Incredible profits

[737 Pylt]

Meanwhile.....Everyone in the us, inculding US airlines continue to feel the pinch. And, they gave this prick (Exxon/Mobile CEO) a $400 million severance! $400 MILLION!!!!!!!!!!!!!!!!!!!!!!
737

AP
Exxon Quarterly Profit 5th Highest Ever
Thursday April 27, 10:47 am ET
By Steve Quinn, AP Business Writer

Exxon Mobil Quarterly Profit 5th Highest Ever for Public Company; Gains on High Oil Prices

DALLAS (AP) -- Exxon Mobil Corp., the world's largest oil company, reported Thursday the fifth highest quarterly profit for any public company in history, posting gains from higher oil prices that were likely to stoke the furor over outsized oil company earnings.
Despite the 7 percent gain in earnings to more than $8 billion in the first quarter, Exxon Mobil said its earnings came in below its record fourth-quarter because all three of its business -- exploration and production; refining; chemicals -- didn't perform as well.
The earnings report comes amid consumer outcry in the U.S. about soaring gasoline prices. The average retail price of gasoline in the U.S. is now $2.91 a gallon, or 68 cents higher than a year ago.
It also comes as Washington lawmakers are looking to appease consumers with various proposals to make big oil companies pay more taxes or provide consumers with some other relief.
In January, Exxon posted the highest quarterly profits of any public company in history: $10.71 billion for the fourth quarter of 2005 and $36.13 billion for the full year.
In the first quarter, net income rose to $8.4 billion, or $1.37 per share, from $7.86 billion, or $1.22 per share, a year ago. Excluding a gain on the sale of an interest in China's Sinopec, the company's year-ago profit was $7.4 billion, or $1.15 per share.
But analysts polled by Thomson Financial were looking for a higher profit of $1.47 per share for the latest quarter, and shares fell $1.02, or 1.6 percent, to $62.08 in morning trading on the New York Stock Exchange.
Howard Silverblatt, a senior index analyst for Standard & Poor's, said the latest profit figure still places Exxon fifth historically among quarterly earnings. Exxon also holds the first, second and fourth spots; Royal Dutch Shell PLC has the third spot.
The company said its average sale price for crude oil in the U.S. during the quarter was $55.99 per barrel compared to $42.70 a year ago. It sold natural gas in the U.S., on average, for $8.31 compared to $6.18 during the same period one year ago.
Earnings from exploration and production of oil and gas rose to $6.4 billion from $5 billion a year ago. Refining profits fell from $1.4 billion to $1.2 billion and profits from its chemical business fell to 949 million from $1.4 billion
Revenue grew to $88.98 billion from $82.05 billion a year earlier. Higher crude oil and natural gas prices and improved marketing margins were partly offset by lower chemical margins.
Placed in perspective, Exxon's revenue for the three-month period was still greater than the annual gross domestic product of some major oil producing nations, including the United Arab Emirates ($74.67 billion) and Kuwait ($55.31 billion), according to statistics maintained by the Central Intelligence Agency.
Exxon said it invested $4.8 billion in capital and exploration projects, a 41 percent increase from 2005.
"In the first quarter of 2006, the results of our continuing long-term investment program contributed to a 5 percent increase in production," Exxon chief executive said in a prepared statement. Exxon also said it returned $7 billion to shareholders through dividends of $2 billion and buying back $5 billion worth of shares.

 

[blzr]

This was posted on another thread by Smacktard

Exxon did very well last year, their profit margin was slightly higher than the industry average of 8%, with a 9.3%. So, for every dollar they invested, they had a profit of 9.3 cents. You paid, into their greedy, green stained hands, a whopping $0.22 for every gallon of gas. But did you realize you paid the government about $0.50 for each gallon? And the government also got taxes from Exxon (from their GROSS Profits), so really, you can add another $0.11 cents to that gallon. If there is such a strain on the poor working man, why doesn't the government drop it's 'share' of the profit as well? Your argument also applies to the government, after all, their share went up too. In fact, their share is almost 3 times larger than the evil oil companies share, but yet you don’t complain about that???

I have a few links for you as well, they might help you ‘limited’ understanding of such basic things…

http://www.washingtonpost.com/wp-dyn/content/article/2005/10/27/AR2005102702399.html

And you might really like this link, it applies to you…
http://txfx.net/2005/10/30/mommy-what-is-a-profit-margin/

And here’s yet another for your personal use…
http://moneycentral.msn.com/investor...ins&Symbol=XOM

 

[TWA Dude]

Not to worry, y'all, the Big Oil Companies use that profit to reinvest in drilling and refining capacity. They said so themselves.

 

[Motive Flow]

You might be shocked to find out that the oil companies do not set the prices at the gas pump, or on a barrel of oil.

Also, how many years were the oil companies not doing so well?
Now they are making a profit and politicians see an easy target.

 

[RiddleEagle18]

If they took this guys 400 million away it would only provide everyone in the US $1 off a gallon for thier gasoline for 1 day...(about 400 million gallons of gas sold in us everyday) you cant look at profits only. You have to look at profit margins. Percentages always tell the whole truth. If it cost them $35 a barrel two years ago and they made $3.50 profit and 10% profit margin(to keep math simple), and this year it cost them $70 a barrel and make $7 profit they still only make 10%. Double thier earnings but remaining exactly the same on profit margin. It's simple they are having to invest twice as much as before therefore twice the profit. High school economics. See ya

 

[jetflyer]

Do you guys believe the saying, "A PICTURE IS WORTH A THOUSAND WORDS"

Well then you have to look at this picture. It is a graph of world oil production from Jan. 2002 till now (NOT GOOD):
http://www.theoildrum.com/story/2006/4/15/72931/5527

This graph is a must see and is why oil prices are high!
It has statistics from the IEA and EIA.

You will see that oil production grew very fast until the end of 2004 and has been FLAT since then.

You don't hear about this in the media. Only oil company profits and Iran and China, etc.

There is a lot bigger problem brewing.

Oil production is flat and everyone is pumping as fast as they can but demand wants to keep going up. It can't so the price rises.

It sure looks like we're hitting world peak oil from this picture......

Thoughts???

Jet

 

[jetflyer]

Here is a short summary of the 2005 New Oil discoveries:
http://www.theoildrum.com/story/2006/2/28/21235/1491

The producers found less new oil that was potentially producable in 2004 and 2005 than any year since WWII. That's right.
Some say this is because they've gotten all the oil they're gonna get because they're so good at finding it now with seismic technologies, etc. and there's nothing else to find. They all had incentives to keep looking and they didn't find anything............ This is troublesome.

1/3 of the new discoveries were found through deep water exploration.

Lukoil(Russian company) found the largest find with 600 million barrels which is enough to power the world for a grand total of 7 days. Woohoo.

No oil company found as much oil as they sold last year. Exxon found enough natural gas in Qatar to be the equivavlent of the oil they sold.

Jet

 

[jetflyer]

$15 billion dollars was spent last year on exploration by the World's PUBLICLY traded oil companies including Russia's, U.S.'s, Europe's, etc.

Exxon made $15 billion in profits in 4 1/2 months alone last year!

The world's publicly traded oil companies didn't spend much at all on exploration.

Exxon didn't even find enough oil from a single field to last ONE DAY at the current 84million barrel/day usage.

From the article on exploration finds in 2005:
http://www.theoildrum.com/story/2006/2/28/21235/1491

So to answer some of the questions above - who won and who lost in 2005. None of the International Oil Companies appear to be big winners. Of the 9 discoveries reported to be greater than 100 million BOE, the operators include BP, Woodside, Daewoo, Shell, Lukoil, ONGC, ConocoPhillips, Unocal, and Gujarat SPC. Overall I would say we are all losers. More money chasing smaller volumes in more and more difficult areas. The remaining unexplored areas of the world are fewer and fewer. Not a lot of smiley faces here.

Has it all been found?

Jet

 

[jetflyer]

Only $15 billion was spent by publicly traded oil companies in 2005 on exploration including Russia's, U.S.'s, Europe's, etc. . This is pitiful.

We NEED these oil companies to invest those profits into alternatives and stop stock-buybacks etc. It's almost like they're content to just let their share price go up and sit back and watch the world crumble from an energy crisis.

On CNBC yesterday one analyst had a good idea:
He would tax heavily the profits of the oil company that were not reinvested into alternatives or for energy exploration.

I hate taxes but that sounded like a good idea since we NEED THEM TO KEEP LOOKING or start trying to get oil from coal or shale or start planting corn!!

So if they reinvested those profits for new energy sources they wouldn't be taxed extra. If they decided to do a stock buy-back that money would be taxed first. Taxes sometimes can do good things and encourage things we need to encourage. Sound like a good idea? To me, kinda...

Jet

 

[fareview]

Meanwhile.....Everyone in the us, inculding US airlines continue to feel the pinch. And, they gave this prick (Exxon/Mobile CEO) a $400 million severance! $400 MILLION!!!!!!!!!!!!!!!!!!!!!!
737

AP
Exxon Quarterly Profit 5th Highest Ever
Thursday April 27, 10:47 am ET
By Steve Quinn, AP Business Writer

Exxon Mobil Quarterly Profit 5th Highest Ever for Public Company; Gains on High Oil Prices

DALLAS (AP) -- Exxon Mobil Corp., the world's largest oil company, reported Thursday the fifth highest quarterly profit for any public company in history, posting gains from higher oil prices that were likely to stoke the furor over outsized oil company earnings.
Despite the 7 percent gain in earnings to more than $8 billion in the first quarter, Exxon Mobil said its earnings came in below its record fourth-quarter because all three of its business -- exploration and production; refining; chemicals -- didn't perform as well.
The earnings report comes amid consumer outcry in the U.S. about soaring gasoline prices. The average retail price of gasoline in the U.S. is now $2.91 a gallon, or 68 cents higher than a year ago.
It also comes as Washington lawmakers are looking to appease consumers with various proposals to make big oil companies pay more taxes or provide consumers with some other relief.
In January, Exxon posted the highest quarterly profits of any public company in history: $10.71 billion for the fourth quarter of 2005 and $36.13 billion for the full year.
In the first quarter, net income rose to $8.4 billion, or $1.37 per share, from $7.86 billion, or $1.22 per share, a year ago. Excluding a gain on the sale of an interest in China's Sinopec, the company's year-ago profit was $7.4 billion, or $1.15 per share.
But analysts polled by Thomson Financial were looking for a higher profit of $1.47 per share for the latest quarter, and shares fell $1.02, or 1.6 percent, to $62.08 in morning trading on the New York Stock Exchange.
Howard Silverblatt, a senior index analyst for Standard & Poor's, said the latest profit figure still places Exxon fifth historically among quarterly earnings. Exxon also holds the first, second and fourth spots; Royal Dutch Shell PLC has the third spot.
The company said its average sale price for crude oil in the U.S. during the quarter was $55.99 per barrel compared to $42.70 a year ago. It sold natural gas in the U.S., on average, for $8.31 compared to $6.18 during the same period one year ago.
Earnings from exploration and production of oil and gas rose to $6.4 billion from $5 billion a year ago. Refining profits fell from $1.4 billion to $1.2 billion and profits from its chemical business fell to 949 million from $1.4 billion
Revenue grew to $88.98 billion from $82.05 billion a year earlier. Higher crude oil and natural gas prices and improved marketing margins were partly offset by lower chemical margins.
Placed in perspective, Exxon's revenue for the three-month period was still greater than the annual gross domestic product of some major oil producing nations, including the United Arab Emirates ($74.67 billion) and Kuwait ($55.31 billion), according to statistics maintained by the Central Intelligence Agency.
Exxon said it invested $4.8 billion in capital and exploration projects, a 41 percent increase from 2005.
"In the first quarter of 2006, the results of our continuing long-term investment program contributed to a 5 percent increase in production," Exxon chief executive said in a prepared statement. Exxon also said it returned $7 billion to shareholders through dividends of $2 billion and buying back $5 billion worth of shares.

You call a guy who has no control over the price of oil and whose Company is one of the largest and most profitable in the world - a co. that gave back $7bn to shareholders - a PRICK.

Their three month revenue exceeded the GDP of the UAE and Kuwait.

Overpaid, maybe depending on your perspective - a prick? How would you know?

fareview

 

[jetflyer]

Once again:
Oil production is flat and everyone is pumping as fast as they can but demand wants to keep going up. It can't so the price rises.

Also, of course there are real supply concerns like Iran causing prices to rise.

The biggest supply concern is of course that the world may be close to peak oil production.

We can't be mad at the oil companies that oil production for the world is flat for the last year and a half and that their product price has gone up.

We can be mad that they're not investing their profits into exploration and alternatives. They need to be responsible and do this....

Jet

 

[SDF2BUF2MCO]

Also, how many years were the oil companies not doing so well?
Now they are making a profit and politicians see an easy target.

No kidding. When's the last time the watchdog media ever report about the record number of "revenue"(via taxes) that the government takes in? All smoke and mirrors.

 

[blzr]

If prices continue to go up, and with my oil and coal stocks, I hope they do, demand will decrease and supply will increase.

We are no worse off now than in the late 70's and this ship will right itself with help from Ethanol, coal, and hopefully (SAFE) nuclear power.

 

[jetflyer]

blzr,

What if the world is reaching peak oil production? What if we're going to start seeing 4-5% less oil pumped per year? This would be a 5-6 million barrel a day loss per year. The oil sands are supposed to produce at most through a lot more heavy investment 4 million barrels a day in 2015.

That puts it into perspective.

Read what the Department of Energy thinks about peak oil here:
This is a must read. It's long, but it is worth reading. It is a great introduction as well to the problem and why it won't be easy to overcome as just planting some corn and turning coal to oil.
http://www.netl.doe.gov/publications...aking_NETL.pdf

I think we'll be on a plateau from oil production numbers I've seen till about 2008. After that we could start seeing a serious decline.

Jet

 

[FN FAL]

When do you think we'll see 5 bucks a gallon at the pump?

I have noticed the evening commutes home have gotten a little easier now that traffic seems to be thinning out.

 

[rediesmi]

Only $15 billion was spent by publicly traded oil companies in 2005 on exploration including Russia's, U.S.'s, Europe's, etc. . This is pitiful.

We NEED these oil companies to invest those profits into alternatives and stop stock-buybacks etc. It's almost like they're content to just let their share price go up and sit back and watch the world crumble from an energy crisis.

On CNBC yesterday one analyst had a good idea:
He would tax heavily the profits of the oil company that were not reinvested into alternatives or for energy exploration.

I hate taxes but that sounded like a good idea since we NEED THEM TO KEEP LOOKING or start trying to get oil from coal or shale or start planting corn!!

So if they reinvested those profits for new energy sources they wouldn't be taxed extra. If they decided to do a stock buy-back that money would be taxed first. Taxes sometimes can do good things and encourage things we need to encourage. Sound like a good idea? To me, kinda...

Jet

Hmmm I guess that's one way to handle it. Maybe the government could tell me how to spend my money too.

Don't be such an alarmist, once energy costs are high enough the alternative sources will become viable. The sky is not falling.

 

[Crash Pad]

When do you think we'll see 5 bucks a gallon at the pump?

I got $3 in the ATL now and it's not even hurricane season. I'm thinking $5 by July 4th. I remember people on this board taking amazing pride in there SUVs. Well done you bought a nuclear program for Iran. You also bought a couple holes in New York. Reap it.

 

[Phaedrus]

I knew it! A thread titled "Incredible Profits" was merely a soapbox for jetflyer to stand upon. Rave on.

 

[Phaedrus]

I got $3 in the ATL now and it's not even hurricane season. I'm thinking $5 by July 4th. I remember people on this board taking amazing pride in there SUVs. Well done you bought a nuclear program for Iran. You also bought a couple holes in New York. Reap it.

Typical. A few words thrown out that would require a tome in rebuttal. The apologia just ain't worth it sometimes.

 

[jetflyer]

War with Iran: $5.00

Katrina Part II: $5.00

Starting a Manhattan Project for alternatives to oil: Priceless

Jet

 

[jetflyer]

I can't help myself Phaedrus If I can educate one person, maybe they'll educate one person, etc. on the mother of all energy crises that is just beginning.

If you don't know what Peak Oil is don't worry. 99.5% of Americans don't know. Be the first on your block to know! Read an article below

For those interested in some reading material on what I and many others believe to be the most difficult problem modern man will have to face read some of these on PEAK OIL:

1) Roscoe Bartlett, Republican Congressman from Maryland just gave this new speech
Feb. 8th, 2006 to Congress.
This is a Wonderful explanation and INTRODUCTION from a Congressman and talks in depth about the Department of Energy Study:
http://www.peakoil.net/Publications/PeakOilSpclOrder%2315TextCharts020806Low.pdf
This speech above has a lot of visual aids too. Who doesn't like pictures?!

Roscoe Bartlett met with Bush about Peak Oil on June 29th, 2005. So Bush, no doubt knows about the coming oil supply problems. Here is the press release:
http://www.bartlett.house.gov/latestnews.asp?ARTICLE2900=7308

2)From Financial Sense Newshour with Jim Puplava:
http://www.netcastdaily.com/fsnewshour.htm
He has interviews with Peak Oil experts weekly on his radio show. You can listen to them from his site. He is interviewing Matthew Simmons Saturday.

3) Here is a recent Associated press article:
http://www.usatoday.com/news/world/2005-05-28-oil-shortage_x.htm?csp=34

4) A great site for PEAK OIL introduction:
www.yubanet.com/cgi-bin/artman/exec/view.cgi/8/15426

5) Article about Peak Oil coming around 2007-2008:
http://www.globalpublicmedia.com/articles/196

6) http://www.financialsense.com/energy/main.htm
Read as many of the articles here especially the Peak Oil ones
a) Peak Oil and what it means to you: http://www.financialsense.com/fsu/editorials/petch/2005/0703.html
b) Crude Awakening: http://www.financialsense.com/fsu/editorials/saxena/2005/0617.html

7) An investment firm that specializes in ENERGY, 321Energy, has daily news articles on PEAK OIL and OIL in general here: http://www.321energy.com/archives.php?c=oil
Canadian Economist talks about imminent Peak oil Problem: http://www.321energy.com/editorials/sprott/sprott070505.html

8) A GREAT BLOG with news updates daily all about PEAK OIL: http://www.theoildrum.com/
ANOTHER GREAT INTRODUCTION and where you can read about flat year over year production of the world oil:
http://www.theoildrum.com/storyonly/2006/3/1/3402/63420


9) Great Chat Group to look at Current Events, Peak Oil Discussion, Energy Technology, and Economics of Peak Oil: http://www.peakoil.com/forums.html

10) Iraq and the Problem of Peak Oil: http://globalresearch.ca/articles/ENG408A.html

11) The Association for the Study of Peak Oil and Gas (ASPO) has their website at: www.peakoil.net They have a new newsletter every month I believe, which talks about the newest developments on peak oil. They have done analysis on Peak Oil and predict 2010 for Peak Oil.

12) Here is the Oil Depletion Analysis Center (ODAC) site. They also have done analysis on Peak Oil and predict 2007-2008 for Peak Oil.They have new articles about peak oil all the time:
http://www.odac-info.org/

13) READ THIS from the U.S. Govt. Department of Energy. It is a must read. It's long, but it is worth reading. It is a great introduction as well to the problem and why it will be such a difficult challenge for mankind.
http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf

14) The Ultimate Doomer Site-He basically thinks we're screwed no matter what: www.lifeaftertheoilcrash.net -- Everything UNDERLINED is a link and you can explore almost all his sources. I recommend looking at as many links as you have time for.

15) http://www.energybulletin.net/
Daily articles on peak oil and ALTERNATIVES to Oil. Good site to learn about everything being done to help.

I think the U.S. will liquefy coal, use the Oil-shale of the Rocky Mountains, and adjust using every alternative imaginable. I think we'll have a very bad recession before things get better. How long will it take? I don't know, but the DOE study says decades.

 

[jetflyer]

If you don't know what Peak Oil is you have to find out.

Don't feel bad 99.5% of Americans don't have a clue what Peak Oil is....especially most of our Senators and Congressmen.

If you don't feel like reading all the links I posted atleast read Republican Congressman Roscoe Bartlett's speech to Congress from Feb. 8th which talks in depth about the U.S. Government Department of Energy Study on Peak Oil:
http://www.peakoil.net/Publications/PeakOilSpclOrder%2315TextCharts020806Low.pdf
There are pictures!! Lots of 'em...

Over half is visual aids. If you scroll to the bottom you can see the visuals that are too small to see mixed in with the speech.

This is going to be a serious problem that planting corn and digging up Canada isn't going to fix alone.

Please, Please, Please, guys take this seriously. Atleast read this......

Knowledge is power. Be the most powerful guy on your block

Jet

 

[Crash Pad]

Jet... Ok lets play that game. I'm on board. I believe everything you say and that the sky is falling. Now what? Now I should what? Write a letter to my congressman? Stop driving to work? Get my nuclear engineering degree? What is your big plan. Knowing something is useless without action.

 

[jetflyer]

Crash,

First off the sky isn't falling. This is just a natural phenomenon that we're going to have to deal with as a natural resource gets depleted. We as a world should have seen this coming but we were blind.

Advice:
Investments: What did well in the 70's?:
Commodities mostly gold and energy mutual funds(natural resources)

Prediction: Dollar will fall compared to other currencies, so invest internationally. It has been happening for some time.

Try to stay out of debt and save money.

I wouldn't buy a new hybrid yet. I would wait till the electric hybrid Plug-In vehicles come out soon. Bush has been touting these. I'd also wait till it's worth it financially for you to get a new car as well.

Diesel vehicles are also a good buy.

Sell your house and move closer to work? Downsize or rent? I think the housing bubble will pop soon. This may not be practical, and if you have a fixed rate mortgage and plan on living there forever even with gas at $10.00/gallon then don't move.

The housing bubble popping will only make the prices lower for a little while because rising out of control inflation will probably bring the price back up to the current level after a couple years.

Consider what would happen if your airline went out of business. There will always be people flying so they aren't all going to go under. If you're in one that is teetering on the edge make a back up plan. I'm sure we've all been doing that lately anyways.

Writing congressmen is a good idea, but Roscoe Bartlett has been talking to them for some time. They probably don't listen though. Maybe the senators, because they all seem just as clueless about our energy future.

--I personally am young and married and me and my wife were about to get a car when I learned about peak oil last year. We have delayed that indefinitely and delayed getting a house. We have two paid off vehicles and rent. We're investing in energy, and I'm highly leveraged in gold and silver bullion. I'm making a killing. I have made 45% on my gold investments so far this year because of my highly leveraged position.

--I changed from Comair Airlines to a good fractional recently. I think it should weather high oil costs pretty well, since they fly the rich. If this doesn't work out a friend works at a loan collection agency making around $40K and I could get a job there. My wife is a teacher so her job should be ok and she should get nice raises with inflation.

I only talk on here because I think it's an outlet for me. I feel like I have to tell someone. I'm sorry you guys have to live with my ranting, I just want everyone to know. My wife doesn't want to hear it and I don't blame her. I am pretty obsessed obviously and have read a ton of books and spend a couple hours a day reading about our energy future. I have my optimistic and pessimistic days. Lately more pessimistic because our leaders are idiots.

I also watch the world and it's become a hobby. Watch what is happening. The governments of the world(MAIN Leaders only) know what is going on. Watch the U.S., Russia, China, Venezuela, Iran, Nigeria, Former Soviet states, France, Germany, Brasil, etc. There is a lot more than meets the eyes. It is so interesting. People are positioning themselves. Russia is going to be very powerful in the future because of their vast energy resources. So will Venezuela.

I try to be positive. I want to think things will be ok. There are some pessimistic Peak Oilers. I try not to listen to them too much. I also don't think our future will be peachy. Maybe we'll all carpool and switch to alternatives and public transportation and be ok? I do know things will change, I just don't know how yet. I really just hope we don't have serious wars over this. This is a big possibility.

Enjoy today as much as you can. Go drive around the U.S. as much as you can, while gas is cheap. Go take that vacation. Have fun.

Adios,
Jet

 

[jetflyer]

Crash,

If you want to send something to your politician send this below. The editors of a Peak Oil blog located at www.theoildrum.com have finally gotten sick of the lack of intelligence on our energy problem in our government. They are sending this below to every politician. They're also encouraging their readers to spread it around. It has links to things like the current plateau in world oil production and a good introduction to peak oil below.

It's link is: http://www.theoildrum.com/story/2006/4/26/121441/891#more

The Politics of Oil: The Discourse Must Change
Posted by The Oil Drum Editors on Thu Apr 27 at 1:29 PM EST


Leaders of both political parties are expressing concern about the high price of gasoline. President George Bush announced yesterday that he was suspending deliveries to the Strategic Petroleum Reserve in order to make more oil available to consumers as well as putting on hold the traditional regulations requiring additives to make fuel burn cleaner during the summer driving season.

Meanwhile, Democratic leaders have had their own response to rising gas prices. Senate Minority Leader Harry Reid has announced his support for the Menendez Amendment, which would "provide more than $6 billion in relief directly to the American people by eliminating the federal tax for both gas and diesel for 60 days." Senator Charles Schumer recently called for a federal investigation to determine whether oil companies are withholding gasoline production, and House Minority Leader Nancy Pelosi has blamed high gas prices on the administration's cozy relationship with the oil companies, price gouging, and royalty relief.

The editors of The Oil Drum are ideologically diverse. Over the last year, we have created a forum at www.theoildrum.com to encourage an open, rational, and fact-based discussion of energy issues. While individual editors frequently express an opinion on a subject, we have never felt it necessary to take a unified position on any specific issue. That is, until today.

There's more... (913 words) | Comments (263) | Permalink |

We strongly feel that the leaders of both political parties are not only headed in the wrong direction with respect to gas prices, but we also worry that they fundamentally misunderstand the factors behind the current situation at gasoline stations around the US. Public statements by political figures over the past several days would seem to suggest that oil companies and their record profits are the sole factor determining the price of gasoline. Not only is this untrue, but it is dangerous to give the American people the impression that only oil companies are to blame. The American people need to understand that the phenomenon of high gas prices cannot be attributed to a single source. They also need to understand that no one political party will be able to fix our current woes.

The major factor that determines gas prices is the price of crude oil from which gasoline is derived. When crude oil prices are high, so are gas prices. The following are just a few factors that affect the price of a barrel of oil:

1. Oil companies do not single-handedly determine the price of oil. The price of oil is set on the crude oil futures market. Simply put, these prices are affected by supply and demand because, at present, oil trades in a global commodity market where increased demand or reduced supply in one place instantly translates into price shifts everywhere. A variety of publicly available information sources show that supply is relatively static at the moment, while world demand continues to grow as economies grow.
2. We have provided evidence many times at The Oil Drum that the output of major oilfields is declining and that we may now have reached a peak or plateau in global oil supply. Oil companies have not been able to increase production for a number of years, and it is unclear that OPEC is accurately reporting their reserves. Even if there were significant sources of high quality oil remaining, it is getting increasingly difficult and expensive to drill. These factors, along with aging infrastructure for oil exploration and a retiring workforce are also contributing to high oil prices.
3. The geopolitical situation is volatile, and an astute citizen may notice that every time there is news from Nigeria or Iran, the price of oil goes up because of the potential and real effects of these situations on world oil supply. Again, oil traders are fearful that the supply will not remain stable forever.
4. Countries like China and India are industrializing at a great pace, and while we are accustomed to obtaining oil at a comfortable quantity and price, it will be impossible (and immoral) to deny similar resources to these countries. China is working furiously to secure new oil supplies, and they're content to negotiate with countries we're reluctant to deal with, like Iran and the Sudan.

These points demonstrate that disruptions in the supply of oil that affect the price of gasoline at the pump are not just a temporary glitch. For various reasons--decreased discoveries of new oilfields, geopolitical instability, international competition for oil supply--we can no longer assume that we will be able to consume as much oil as possible, or ever get it again for $1.50 a gallon.

Demagoguery and grandstanding are not strategies for addressing our energy problems. As an alternative, the editors of The Oil Drum put forth the following recommendations:

1. It is nonsensical for political leaders of both parties to eliminate the gas tax temporarily or permanently as this will only worsen our dependence on oil by disincentivizing the innovation of oil alternatives and oil conservation efforts.
2. Both mainstream American political parties are doing their country a disservice by accusing convenient scapegoats of price gouging or price fixing instead of educating the public about how the price of gas is actually set.
3. Right now, governments should be focused on helping us cure our "addiction to oil." The answer does not lie in lowering gas prices, which will only encourage people to drive more and further waste our valuable resources. As the Department of Energy funded Hirsch Report on Peak Oil laid out, the consequences of not taking steps to transition away from oil could be dramatic to our economic system. Appropriate solutions include large-scale research, development, and implementation programs to improve the scalability of alternative sources of energy, other projects geared towards improving mass transit and carpooling programs across the country, providing incentives to buy smaller and more fuel efficient vehicles, and promoting a campaign to increase awareness about conservation.

The political discourse on this topic is simply so devoid of fact, and constructive discourse so buried and out of the mainstream, that we felt we needed to raise a voice of reason. Public officials will continue to misinform and obfuscate if we allow it.

The only solution is to educate the public about the most important problem we face as a generation. We, the citizens of the US and the world, must move our attention to this the issue of energy more than any other. We must hold our representative governments accountable for having an open and honest debate on the subject.

Simply put, we must learn more about where our energy comes from.

Jet

 

[PCL_128]

You guys really need to stop making threads about oil, oil companies, oil alternatives, or anything even remotely related to oil or oil byproducts. All it does is bring out the crazy conspiracy nuts like jetflyer that don't understand the most basic principals of the free market.

Peak oil is a fantasy in the first place that has been touted for the past 40 years by various wackjobs. However, just for the sake of argument, let's assume that we have indeed reached peak oil. (stop laughing, I know it's ridiculous too) As a result of reduced supply with increasing demand, gas prices would steadily rise to $5/gallon, then $7/gallon, eventually $10/gallon and so on. As this takes place, the energy companies would reap huge profits and invest them in alternative energy sources, hybrid cars, hydrogen cars, etc... so they will still have a product to sell after the oil runs out. The automotive companies would begin to sell massive amounts of electric and hybrid vehicles as they become more cost effective as the price of fuel rises. This would prolong the amount of time that the oil reserves would last, giving the energy companies even more time to develop new forms of energy. Eventually, everything stablizes and life goes on. No end of the world, no massive economic collapse, no wars, no nothing. The peak oil nuts are just that: nuts. The free market takes care of all this on its own if they frickin' government will just get out of the way and let free commerce work as it's designed to do.

 

[jetflyer]

PCL,
After you read the U.S. govt. DOE study, you still came to those conclusions?

Do you truly understand the scope of the problem?

If you don't, I can help you.

Jet

 

[PCL_128]

PCL,
After you read the U.S. govt. DOE study you still came to those conclusions?

Do you truly understand the scope of the problem?

No only that, but I've read the dozens of other documents and websites that you have posted over the past year or two about this (non)issue. Nearly all of it simply ignores basic economic principals, and even worse, a lot of it demonstrates that many of these "sources" don't even understand how known oil reserves are calculated. With all due respect to Mr. Bartlett, he is cherry-picking studies and quotes that support his predisposed theory and is obviously data mining. An in-depth study of oil reserves and oil-related economics (not to mention basic supply-side economics) will discredit any "end-of-the-world" peak oil nonsense. Trust the free markets.

 

[jetflyer]

PCL,

I have no doubt the free market will work.

I just think: Why should we wait till the oil price is high enough to cripple the economy to start the alternative movement? This is what Roscoe Bartlett is saying as well.

Let's be preemptive.

That's all.

Eventually you're right the free market will work, there is no doubt about that. Will we all be much poorer by the time it finds an equilibrium?

Well it may be too late to be preemptive anyways. The high prices are starting now and investment is beginning.

Jet

 

[PCL_128]

I have no doubt the free market will work.

I just think: Why should we wait till the oil price is high enough to cripple the economy to start the alternative movement? This is what Roscoe Bartlett is saying as well.

Let's be preemptive.

That's all.

Eventually you're right the free market will work, there is no doubt about that. Will we all be much poorer by the time it finds an equilibrium?

Well it may be too late to be preemptive anyways. The high prices are starting now.

Jet

The free markets don't work if the government "intervenes preemptively" as you suggest. Government intevention is always counter-productive. You will only make things worse if the government gets involved. The Nixon and Ford price controls are now widely regarded as disasters that only deepened the problems and extended the misery. The policies of FDR are also now considered by many historians and economists to have extended the great depression, not saved us from it. Sometimes it isn't pretty, but it's always better to just sit back and allow supply-side economics to work rather than try some convoluted "intervention."