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2007-06-18 -Lurid Crime Tales-

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Posted by Delphi 2007-06-18 11:22|| || Front Page|| [1 views ] Top

#1 Refineries take years to plan and permit, then more years to build. They cost hundreds of millions of dollars. Such large, long lead-time investments need either 1) low risk, or 2) high potential return, to be justified. The injection of undertainty - risk - through government biofuels edicts, hurts the incentive to invest. The inability to generate high potential returns (prevented by either 'windfall profits' taxes or lower cost foreign supply) also hurts the incentive to invest.
I have a personal vested (literally) interest in this - it is my pension fund that will be there or not, according to decisions like this.

Posted by Glenmore">Glenmore 2007-06-18 13:36|| 2007-06-18 13:36|| Front Page Top

#2 They (oil companies) are scamming the American people to keep prices and profits high. The demand for gasoline is going to remain high despite increases in biofuel production.

Posted by JohnQC 2007-06-18 13:37|| 2007-06-18 13:37|| Front Page Top

#3 Refineries are doing quite well as they are & their profits seem to actually go up when their capacity falls, that's a perverse incentive not to build refineries. I strongly suspect the oil industry is aware that world oil production is on the decline, which would be a very good reason not to substantially add to refining capacity. Alternative fuels just won't be available in a large enough quantity to really make a difference in meeting total demand, this rationale is a snow job.

Posted by Anguper Hupomosing9418 2007-06-18 15:26|| 2007-06-18 15:26|| Front Page Top

#4 Yeah! It's a scam! Hundreds of tankers are hiding right over the horizon with OUR CHEAP OIL. Heads should roll, we need an investigation. The stuff costs most than bottled water now.

Posted by Shipman 2007-06-18 17:11|| 2007-06-18 17:11|| Front Page Top

#5 John Q - OF COURSE we're trying to keep profits high! What business doesn't? There is no scam though. Competition is still quite fierce, despite the reduced number of companies. Numerous government investigations have shown this. Our executives make way too much money to make price deals with other companies' execs - they'd go to jail and be unable to spend all that dough (whatever exec some crooked one approached would rat him out a) to put that competitor at a disadvantage and b) out of fear the other guy was working with the feds, attempting to get him arrested.) Our primary competition is foreign national oil companies; at any stage of the business (production, refining or marketing) they can undercut our price, if they choose (their costs are lower - and they can always just charge us evil oil companies more). I can't think of another business that is more price competitive: EVERYBODY sees the price of every seller in big letters, every day - and can go to the least expensive.
The oil companies profit right now is about 25 cents per gallon (tax at the pump is about 45 cents.) That's about 10% profit to sales rate; the consumer electronics industry rate is about 13.5% & medical/pharma is about 21.5% for comparison.
20 years ago, when gas was cheap (and half my peers were being laid off) gas took about 3% of the personal consumption budget, just about the same as today. But 20 years ago recreation took 10% vs 11% today; medical has gone from 14% to 21%.
Marketing only makes a few cents a gallon. WalMart can and does routinely undercut our price at the pump. They'll buy, in huge quantities, from whoever gives them the best price - be it a foreign or domestic refinery (transportation costs are generally the deciding factor). Refineries have immense fixed costs and need to run as close to full capacity as possible. Right now they are making good margins, but they don't always. That's probably about 8-10 cents a gallon. Production (drilling, platforms, labor, etc.) generates the other 15 cents.
Summary: 1) Right now we ARE doing well, and like it that way. 2) There is no scam, price fix, etc. 3) Our profit rates are not much different from the average American business (but because we are so BIG, the absolute dollar profits are HUGE.) 4) The best way to screw the oil companies out of their obscene profits is to use less oil. That is exactly what happened in the 1980's, and it really is not happening much right now.

Posted by Glenmore">Glenmore 2007-06-18 17:37|| 2007-06-18 17:37|| Front Page Top

#6 Glenmore is just saying that because he knows what he's talking about, which should always make you suspicious.

Posted by Shipman 2007-06-18 19:48|| 2007-06-18 19:48|| Front Page Top

#7 You almost gotta admire these guys. They TELL us outright that they are going to screw us and we do nothing. Still they collect govt. subsidies!!!!

WTF?????

Posted by bigjim-ky 2007-06-18 20:31|| 2007-06-18 20:31|| Front Page Top

#8 Shipman, can you translate your Glenmore summary into English? Thanks

Posted by twobyfour 2007-06-18 20:56|| 2007-06-18 20:56|| Front Page Top

#9 You know people in the last thirty years there's been nothing put in the Constitution that prohibited the federal government from constructing refineries to increase capacity. Just like Ike used national defense as a rationale to build the interstate highway system, national defense could have been used as an excuse to build capacity. Once built could have been employed like the Federal Reserve in mitigating the effects of demand and supply. So, before you go tacking the oil companies up on the wall, remember the absence of action on our own elected officials part. That includes both parties.

Posted by Procopius2k 2007-06-18 21:41|| 2007-06-18 21:41|| Front Page Top

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