gas strike may 15

[MAXIMAN]

Originally posted by HobbyMan
Rising gas prices are inevitable. The price of everything is going up. Like you say, there is not silver bullet. But why have the gas prices skyrocketed in the past few years with oil companies making record profits?

Record profits as compared to what?

The media constantly harps on the "Record Profits" strawman. The fact is the profit margin for oil companies is less than many other companies. Nike, Microsoft, and Cingular have higher profit margins.

Most oil companies realize a profit margin of 10-15%. This is peanuts compared to other industries. All it means is for every dollar invested they get a $1.15 back. Whereas Nike invests a dollar and gets a $3 back. Now you tell me what's a better deal.

Wold you rather invest 10 dollars and get back $11.50 or invest $10 and get back $30?

Yes Exxon/Mobil had a profit of 30 billion dollars...so what ...they had to invest 200 billion to make it! That's right...they invested 200 million and got back 230 million so their profit was 15%.

If Nike had invested 200 billion they would have gotten back 800 billion and netted 600 billion dollars. The fact is Nike doesn't sell this many shoes. EXXON DOES! But they profit margin is nowhere near that of Nike.

Another thing most people are utterly clueless of is not just the sheer capital required (as I have just explained) but the insurmountable risk associated with oil and gas exploration...

I actually had some buffoon at TeXSive ladt year tell me that...and I quote..."Hell all they gotta do is dig a hole in your back yard and refined gasoline will flow up out of the ground!"

I'm serious...he actually said that. I have no idea if he meant it...but he said it. This is a common attitude amongst the public. They think "BIG OIL " does nothing and reap HUGE profits. Nothing could be further from the truth. The risks associated with the exploration and development of any natural resource (especially oil and gas) is higher than the risk reward relationship of casino gambling. I know...I make a living in exploration and development...and have for the past 25 years. We actually use a mathematical odds model called the Monte Carlo Risk Assessment Model. This model was developed years ago by professional gamblers to get a handle on the odds of winning at casino gambling (poker, craps, roulette, etc).

In the past couple decades the petroleum industry has modified this model to help assess the inherent risk of oil and gas exploration.

I really get weary of hearing about "record profits". If Microsoft made 10 billion in profit ...they invested 3 or 4 billion to get it. One the other hand Shell had to invest 67 billion to make the same profit.


Get it?

[MAXIMAN]

Originally posted by HobbyMan
...they could be already marketing electric cars. ...I am not talking busses that run on natural gas. I mean high speed electric trains. People in the United States are too greedy to ride trains because they want to sit in their gas guzzling car driving down the road only caring for me and mine.

Andrew

Where do you think electricity comes from? It doesn't grow on trees.

80% of ALL electricty in the USA is derived from some hydrocarbon base energy...either coal, natural gas or oil. Only 10% comes from hydro. There simply is not enough rivers to dam to generate the electricty needs for the greatest economy on the planet. The remaining 10% consist of wind, solar, geothermal, and Nuke.

The former are pretty much useless in terms of physics. The technology is simply not there to make them efficient nor economical on a broad scale. However nuclear can easily provide our nation with a significant amount of the "juice it needs". But take this to the bank my friend...the enviroMENTALS will never allow that to happen.

And so the paradox perpetuates it's self...

[MAXIMAN]

One last thing. The figures I quoted may not be precise...but they are intended to illustrate a point. That being the difference between profit and profit margin. This is an area of economics that many people have never given pause to.

The profit margin of oil companies is very modest compared to those of others industries like software for instance...or bottled beverages (what about BIG WATER? )

10-15 percent is very modest. Some industries realize profit margins 10 fold greater than that...and without the associated risk of exploration.

Think about it.

[mro]

the government taketh

You may hear a politician now and then saying how "bad" oil companies are to make so much money and how they plan to "tax" em more.

Taxes on gas that you should be familiar with are what you pay at the pump. Here in CA CA land that's about 40 cents per gallon plus another 8 3/4 percent sales tax which taxes both the gallon of gas and the state and federal tax (another $00.32 per gallon at current prices for a total of about 20 percent)

That alone is more than the oil companies make and they still pay ALL the business taxes, property taxes and government leases as well as additional taxes on imported oil.

I would not mind the pump taxes so much but our state has repeatedly diverted the gas tax money to pay for crap the citizens here would not allow general taxes to be raised for. Just here it adds up to billions and billions and our idiot citizens have now allowed bonds (state borrowing) to pay for road maintenance that has been neglected because they spent the money elsewhere.

Rant Rant Rant................


mro
lets use our nutron bombs in the middle east, would stop all the conflits there and oil could go down to a few bucks per barrel. World peace and cheep gas too

[mro]

lets use our nutron bombs in the middle east, would stop all the conflits there and oil could go down to a few bucks per barrel. World peace and cheep gas too

Can't believe I typed that

time for another martini


mro

[Wildkat]

Record profits as compared to what?

Previous years maybe?

While it may be true that oil companies have less of a profit margin than Microsoft, Cingular and Nike... the difference here would be that I don't depend on the other three. I can choose other services... there is an option (except with Microsoft... until Apple gets a bit more on track)... but when it comes to buying gas... there is no choice... The station down the street is just as costly as the one around the corner. Oh sure... I could choose to walk everywhere I go... but that isn't nearly as realistic...
I'm not taking away anything from the risks involved in exploration... I do understand this... but some of the thinking shown by the major oil companies in raising their prices is skewed... and comes across as a bit greedy to some of us who have to keep paying more... and more... and more...

While state taxation is responsible for some of the increased prices at the pump... it wouldn't hurt for the oil companies to come down just a bit... but there I go looking through those rose colored glasses again...


What?!?!? Electricity DOESN'T grow on trees?

(probably a good thing as every time it rained... there would be a problem)

[MAXIMAN]

Re: Record profits as compared to what?

Originally posted by Wildkat
but some of the thinking shown by the major oil companies in raising their prices is skewed... and comes across as a bit greedy to some of us who have to keep paying more... and more... and more...

it wouldn't hurt for the oil companies to come down just a bit... but there I go looking through those rose colored glasses again...

HUH?

I am puzzled by the sheer lack of understanding of free market capitalism.

Why would oil companies arbitrarily reduce gas prices? WHY? Better yet why should they? Just because you need their product?

The current price of any product is dictated by what you will pay... what the market will bear. And until they can't sell what they produce the price will remain where it is currently.

The only way for the price of gas to come dow is for YOU to stop using. You and I and everyone else on the planet. I'm guessing that won't happen until gasoline gets close to $4 per gallon...at least that's what studies show.

But to say that oil companies should simply cut the price they charge at the pump is like saying farmers should abitrarily reduce the price they sell their corn just so your tortillas will be less expensive. And remember...corn right now is at an all time high because of this ethanol craze. So should corn be arbitrarily reduced in price just so my corn flakes won't be so expensive? NO...this is what the market will bear and the farmers should get what their product is worth. And in a free market they do.

Why is it this errant notion of arbitrary price reduction only applies to gasoline and nothing else. You need gasoline for what? A car ...right? Have you not noticed what the price of cars has done in 25 years? New or used...cars have quadrupled in most cases. Gasoline hasn't even done this. So should cars prices simply and arbitrarily be reduced because you must have a car to live. Tell that to the UAW and assembly lin workers that make 75K for putting lug nuts on a truck.

And I don't hear people screaming about "BIG AUTO" raping the public.

Please don't think I'm being mean spirited here ... I'm just trying to understand why people have such a level of hatred for oil companies but not other industries they depend on. To me...as a small ...independent oil and gas producer...I just don't understand it.

Though I think new car prices are insanely high...I would never expect auto companies to magically reduce car prices simply because I couldn't afford them. Nor would I want the goverment to step in and implement price controls on GM or Ford. That would simply be like pouring gasoline on the proverbial fire.

I'm seriously confused here...

[Wildkat]

Because it is SO much easier to point fingers at them...

I understand free market capitalism... don't get me wrong... I also understand the stations themselves are as much to blame if not more so than the oil companies... just as we are who still pay the $3 a gallon...
It's more frustration than anything else... Why don't I scream about the price of a new car? Because I don't have to buy a new car everyday... I don't have to buy a new car at all... I can choose to buy a used one instead... You can't buy used gas...
It's a vicious circle... I have to buy gas... and I am relying too much on my vehicle to get me around probably...
The law of supply and demand certainly come back to bite one in the backside on this one...

You're right... we shouldn't expect the oil companies to arbitrarily reduce their prices... but man would it ever be nice if they did!


Here's a link for you...
The Oil Drum
See? I'm willing to look at both sides...

Mean spirited? you? Nawwww...

[MAXIMAN]

Re: Because it is SO much easier to point fingers at them...

Originally posted by Wildkat


You're right... we shouldn't expect the oil companies to arbitrarily reduce their prices... but man would it ever be nice if they did!

HAHAHAHAHA! Some one was giving crap about this issue last week. Like I told 'em...I don't like it either...I have tobuyit just like everyone else.

I think Hobby had a point. More people shold rely on mass transit in big cities. This is a vry cost effective way to get around. But American's don't "cotton" to that idea much. And so the price continues on it's upward spiral...

[Pat Kelly]

The oil companies' profit is high because of the volume sold. The profit margin is still the same.
They're making (reportedly) obscene profit because people are buying (reportedly) obscene amounts of gas.

[Wildkat]

That's it... people don't want to give up their luxury...

I combine my trips so that I don't make as many as I used to... If I need something from a store farther away... I stock up on it while I'm there so I don't go back as frequently...
I fill up the Mom-mobile every 275 miles... I used to do that once every week and a half... now I do it once a month.

I still need the supply... I just don't demand it as much...

[MAXIMAN]

And the crowd roars! Somebody finally gets it!

And when the price gets high enough the "obscene" consumption will drop...then the prices will follow. This all happened in the early 80's. Because of the XSive price of crude in the 70's the US cuts it's imports drastically by the early 80's. Due to the increase in production there was a glut and the price dropped like a rock.

Remeber the good 'ol days of the 90's when gas was about a buck. I even saw it as low as 79 cents around here.

The wheels of industry are in high gear. Give it few years and you'll see the price of oil and gas fall again as new reserves are found and production rises. Just like the cycles of the seasons.

If you want to track history of energy prices try this:

http://www.oilnergy.com/

[mro]

More people should rely on mass transit in big cities. This is a very cost effective way to get around.

Thought your were pretty smart until read that.
If you don't know, not one public transportation agency makes enough money from there fairs even to pay for general over head. All are subsidized by tax dollars to as much as 90 percent.

In the Bay Area public transportation agencies are political fiefdoms. There are more than a dozen different agencies with in 25 miles of Hayward.

As for big cities, (New York, parts of LA etc)public transportation is actually needed and used but still can not come even close to paying for it's own upkeep.

BART in particular is so bad, that it would be cheaper for tax payers to buy every rider a brand new car and pay ALL expenses. On top of that it subsidizes travel to San Francisco because it is near useless to go anywhere else. Local bus service from near my home to industrial area where my shop is requires two transfers. A 10 to 15 minuet ride on my 80G takes as much as 1 1/2 to 2 hours on the bus. I can ride a bycycle to my shop faster than taking a bus.


mro

[MAXIMAN]

If more people used mass trans it would be profitable. But like I said American's won't do it! DOH!

So it's not currently effective to haul 3 people around on a 100 passenger bus! Doh! But if the bus were 75% full it would work beautifully. Now ...you tell me how to get people to ride the bus. HA!

I guess we could get the government involved and pass laws to force people in cities to ride the bus. But as you know I am opposed to using the police power of the state to live peoples lives for them.

[prometheus578]

To me...as a small ...independent oil and gas producer...

I, too, am a small independant gas producer, which is why no one wants to car-pool with me.

(You really didn't think that I'd let that line go un-commented on, did you?)