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Oil at $120: Here's Why

Mike

Well-known member
Oil at $120: Here's Why
humanevents.com ^ | 05/07/2008 | Michael J. Economides

It would be more amusing had I not been personally involved. Three years ago I was a lone voice outrageously predicting $100 oil, debated on many occasions on national TV by those predicting $50 or even less. The tapes are still available.

Now, $100 seems conservative, others have jumped on that number by the carload and the OPEC president said last week that oil may climb to $200. This, by the way, is the same organization that four years ago was insisting that the “official” price was between $24 and $28, while we were paying $50. Clearly they hoodwinked us.

Oil is at $120 with no price reduction in sight because of two simple but unsavory facts: We in the United States and Europe have earned the right and the luxury to be ridiculous and oil producing countries, knowing this, have become militants, in what arguably can be called energy imperialism.

First a disclaimer, in itself silly that I have to make. This article is not paid by Big Oil. Second, I have a simple belief: energy and its abundance is perhaps the most important commodity in modern life, bar none, and any energy shortages will plunge the world in an economic tailspin we have never experienced before. If one does not believe this, no need to read further.

Of the world energy demand 87 percent comes from fossil fuels, oil, gas and coal. This fraction has not changed much since the 1970’s and the first “energy crisis” while energy demand has more than doubled. By almost everybody’s estimates by the year 2030, the total world demand will increase by 50 percent and oil, gas and coal will still provide 87 percent of the world’s energy.

The reason we use them is not because of some evil conspiracy headed by a dark knight by the name of Dick Cheney. We use them because they are the easiest, most flexible, most reliable and most efficient forms of energy. Biofuels as done today, cause a negative energy balance not even considering their impact on food prices. I have no aversion to wind or solar. I love the sun, I am Greek. But they are eminently unreliable and, even in their best case, without government subsidies, they make $200 to $2000 oil still attractive. It is that simple.

But here is how we are ridiculous and it would have been funny had we not run the danger of committing societal hara-kiri. We have let dazed environmentalism of the most outrageous variety to put on a tie and become mainstream, dominate the covers of national newsmagazines and, predictably as of late, earn Oscars, Emmys and Nobels.

There are no alternatives to fossil fuels for decades to come and the transition will be long and painful. We will continue to be a fossil-fuel dependent economy for the foreseeable future. To boot, the US imports now almost 70 percent of 21 million barrels per day of oil demand. Hugo Chavez, Vladimir Putin and Mahmoud Ahmedinejad have noticed.

So what do we do now? We are not allowed to drill in proven offshore or arctic resources and where we can drill “it takes more than an act of Congress”. At any given time, our oil and gas reserves are perhaps 40 percent less than they could have been in practically any other country because of environmental compliance. Ask almost any American which country provides more oil to the United States and the answer would be Saudi Arabia, Canada or Mexico. The correct answer is of course the United States, by far. In a margin business where one half of one percent of over or under supply can cause havoc on the oil price, drilling in the ANWR would make a heck of difference both really and symbolically.

It takes 800 permits to build a new refinery. Is it surprising that none has been built in over 30 years?

Big Oil is of course blamed by many, headed by national politicians. The truth is that US oil companies have very little impact on current oil prices and their influence is waning by energy militant countries that own the reserves. Instead of being protected they are maligned by politicians and a gullible public. Simple question: suppose that the energy industry is all nationalized and the ExxonMobil’s of the world are taken over by the government. Does anybody believe that gasoline prices would be lower? It may surprise almost all to realize that, having to buy oil from militant nations with little control over them, US Big Oil and the consumers are in much closer predicament than taxing and regulating government or elitist, touchy feely politicians and environmentalists.

And of course the biggest boogieman is climate change hysteria. Both Hillary Clinton and Barrack Obama have bought the man-made origin and have adopted the slogan of 80 percent reduction in carbon dioxide emissions (the main greenhouse gas produced from burning fossil fuels) by 2050. John McCain is not far behind. If they succeed they will bring a growing United States to the level of the lowest 5 percentile of the world’s poorest countries. Maybe that is the egalitarianism they seek: to make all of the world that poor.
 

TSR

Well-known member
Mike said:
Oil at $120: Here's Why
humanevents.com ^ | 05/07/2008 | Michael J. Economides

It would be more amusing had I not been personally involved. Three years ago I was a lone voice outrageously predicting $100 oil, debated on many occasions on national TV by those predicting $50 or even less. The tapes are still available.

Now, $100 seems conservative, others have jumped on that number by the carload and the OPEC president said last week that oil may climb to $200. This, by the way, is the same organization that four years ago was insisting that the “official” price was between $24 and $28, while we were paying $50. Clearly they hoodwinked us.

Oil is at $120 with no price reduction in sight because of two simple but unsavory facts: We in the United States and Europe have earned the right and the luxury to be ridiculous and oil producing countries, knowing this, have become militants, in what arguably can be called energy imperialism.

First a disclaimer, in itself silly that I have to make. This article is not paid by Big Oil. Second, I have a simple belief: energy and its abundance is perhaps the most important commodity in modern life, bar none, and any energy shortages will plunge the world in an economic tailspin we have never experienced before. If one does not believe this, no need to read further.

Of the world energy demand 87 percent comes from fossil fuels, oil, gas and coal. This fraction has not changed much since the 1970’s and the first “energy crisis” while energy demand has more than doubled. By almost everybody’s estimates by the year 2030, the total world demand will increase by 50 percent and oil, gas and coal will still provide 87 percent of the world’s energy.

The reason we use them is not because of some evil conspiracy headed by a dark knight by the name of Dick Cheney. We use them because they are the easiest, most flexible, most reliable and most efficient forms of energy. Biofuels as done today, cause a negative energy balance not even considering their impact on food prices. I have no aversion to wind or solar. I love the sun, I am Greek. But they are eminently unreliable and, even in their best case, without government subsidies, they make $200 to $2000 oil still attractive. It is that simple.

But here is how we are ridiculous and it would have been funny had we not run the danger of committing societal hara-kiri. We have let dazed environmentalism of the most outrageous variety to put on a tie and become mainstream, dominate the covers of national newsmagazines and, predictably as of late, earn Oscars, Emmys and Nobels.

There are no alternatives to fossil fuels for decades to come and the transition will be long and painful. We will continue to be a fossil-fuel dependent economy for the foreseeable future. To boot, the US imports now almost 70 percent of 21 million barrels per day of oil demand. Hugo Chavez, Vladimir Putin and Mahmoud Ahmedinejad have noticed.

So what do we do now? We are not allowed to drill in proven offshore or arctic resources and where we can drill “it takes more than an act of Congress”. At any given time, our oil and gas reserves are perhaps 40 percent less than they could have been in practically any other country because of environmental compliance. Ask almost any American which country provides more oil to the United States and the answer would be Saudi Arabia, Canada or Mexico. The correct answer is of course the United States, by far. In a margin business where one half of one percent of over or under supply can cause havoc on the oil price, drilling in the ANWR would make a heck of difference both really and symbolically.

It takes 800 permits to build a new refinery. Is it surprising that none has been built in over 30 years?

Big Oil is of course blamed by many, headed by national politicians. The truth is that US oil companies have very little impact on current oil prices and their influence is waning by energy militant countries that own the reserves. Instead of being protected they are maligned by politicians and a gullible public. Simple question: suppose that the energy industry is all nationalized and the ExxonMobil’s of the world are taken over by the government. Does anybody believe that gasoline prices would be lower? It may surprise almost all to realize that, having to buy oil from militant nations with little control over them, US Big Oil and the consumers are in much closer predicament than taxing and regulating government or elitist, touchy feely politicians and environmentalists.

And of course the biggest boogieman is climate change hysteria. Both Hillary Clinton and Barrack Obama have bought the man-made origin and have adopted the slogan of 80 percent reduction in carbon dioxide emissions (the main greenhouse gas produced from burning fossil fuels) by 2050. John McCain is not far behind. If they succeed they will bring a growing United States to the level of the lowest 5 percentile of the world’s poorest countries. Maybe that is the egalitarianism they seek: to make all of the world that poor.

Mike this man COULD be right but I would still like to have ALL the facts before I make accept all he says. I also have faith in our entrepreneurs coming up with new energy technologies. I don't think they are decades away, at least I certainly hope not. BTW have you seen the new Climate Change segment on TV with both Pelosi and Gingrich seated together?
 

Texan

Well-known member
Goldman Sachs: Oil at $150-$200/bbl Possible in Next 6 to 24 Months
by Lananh Nguyen, Angela Henshall and Gregory Meyer
Dow Jones Newswires 5/6/2008

LONDON, May 6, 2008 (Dow Jones Newswires)

An oil price "super-spike" to $150-$200 a barrel is increasingly likely within the next six to 24 months, Goldman Sachs says.

"We believe the current energy crisis may be coming to a head, as a lack of adequate supply growth is becoming apparent and resulting in needed demand rationing in the OECD areas in particular the United States," Goldman Sachs analysts said in a research note Monday.

Goldman also raised its 2008 spot crude oil price forecasts, pegging West Texas Intermediate crude at $108 a barrel from a previous $96 a barrel, and Brent crude at $108 a barrel from $95 a barrel.

However, "predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty," the analysts said.

Goldman analysts made waves nearly three years ago when a team led by Arjun Murti, head of Goldman's energy research team, put forward a theory that oil prices were in the midst of a "super-spike" that could lift oil prices as high as a then-unheard of $105 a barrel.

In March, the group's prediction was borne out as front-month above $105 for the first time ever.

"We believe we may be in the early stages of having the end game of our 'super-spike' thesis play out, with crude oil prices having risen over $50 a barrel since the U.S. economic crisis began last summer - a remarkable move and one that we think is fundamentally supported by tight global supply/demand balances," the analysts said in Monday's report.

On the supply side, spare production capacity from the Organization of Petroleum Exporting Countries would continue to remain tight, with exports likely to be hampered by lackluster supply growth and sharply higher domestic demand, Goldman said. Meanwhile, non-OPEC crude production would also struggle to grow, particularly in Russia and Mexico.

Cost inflation and restrictions on foreign investment in many exporting countries would further limit oil supply growth.

On the demand side, a downturn in U.S. and Organization for Economic Cooperation and Development countries' consumption would be outpaced by strong demand growth in non-OECD countries, keeping oil market fundamentals tight, the analysts said.

LONDON, May 6, 2008 (Dow Jones Newswires)



http://www.rigzone.com/news/article.asp?a_id=61537
 

backhoeboogie

Well-known member
There are a lot of folks locally who have been scrapping the left over digs from dried up oil patches for years. Many of them are injecting and seperating and piping the salt water way back to the injection wells. It is a lot of work for small dividends.

With this speculation and price increases, some of them have begun to do quite well for the first times in their lives.

It is too bad that all the fat cats are also benefitting but speculators are speculating all of it.
 

backhoeboogie

Well-known member
Last p.m. I pulled the sales receipts for tube steel, angle iron etc. Go back to '99 and see what happened each year. Gasoline and diesel haven't caught up with steel price increases yet. They are getting close
 

aplusmnt

Well-known member
backhoeboogie said:
Last p.m. I pulled the sales receipts for tube steel, angle iron etc. Go back to '99 and see what happened each year. Gasoline and diesel haven't caught up with steel price increases yet. They are getting close

Around here metal thefts are off the charts. You better not leave you lawnmower setting out and their have been stories of cars being stolen just to smash and sell for the metal.

The doom and gloom bush haters do not realize it is the exact same scenario of what is happening with gas prices. China is using up all the steel they can get and I am sure India is also. These countries with large populations are going through a industrial revolution, and are sucking up the worlds resources in record numbers.

We do not have a steel man in office, our VP has not been meeting secretly with the Steel producers, so I wonder who is to blame for Steel prices going through the roof?........Or is it that maybe oil and steel share a common denominator, that being China and India as well as a growing world.
 

Mike

Well-known member
Does ‘Big Oil’ deserve our scorn?
The Montana Standard ^ | 02/07/2008 | Shaun Hoolahan

Exxon Mobil recently posted the biggest-ever annual profit for a U.S. company at $40.6 billion dollars. Outrageous — they gasp — consumers are obviously being gouged by Big Oil.


Let’s look at the facts. First of all, just who is “Big Oil?” Exxon Mobil, Shell, BP, Chevron Texaco, Conoco Phillips? Wrong! It’s the government-controlled national oil companies of Saudi Arabia, Iran, Iraq, Venezuela, Libya, Algeria, Nigeria, Russia, Brazil, China, etc. In fact, the privately held Western oil companies that most people associate with “Big Oil” control less than 6 percent of the world’s reserves.


Do these companies set the price of oil? Absolutely not! Since 1973, the price has been controlled by a cartel of Oil Producing and Exporting Countries (OPEC) through imposed production limits. Prior to 1973, the price of oil was also controlled by a cartel that imposed production limits — namely, the Texas Railroad Commission.


With the exception of Saudi Arabia and war-torn Iraq, most OPEC countries are already producing at maximum capacity. Oil supply for 2007 was 85.5 million barrels per day compared to a demand of 85.8 million barrels per day. What do you think the price of oil will be when Saudi Arabia (which hasn’t discovered a new major oil field in over 30 years) no longer has spare capacity?


At current demand, we (as a world) are consuming more than a billion barrels of oil every 12 days. That means we need to be finding a billion-barrel field (which are classified as “giants”) every 12 days — and we are not. It’s even worse in that the fields which we are discovering are technically more difficult to produce — i.e., they produce at much slower rates — meaning that we really need to find a giant field every three to four days. Ten years from now, $90-a-barrel oil may be something we could only wish for. Most economists treat oil as a commodity — just show up at the window with enough money and they’ll make more. Unfortunately, oil is a finite resource.


But what about Exxon’s “enormous” profits? Exxon is a U.S. oil company, meaning that it pays enormous taxes to the U.S. government on its worldwide income. The same cannot be said for Total Elf Fina (a major oil company almost in the same league as Exxon that is based in France). Most foreign countries do not tax on worldwide income (at least none that I can think of). If we are to impose an additional tax burden on the U.S. oil companies, what incentive do they have to keep from packing their bags and relocating their base of operations to a more tax-friendly country?

But isn’t Exxon charging excessive prices at the pump? Shouldn’t it return those profits to the consumer in the form of lower pump prices? Exxon’s profit margin is a mere 10 cents on the dollar ($40.6 billion dollars profit on $404 billion dollars of revenue). The absolute numbers are big because Exxon is big.


There are a lot of companies in the U.S. with operating margins well in excess of 10 percent. For example, as an independent consultant, I made 73 cents profit on every dollar of revenue last year. Are my profits excessive? Should I be hauled before Congress to justify my profit margin?


By and large, the price at the pump is governed by the cost of refinery feedstock (crude oil), which is controlled by OPEC. The rest is governed by operating efficiencies and market forces.


What happens to the independent refiner if Exxon sells its refinery products at less than its cost of manufacture? The independents couldn’t compete, would scream bloody murder, and would haul Exxon before the courts for unfair trade practices. The same would apply to other integrated oil companies that might have a larger proportion than Exxon of their business in the downstream sector (refining and marketing) as opposed to the upstream sector (exploration and production).


Should the government force Exxon to subsidize the price at the pump? Just look at the exodus of private oil com-panies from Venezuela as a result of what Hugo Chavez is doing.


Lastly, ask yourself this question: “Who is Exxon?” Exxon is not this amorphous entity, but a business owned by its shareholders. So the next time you find yourself complaining about Exxon’s excessive profits, instead of complaining, buy its stock. And when you hear presidential candidates lambasting Big Oil in their plight to get elected, rest assured that you are at least better informed.


— Shaun Hoolahan, of 801 Rickards St. in Opportunity, was born and raised there. He received a bachelor’s degree in petroleum engineering from Montana Tech in 1982, a master’s degree in engineering management from the University of Alaska in 1987 and is a licensed/registered professional petroleum engineer who has worked on oil and gas developments around the globe. Retiring in 2005, he returned with his family to Opportunity and formed a consulting business. This article was written during a layover at the Frankfurt (Germany) International Airport.
 

aplusmnt

Well-known member
Mike said:
Does ‘Big Oil’ deserve our scorn?
The Montana Standard ^ | 02/07/2008 | Shaun Hoolahan

Exxon Mobil recently posted the biggest-ever annual profit for a U.S. company at $40.6 billion dollars. Outrageous — they gasp — consumers are obviously being gouged by Big Oil.


Let’s look at the facts. First of all, just who is “Big Oil?” Exxon Mobil, Shell, BP, Chevron Texaco, Conoco Phillips? Wrong! It’s the government-controlled national oil companies of Saudi Arabia, Iran, Iraq, Venezuela, Libya, Algeria, Nigeria, Russia, Brazil, China, etc. In fact, the privately held Western oil companies that most people associate with “Big Oil” control less than 6 percent of the world’s reserves.


Do these companies set the price of oil? Absolutely not! Since 1973, the price has been controlled by a cartel of Oil Producing and Exporting Countries (OPEC) through imposed production limits. Prior to 1973, the price of oil was also controlled by a cartel that imposed production limits — namely, the Texas Railroad Commission.


With the exception of Saudi Arabia and war-torn Iraq, most OPEC countries are already producing at maximum capacity. Oil supply for 2007 was 85.5 million barrels per day compared to a demand of 85.8 million barrels per day. What do you think the price of oil will be when Saudi Arabia (which hasn’t discovered a new major oil field in over 30 years) no longer has spare capacity?


At current demand, we (as a world) are consuming more than a billion barrels of oil every 12 days. That means we need to be finding a billion-barrel field (which are classified as “giants”) every 12 days — and we are not. It’s even worse in that the fields which we are discovering are technically more difficult to produce — i.e., they produce at much slower rates — meaning that we really need to find a giant field every three to four days. Ten years from now, $90-a-barrel oil may be something we could only wish for. Most economists treat oil as a commodity — just show up at the window with enough money and they’ll make more. Unfortunately, oil is a finite resource.


But what about Exxon’s “enormous” profits? Exxon is a U.S. oil company, meaning that it pays enormous taxes to the U.S. government on its worldwide income. The same cannot be said for Total Elf Fina (a major oil company almost in the same league as Exxon that is based in France). Most foreign countries do not tax on worldwide income (at least none that I can think of). If we are to impose an additional tax burden on the U.S. oil companies, what incentive do they have to keep from packing their bags and relocating their base of operations to a more tax-friendly country?

But isn’t Exxon charging excessive prices at the pump? Shouldn’t it return those profits to the consumer in the form of lower pump prices? Exxon’s profit margin is a mere 10 cents on the dollar ($40.6 billion dollars profit on $404 billion dollars of revenue). The absolute numbers are big because Exxon is big.


There are a lot of companies in the U.S. with operating margins well in excess of 10 percent. For example, as an independent consultant, I made 73 cents profit on every dollar of revenue last year. Are my profits excessive? Should I be hauled before Congress to justify my profit margin?


By and large, the price at the pump is governed by the cost of refinery feedstock (crude oil), which is controlled by OPEC. The rest is governed by operating efficiencies and market forces.


What happens to the independent refiner if Exxon sells its refinery products at less than its cost of manufacture? The independents couldn’t compete, would scream bloody murder, and would haul Exxon before the courts for unfair trade practices. The same would apply to other integrated oil companies that might have a larger proportion than Exxon of their business in the downstream sector (refining and marketing) as opposed to the upstream sector (exploration and production).


Should the government force Exxon to subsidize the price at the pump? Just look at the exodus of private oil com-panies from Venezuela as a result of what Hugo Chavez is doing.


Lastly, ask yourself this question: “Who is Exxon?” Exxon is not this amorphous entity, but a business owned by its shareholders. So the next time you find yourself complaining about Exxon’s excessive profits, instead of complaining, buy its stock. And when you hear presidential candidates lambasting Big Oil in their plight to get elected, rest assured that you are at least better informed.


— Shaun Hoolahan, of 801 Rickards St. in Opportunity, was born and raised there. He received a bachelor’s degree in petroleum engineering from Montana Tech in 1982, a master’s degree in engineering management from the University of Alaska in 1987 and is a licensed/registered professional petroleum engineer who has worked on oil and gas developments around the globe. Retiring in 2005, he returned with his family to Opportunity and formed a consulting business. This article was written during a layover at the Frankfurt (Germany) International Airport.

The Liberals will never get it, as we recently learned they are not very good at rationalizing issues. Liberalism Truly is a Mental disorder!

If only the schools could identify this mental disorder when they were kids, maybe we could find them some help, maybe have some special Liberal Retardation classes, and they could ride to school in a Hybrid short bus.
 

Steve

Well-known member
if crude can't be shipped, prices will go up.. no matter how much any one produces.. if the product is with held from the market a supply shortage will happen.. if there is now a shortage of available tankers... where have they gone and what (or who) is holding them hostage?

Iran Doubles Oil Stored in Tankers, Bolstering Rates
By Alaric Nightingale

May 2 (Bloomberg) -- Iran, OPEC's second-largest oil producer, more than doubled the amount stored in tankers idling in the Persian Gulf, sending ship prices higher as demand for some of its crude fell, people familiar with the situation said.

The 10 tankers hold at least 20 million barrels of oil, equal to about 5 days of the country's output, said the people, who asked not to be identified because the information isn't public. Rates for tankers have more than tripled since April 8, based on data from the Baltic Exchange and ship-fuel prices.

While oil rose to a record $119.93 a barrel on April 28, Iran has a glut of its sulfur-rich crude as refineries that can process the fuel shut down

Freight derivatives that traders use to bet on, or hedge, swings in the benchmark price for shipping oil to Asia climbed 2.5

Iran's use of ships for storage cut the supply of available supertankers,... available to rent within the next 30 days dropped to 28 from 56 a month ago,

Who would have guessed Iran?
 

MoGal

Well-known member
I think if one puts together several different articles one could probably come up with the real truth. Lack of oversight, yet again. (surprise, surprise!) Even the senate did an investigation and they don't have the balls to act on it.

The federal reserve is giving out loans to banks at 2% and some of this is being invested in commodities ....... so we're bailing out the banks so they can invest in commodities????

-----------------------------
http://financialsense.com/editorials/engdahl/2008/0502.html (full article)

The price of crude oil today is not made according to any traditional relation of supply to demand. It’s controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. How?
 

aplusmnt

Well-known member
MoGal said:
The price of crude oil today is not made according to any traditional relation of supply to demand. It’s controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. How?

The American oil companies control such as small fraction of the world oil, I may be wrong but it is like less than 10%. OPEC is the big controller of the world oil. American companies are at the mercy of them. And after OPEC you have Russia, Mexico, Canada, and other Countries controlling a large portion of the Oil Market.

America has less to do with the price of oil on the management side than everyone gives them credit for. Now as consumers using up more than our share Americans have been very fortunate that we have had some of the cheaper gas prices world wide than most other countries. We are the Gluttons of the world, control the smallest percentage, but had some of the cheapest prices.......now we whine when we have to start paying our fair share. :roll: We are spoiled!
 

TSR

Well-known member
aplusmnt said:
Mike said:
Does ‘Big Oil’ deserve our scorn?
The Montana Standard ^ | 02/07/2008 | Shaun Hoolahan

Exxon Mobil recently posted the biggest-ever annual profit for a U.S. company at $40.6 billion dollars. Outrageous — they gasp — consumers are obviously being gouged by Big Oil.


Let’s look at the facts. First of all, just who is “Big Oil?” Exxon Mobil, Shell, BP, Chevron Texaco, Conoco Phillips? Wrong! It’s the government-controlled national oil companies of Saudi Arabia, Iran, Iraq, Venezuela, Libya, Algeria, Nigeria, Russia, Brazil, China, etc. In fact, the privately held Western oil companies that most people associate with “Big Oil” control less than 6 percent of the world’s reserves.


Do these companies set the price of oil? Absolutely not! Since 1973, the price has been controlled by a cartel of Oil Producing and Exporting Countries (OPEC) through imposed production limits. Prior to 1973, the price of oil was also controlled by a cartel that imposed production limits — namely, the Texas Railroad Commission.


With the exception of Saudi Arabia and war-torn Iraq, most OPEC countries are already producing at maximum capacity. Oil supply for 2007 was 85.5 million barrels per day compared to a demand of 85.8 million barrels per day. What do you think the price of oil will be when Saudi Arabia (which hasn’t discovered a new major oil field in over 30 years) no longer has spare capacity?


At current demand, we (as a world) are consuming more than a billion barrels of oil every 12 days. That means we need to be finding a billion-barrel field (which are classified as “giants”) every 12 days — and we are not. It’s even worse in that the fields which we are discovering are technically more difficult to produce — i.e., they produce at much slower rates — meaning that we really need to find a giant field every three to four days. Ten years from now, $90-a-barrel oil may be something we could only wish for. Most economists treat oil as a commodity — just show up at the window with enough money and they’ll make more. Unfortunately, oil is a finite resource.


But what about Exxon’s “enormous” profits? Exxon is a U.S. oil company, meaning that it pays enormous taxes to the U.S. government on its worldwide income. The same cannot be said for Total Elf Fina (a major oil company almost in the same league as Exxon that is based in France). Most foreign countries do not tax on worldwide income (at least none that I can think of). If we are to impose an additional tax burden on the U.S. oil companies, what incentive do they have to keep from packing their bags and relocating their base of operations to a more tax-friendly country?

But isn’t Exxon charging excessive prices at the pump? Shouldn’t it return those profits to the consumer in the form of lower pump prices? Exxon’s profit margin is a mere 10 cents on the dollar ($40.6 billion dollars profit on $404 billion dollars of revenue). The absolute numbers are big because Exxon is big.


There are a lot of companies in the U.S. with operating margins well in excess of 10 percent. For example, as an independent consultant, I made 73 cents profit on every dollar of revenue last year. Are my profits excessive? Should I be hauled before Congress to justify my profit margin?


By and large, the price at the pump is governed by the cost of refinery feedstock (crude oil), which is controlled by OPEC. The rest is governed by operating efficiencies and market forces.


What happens to the independent refiner if Exxon sells its refinery products at less than its cost of manufacture? The independents couldn’t compete, would scream bloody murder, and would haul Exxon before the courts for unfair trade practices. The same would apply to other integrated oil companies that might have a larger proportion than Exxon of their business in the downstream sector (refining and marketing) as opposed to the upstream sector (exploration and production).


Should the government force Exxon to subsidize the price at the pump? Just look at the exodus of private oil com-panies from Venezuela as a result of what Hugo Chavez is doing.


Lastly, ask yourself this question: “Who is Exxon?” Exxon is not this amorphous entity, but a business owned by its shareholders. So the next time you find yourself complaining about Exxon’s excessive profits, instead of complaining, buy its stock. And when you hear presidential candidates lambasting Big Oil in their plight to get elected, rest assured that you are at least better informed.


— Shaun Hoolahan, of 801 Rickards St. in Opportunity, was born and raised there. He received a bachelor’s degree in petroleum engineering from Montana Tech in 1982, a master’s degree in engineering management from the University of Alaska in 1987 and is a licensed/registered professional petroleum engineer who has worked on oil and gas developments around the globe. Retiring in 2005, he returned with his family to Opportunity and formed a consulting business. This article was written during a layover at the Frankfurt (Germany) International Airport.

The Liberals will never get it, as we recently learned they are not very good at rationalizing issues. Liberalism Truly is a Mental disorder!

If only the schools could identify this mental disorder when they were kids, maybe we could find them some help, maybe have some special Liberal Retardation classes, and they could ride to school in a Hybrid short bus.

Aplus according to the article you posted on the other thread those "other countries" are taxing Exxon at a much higher rate than the United States. And you are saying, "who just doesn't get it"? :) This author evidently needs to read the article you posted on the other thread then maybe he and you could argue. Man that might be an interesting argument to hear. No on second thought it might be kind of boring.
 

aplusmnt

Well-known member
Since 2000, Exxon's oil output from two of its largest regions, the United States and Europe, declined a startling 37%. That's 500,000 fewer barrels a day in just seven years.

Exxon reported 100,000 fewer barrels per day last year alone due to the nature of the contracts big oil companies sign with countries such as Angola and Nigeria. In such contracts, foreign companies put up the capital to fund new projects, and they are paid back in barrels. If oil prices rise above certain levels, Exxon gets to keep fewer of those barrels as profit for itself.

Exxon plans on bringing new fields online in Russia, the Middle East and Africa over the next four years, but they won't be enough to generate growth beyond what the company is losing due to the maturation of its fields in the North Sea and Alaska, the nationalization of its fields in Venezuela and volumes lost due to those production-sharing agreements with other countries.
 
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