

Todd

11-01-2005, 08:41 PM

I keep seeing this brought up as some sign of government failure. Where did all them smart guys go to school? Canada? France? :rolleyes:

If water from the fountain of knowledge hasn't been absorbed well by the general populace, I'd first look at the sponges before I'd blame the water supply.

The lack of understanding of basic concepts has more to do with students not wanting to learn what they are presented with than a lack of trying on the part of the educational system. Heck I didn't try and pry apart Economics 101 until I was in my 2nd year of college. It was completely lost on me in high school but not for a lack of teachers trying. It was clearly a lack of motivation on my part to "want" to learn.

Statistically there is a much higher percentage of 'high performers' coming out of private schools than from public schools. I would say that fact is not caused by the students having an ingrained motivation to learn but that the teachers strive for higher goals for their students and themselves.

Maybe they are limited by the curriculum they are given by the school board, maybe not.

The fact that competition breeds higher standards and performance is completely lost on the government and its public education koolaide drinkers. If a consumer has only one option for said product, what motivation does the provider of said product have to improve? That would mean more work in most cases.

Dan

11-02-2005, 05:08 AM

The fact that competition breeds higher standards and performance is completely lost on the government and its public education koolaide drinkers. If a consumer has only one option for said product, what motivation does the provider of said product have to improve? That would mean more work in most cases.

Amen, Brother!

Best,

Dan

duhtroll

11-02-2005, 07:38 AM

Or maybe it's because those in private schools have more money.

When you're worried about a bed to sleep in, clothes to wear, and food to eat, grades just aren't as high on the priority list.

Is this true of everyone in public school? Of course not, but statistically the averages are a direct result of income.

In a nutshell, rich kids get a better education because there are fewer distractions keeping them from learning.

As far as the teachers go, imagine having that "average" group of kids in a private school and then the same "average" group of kids in a public school. In most areas of the country there is a stark difference between the two.

Sorry Todd, but your analysis shows a lack of understanding about the how schools work in this country. There is certainly a discrepancy between public and private, but 1) it's not because of better teachers, it's because of better students, and 2) the public schools are catching up (no thanks to GWB).

I have not seen the school board dictate curriculum in any school I have been in, either. I'm not speaking of banning a book from the reading list, but a full-fledged curriculum from preK-12. School board members are usually not educators and don't have the skills necessary to prescribe or implement a curriculum.

People who believe in NCLB and think competition will fix our problems (including this whole school voucher notion) must think that teachers have some perverse aspiration to mediocrity, and that only when we are scared out of our wits will we perform.

That sickens me.

-A

Statistically there is a much higher percentage of 'high performers' coming out of private schools than from public schools. I would say that fact is not caused by the students having an ingrained motivation to learn but that the teachers strive for higher goals for their students and themselves.

Maybe they are limited by the curriculum they are given by the school board, maybe not.

The fact that competition breeds higher standards and performance is completely lost on the government and its public education koolaide drinkers. If a consumer has only one option for said product, what motivation does the provider of said product have to improve? That would mean more work in most cases.

rocknrod

11-02-2005, 08:03 AM

Halliburton, Exxon, Chevron, etc., of course!
The indictments will be fun to watch after the regime change!
:DOne Track Mind!

When the Dems don't like the outcome, they say "re-count" until it comes out the way they want it. Thats historical, not arguable!
Now, after months and months of 9-11 investigations, Investigating the CIA info that lead to Iraq war. All this until most Americans are sick of it. The Dems didnt like the outcome.
So guess what?
They want "Round II" on the investigation. Hence the tantrum thrown yesterday in the Senate by Harry Reid.
All this is for one reason.
They want to get George Bush impeached.
Not sure if they realize how sick and tired America is of these games.

MikesMerc

11-02-2005, 08:24 AM

I don't have a problem with profits, is the American way, but it does bother me than when somebody farts in Saudi Arabia the price of gas doubles at my local pump about 5 seconds later......I do have a problem with that.

It's called commodity pricing. I'm not saying I'm happy with this either, but you need to understand that this pricing mechanism is the same for ALL commidty based products. When the frost comes early and kills the green bean crop, the cost of green beans already sitting on the store shelf jump immediately. Same scenario.

MikesMerc

11-02-2005, 08:40 AM

Wouldn't the cost of exploration be factored in as "cost of doing business"? Also, wouldn't the exploration costs result in a lowering of taxes, which is factored in before the final profit figures are determined.

No. That's not how it works.

The billions of dollars in costs associated with new drilling and refining technologies are "capitalized" and written off (expensed) over time thorugh depreciation charges. This has the effect of making capital intensive expenditures a "fixed cost" over time. Accordingly, when you have a large spike in gross margin (variable revenue less variable costs ) which exceeds fixed costs, you have large profits.

Prices skyrocketed because the supply side of the equasion was supposed to be greatly impacted. Well, here in North Jersey, I haven't seen one gas line as a result of the hurricanes. So, at more than $3.50 per gallon at the high side, where did the extra capacity come from?

There was no extra capacity. Whether you decided to pump less gas or not, it is a fact that america, as a whole pumped, less gas due to the higher prices. Not a lot less, but less.

Another thing to consider is that price jumps not just from supply, but from the anticipated costs associated with bringing the oil rigs and refineries back on line.

Add that plus speculation pricing and there you have it.

If they were paying more for their product, as we were all told, wouldn't the higher product cost have diminished the overall profit?

No. The largest cost component in the industry is drilling and refinement. They have only begun to incur the expenses necessary to fix everything that was damaged.

In addition, the cost of fuel is specualtive. It is a commodity. Commodities have no differentiation between brands. Accordingly only supply and demand dictate price. When you have this situation (commodity pricing) the supply chain has high level of speculation.

For example, Everyone complains that the gas station owner is charging $3 a gallon when we know he only paid $2 for what is still in his tank. However, the gas station owner knows that the price from his suppliers is going to rise...dramatically. In order for him to have the cash to buy his next round of inventory he needs to raise prices now. Remember retailers and wholesalers do not make any profit until AFTER they sell there product. They buy thier inventory out of there own pockets, then sell it. Margins for fuel retailers are thin and they cannot "out of pocket" for the next tank refill when prices spike.

A bit simplistic of an explanation, but that's pretty close.

And now, with per barrel prices droping, why hasn't there been a huge price drop in direct relation to the huge price increase?

Some of this might be geographic locations which need time to catch up. Here in Michigan premium is down to $2.35. That's a big decrease from the high.

Seems like, at $3 gallon plus, we got religion now, but, unfortunately, with the oil appetites of other countries growing and growing, our overall decrease in consumption will easily be compensated for by other nations increase in demand.

No doubt. Well said.

In fact, the price drops we are seeing now are only a temporary reprieve that stems from government pressure to keep the prices down and demand that had curbed do to such huge price spikes. Prices will begin there usually creep up again in the next few months. Long range estimates have Premium at or near $3 a gallon again in the next 6 months.

dwasson

11-02-2005, 09:54 AM

hitchhiker

11-02-2005, 10:02 AM

One Track Mind!

When the Dems don't like the outcome, they say "re-count" until it comes out the way they want it. Thats historical, not arguable!
Now, after months and months of 9-11 investigations, Investigating the CIA info that lead to Iraq war. All this until most Americans are sick of it. The Dems didnt like the outcome.
So guess what?
They want "Round II" on the investigation. Hence the tantrum thrown yesterday in the Senate by Harry Reid.
All this is for one reason.
They want to get George Bush impeached.
Not sure if they realize how sick and tired America is of these games.
http://www.barbneal.com/graphics/bugsani.gifWhat a Maroon!

http://www.barbneal.com/wav/ltunes/Bugs/Bugs29.wav

MENINBLK

11-02-2005, 10:12 AM

IMO the reason the government doesn't get involved is the higher the gas price the more taxes collected. It's a Win Win situtation. :(

This is a wrong statement...

Taxes on Fuel are per gallon, not per $.
The reason why the tax revenue goes up is because
the demand for fuel is rising.

You sell more gas, you get more taxes.

Remember January 2005, 87 Octane was barely over $2/gal...

duhtroll

11-02-2005, 10:28 AM

All else aside, I really don't think they want President Cheney. I don't believe impeachment is their goal.

I would think it more likely they would use this in the next set of elections.

They want "Round II" on the investigation. Hence the tantrum thrown yesterday in the Senate by Harry Reid.
All this is for one reason.
They want to get George Bush impeached.
Not sure if they realize how sick and tired America is of these games.

MikesMerc

11-02-2005, 12:22 PM

One other issue is the multitude of different gasoline formulas demanded by the government. Since most gasoline is batch processed the refiners must estimate demand on each of the different mixtures. With refining capacity maxed out, and the NIMBY factor maiking almost impossible to build new refineries, any misjudgement can result in a shortage in or more formulas.

So, lets say that you are oil company exec who believes that we are running out of cheap oil. You are trying to get out front of the hydrogen economy (or LPG, or ethanol, or any other new fuel). Why would you, as an honest custodian of your shareholders investment, want to build more refinery capacity? With the added costs imposed EPA issues, the NIMBY problems and your desire to keep your name out of the papers, and a belief (hope?) that is all going to be abandoned soon, why bother? As the price of oil keeps going up, spurred by this or that panic, you'll make money anyway.

Good post Dan. Right on point.

As a good example of how forecasting the mixtures can indeed significantly effect the marketplace, simply look at Diesel Fuel (my favorite topic). Pump prices are still though the roof. Right now diesel is more expensive the premium pump gas....a very odd phenominon. This is happening because some refineries were moved away from deisel and the demand from the far east has risen. Some Refineries moving to gasoline has helped the gas prices, but has left diesel under supplied. The DOE had listed Deisel at $1.98 last December. 10 months later its at $2.87 as of today. And that's after a 40 cent drop per gallon last week. Deisel has been in the $3.15 to $3.30 range for the last four weeks.

Smokie

11-02-2005, 01:27 PM

Well, this has been one of most informative threads I had the pleasure of reading in quite sometime, not that I am happy per say with why gasoline cost so much or the reasons for the volatility of a comodity that is as necessary as electricity and yet remains uncontrolled, with no system of checks and balances other than market forces.

I have learned quite a bit, thank you to those that provided so much information.

MikesMerc

11-02-2005, 02:35 PM

Well Smokie, I agree with you that the price of fuel sucks. I also have my doubts at times that free market forces can correct for all things. But, in the end, I've yet to see one single regulated industry where the consumer benefited in the long run. We all know the short comings of the free market forces, but is there truly a better alternative given the consistent faliure of government regulation? That's the issue here.

dwasson

11-02-2005, 02:42 PM

gpfarrell

11-02-2005, 02:53 PM

Unregulated economies have more "checks & balances" that react quicker than any government authority could possilbly create.

Most regulatory efforts backfire. Capitalism is very quick, government is very slow. Capitalism has a very clear agenda... maximize the utility of resources... government has a very muddled agenda, often driven my media & polls instead of logic and reason.

We've all heard the old driving advice "You can't break the laws of physics".

Well, maybe I'm biased since my degree is in Economics, but you can't break the laws of economics either... that's why they are laws after all.

Restrict profits (by the proposed "excess profits" tax) and you'll restrict supply. Let profits run high and free... and the industry will attract new players and competition will drive the prices back down.

I too would much rather have the option of buying gas at $4.00/gallon than staring at an empty pump that reads $2.50/gallon. The government can't force companies to be in a business that doesn't maximize their resources... if you want that you should pick a different spot on the globe... good luck finding one that has a better standard of living than we take for granted here.

Hope this doesn't sound like a rant... this is an amazingly well behaved thread for what could be an explosive topic.

Cheers,

Greg

dwasson

11-02-2005, 02:56 PM

from: http://www.techcentralstation.com/110205E.html

Here we go again. Gasoline prices are dropping as usual with the end of the summer driving season. But oil companies are announcing huge quarterly profits, so the inevitable reaction has begun -- howls on Capitol Hill. Self-proclaimed friends of consumers want the profits refunded to "ease consumers' pain." They propose to do that through a "windfall profits tax," arguing that the government would make better use of the money than would the oil companies.

They point out breathlessly that one company's last quarter earnings were $9 billion, and then multiply it to reach $36 billion for a full year. (As a relative measure, that's about how much US families spend on their pets each year. Comparisons often help when hysteria is setting in.)

Twenty-five years ago, with gasoline prices at record highs and company profits "unconscionable" according to some, like-minded critics won the day in Congress and enacted a windfall profits tax. It was a disaster.

· It did not allow companies to charge world market prices for "old oil." So they could not spend money to rework oilfields; domestic production dwindled rapidly.

· It allowed them to charge market prices only for "new oil" from new areas. Companies had to bypass oilfields that they had discovered but not yet developed, and search (wildcat) in less likely places. Again, domestic production suffered.

· It allowed them to charge world market prices for imported oil. So the companies began to explore more in highly promising places overseas. Domestic production suffered; overseas exploration and development boomed.

· Critics complained that the companies were abandoning the US. One oil executive responded, "We're not moving out of the US; we're being thrown out."

Every subsequent study, including from the US Congress now entertaining the tax, showed that the era's price controls and windfall profits tax contributed greatly to our nation's increased reliance on foreign oil. Those policies did exactly the opposite of what they were intended to do. But without institutional memory, critics seem again ready to fall back on the old, failed policies and "do something" no matter what the result may be.

Not everyone wants a windfall profits tax. Some in Congress advocate opening the Arctic National Wildlife Reserve buffer zone to oil company operations; they are reviled for the thought. Others practically demand that the companies build new refineries to increase total US refining capacity. They point out that there has been no new refinery built in the US for 30 years. That's true, BUT:

· Increased refining capacity does not add crude oil to US or to world supply. The price of crude oil (and thus of gasoline) depends on the amount of crude oil on the market -- the supply among all the nations that use oil.

· More US refining capacity will not address those issues.

· US oil companies have continued to improve efficiency and increase refining capacity to meet US demand for gasoline and other fuels. Refining capacity is tight, but will continue to grow with demand. The main issue is supply.

· On the other hand, no company can or should spend several billion dollars to provide "excess refining capacity." "Excess capacity" does not pay for itself; any company that proposed to build it would see their shareholders shift investment to other companies that did not plan to build themselves out of profitability.

Others propose doing away with state or locally mandated "boutique" gasolines. At least 20 such gasolines must be sold in particular regions; they require special shipping arrangements and reduce pipeline efficiency. They virtually guarantee gasoline shortages or high prices in those areas.

Maybe it's Halloween week, but there's no treat here. Some of these ideas are tricks -- old, failed ones at that.

Dan

11-02-2005, 06:08 PM

What a Maroon!

Name calling. What an educated and well articulated counter point. :P :)

Dan

11-02-2005, 06:18 PM

from: http://www.techcentralstation.com/110205E.html

... so the inevitable reaction has begun -- howls on Capitol Hill. Self-proclaimed friends of consumers want the profits refunded to "ease consumers' pain." They propose to do that through a "windfall profits tax," arguing that the government would make better use of the money than would the oil companies.

They point out breathlessly that one company's last quarter earnings were $9 billion, and then multiply it to reach $36 billion for a full year. (As a relative measure, that's about how much US families spend on their pets each year. Comparisons often help when hysteria is setting in.)

Twenty-five years ago, with gasoline prices at record highs and company profits "unconscionable" according to some, like-minded critics won the day in Congress and enacted a windfall profits tax. It was a disaster.

Not everyone wants a windfall profits tax. Some in Congress advocate opening the Arctic National Wildlife Reserve buffer zone to oil company operations; they are reviled for the thought. Others practically demand that the companies build new refineries to increase total US refining capacity. They point out that there has been no new refinery built in the US for 30 years. That's true, BUT:

· Increased refining capacity does not add crude oil to US or to world supply. The price of crude oil (and thus of gasoline) depends on the amount of crude oil on the market -- the supply among all the nations that use oil.

· More US refining capacity will not address those issues.

· US oil companies have continued to improve efficiency and increase refining capacity to meet US demand for gasoline and other fuels. Refining capacity is tight, but will continue to grow with demand. The main issue is supply.

· On the other hand, no company can or should spend several billion dollars to provide "excess refining capacity." "Excess capacity" does not pay for itself; any company that proposed to build it would see their shareholders shift investment to other companies that did not plan to build themselves out of profitability.

Others propose doing away with state or locally mandated "boutique" gasolines. At least 20 such gasolines must be sold in particular regions; they require special shipping arrangements and reduce pipeline efficiency. They virtually guarantee gasoline shortages or high prices in those areas.

Maybe it's Halloween week, but there's no treat here. Some of these ideas are tricks -- old, failed ones at that.

Dan,

1. The "rob from the rich and give to the poor cry" is typical (even more so when election years are close). Are you really surprised by this?

2. The environuts want us all to feel as much pain as possible because we use the automobile and will get in the way of anything which might decrease that pain. Again, surprised?

I am guessing that you probably aren't or you wouldn't be making such good posts. :up:

Best,

Dan

hitchhiker

11-02-2005, 11:15 PM

Name calling. What an educated and well articulated counter point. :P :)

Why thank you very much!

There is no way I am going to engage someone who can't think for themselves in a dialogue. It simply isn't worth it.

:D

Dan

11-03-2005, 05:38 AM

Why thank you very much!

There is no way I am going to engage someone who can't think for themselves in a dialogue. It simply isn't worth it.

:D

If that is your assertion then isn't leveling an insult still a form of engagement? :)

Best,

Dan

DeadVic

11-03-2005, 09:36 AM

"Who is making money from the high gas prices?"

That be me.... :D

:beer:

rocknrod

11-04-2005, 02:50 PM

Why thank you very much!

There is no way I am going to engage someone who can't think for themselves in a dialogue. It simply isn't worth it.

:D
But he still engages in insults.
Just doesnt engage. Riiiiiiight.
Like I always say: "he won't take his medicine"

Dan

11-05-2005, 07:18 AM

But he still engages in insults.
Just doesnt engage. Riiiiiiight.
Like I always say: "he won't take his medicine"

Precisely what I was saying. It is hypocritical to say that one is not going to engage someone and then engage them solely for the sake of insulting them.

I love double standards. :)

Best,

Dan

hitchhiker

11-05-2005, 12:36 PM

Precisely what I was saying. It is hypocritical to say that one is not going to engage someone and then engage them solely for the sake of insulting them.

I love double standards. :)

Best,

Dan

Same Old S**t.

Blah Blah Blah...

:lol:

ole69

11-05-2005, 04:35 PM

Hmmm a very informative thread,educational,well-articulated,decisive,and cool rebuttals
Now I see that the education has ended, that it is now changing lanes :alone:

Dan

11-06-2005, 01:35 PM

Same Old S**t.

Blah Blah Blah...

:lol:

:laugh:

Thank you, very much, for making my point even more abundantly than it was made before. :up:

Best,

Dan

hitchhiker

11-06-2005, 01:42 PM

The perception of the easily fooled, who will believe anything that the current regime tells them to believe, is truly a sight to behold.

In case you might be wondering, the earth is no longer considered to be flat
and we're no longer living in the 1950's!

Say goodnight Gracie.

:D

Dan

11-06-2005, 02:02 PM

:laugh:

I guess you are now "not engaging" me.

:laugh:

"Good night, Gracie." :up:

This is fun. :D

Best,

Dan

hitchhiker

11-06-2005, 02:03 PM

Keeping guessing if it makes you feel better.

:D

Dan

11-06-2005, 02:07 PM

Ahh, diverting the subject from the main point. I like it.

I'll keep laughing, too. :laugh:

:)

Best,

Dan

Dan

11-06-2005, 02:08 PM

Your turn. :)

hitchhiker

11-06-2005, 02:09 PM

I think you like this too much!

In case you hadn't noticed, there ceased to be any point at all several posts ago. Hello!

:lol:

Dan

11-06-2005, 02:11 PM

Yeah, you're right. I noticed.

I'll be happy to let it go at that if you will? :)

Best,

Dan

SergntMac

11-06-2005, 02:55 PM

I don't have a problem with profits, is the American way, but it does bother me than when somebody farts in Saudi Arabia the price of gas doubles at my local pump about 5 seconds later......I do have a problem with that. Yeah, it's a peeve, and these great discussions are informative, thank you all. However, there's one more angle to consider in the fuel tree, your local pumpmaster.

I have a real "mom and pop" operation I visit often, it's on my path to work. I stop there because it always seems easy in, easy out when I need gas, oil, newspaper, cigarettes, milk, dry ceral or bread. That's it. Open 18 hours a day, Mom works days, Pop works nights. Their gas is always one penny cheaper than the superstations/marts within two blocks in either direction. It's in the middle of the block too, so, it sees traffic mostly from one direction.

They seem to do okay, been open for over 20 years. I spent a few minutes asking Pop how he does it, and it seems quite simple. He's got two 5000 gal. tanks underground, 87 and 93 octane. Every night, he "sticks" the tanks, and when he's down to 500 gallons, he places an order and it's delivered the next day. At the order, he's given a price per gallon, and he must have that in a certified check for the driver.

If he pays 2.50 per gallon and resells for 2.75 per gallon, he makes 1,125.00 profit per delivery. From that, he must cover his overhead. If his next order comes in at 2.75 per gallon, he must make up the difference from his savings. Of course, he must adjust the retail to 3.00 per gallon, but he still makes just 1,125.00 profit per delivery.

Now Pop may run out and up his pump price the moment he hears his delivery price, but he's only got 500 gallons in the ground, and his "gouging" earns him an extra 125 bucks, provided he sells out all of his gas before the delivery truck arrives. Doesn't seem like a lot, does it, certainly not enough to restore his savings. That will take time, and I'm sure he'll end up giving it back the next time the prices flux.

If I understand this right, the delivery price is the same for all, but pump prices differ from station to station due to the overhead involved. Mom and Pop make it work undercutting the big guys by one penny, but the superstations with numerous 10,000 gal. tanks, 20 pumps, 30 employees and so on, can't afford to compete. It also explains why it seems that when someone in Saudi Arabia farts, pump prices jump, and why pump prices are slow to go back down after they shoot up. Pop has to sell his 2.75 cost gas before he can take advantage of any price reduction in the next delivery.

It's probably the same scenario for the supplier, who buys refined gas in very large quanities too. He pays one price when his shipment comes in, and charges a higher price when he delivers it to the retail dealers, because his next load will cost him the same difference. I can't say the economics are really this simple, but they could be something like this.

ole69

11-06-2005, 03:52 PM

I remember seeing a story on the NEWS on how different stations pay different prices. Whereas a smaller station may pay more 'cause he only moves so many hundreds or thousands of gallons per week. But a larger franchise or company owned store that moves tens of thousands of gallons per week gets huge discounts because of their volume selling. i.e. two Exxon stations are blocks apart, but the one that out sells the other, may have a higher profit margin due to him selling more, getting it cheaper, but still selling it at the same price.....

--or something like :bandit:

dwasson

11-06-2005, 06:15 PM

There have been lawsuits in Michigan (lost I think) where francisees sued the oil companies because they were charged more than company owned stores.

rocknrod

11-06-2005, 06:22 PM

dwasson

11-06-2005, 06:25 PM

So the answer is: Government.

Usually is.

Bluerauder

11-07-2005, 08:11 AM

If I understand this right, the delivery price is the same for all, but pump prices differ from station to station due to the overhead involved.
Not necessarily .... there is something called "zone pricing" that affects the cost of gas in particular zones. If you live near one of these zone borders (like I do), you can see a wide range of prices. That's why it is always better for me to fill up near my house rather than to get it nearer to work. :D

I personally like the Mom & Pop operations ... they are local businesses. However, it is getting harder and harder for them to compete with the mega-stations. :(

python357

11-07-2005, 10:54 AM

I'm no economics professor and know little about the commidities market, But what about the oil companies not having to pay for drilling on public lands? This has been a very enlightening discussion, thank you all

dwasson

11-07-2005, 10:59 AM

But what about the oil companies not having to pay for drilling on public lands?

Like the miners and ranchers and lumber companies, it is all cronyism and theft.

hitchhiker

11-07-2005, 11:55 AM

Like the miners and ranchers and lumber companies, it is all cronyism and theft.

They do pay.

It's in the sacks of money being brought into the White House and Senate Offices!

Actually, I'm sure that most national level politicians now have offshore bank accounts just like the drug dealers.

:lol:

merc406

11-07-2005, 12:03 PM

The fact is we have all been screwed and now it's time for them to lower the price to, hmmmm 55 cents a gallon for a year maybe, maybe more........

ohh, damn, must have been in a daydream, carry on..........:lol:

Dan

11-07-2005, 05:34 PM

They do pay.

Actually, I'm sure that most national level politicians now have offshore bank accounts just like the drug dealers.

:lol:

If they were smart they would be investing off shore. The tax benefits are way to good to ignore.

You should look into it sometime. There are ways to do it that are totally legal.

Best,

Dan