Oil Companies continue to fleece Americans

[Freak Out]

Re: Oil Companies continue to fleece Americans

So you don't know what the purpose of the gas tax is in this country?

I see why they do it, I just don't agree with it. Too much government interfering with the free market.

No you don't.

[Partial]

Compared to other countries our PT sucks ass. We are completely dependent on fuel and personal automobiles.

Agreed, but if you look at cities in other countries, they tend to be smaller, with more people centralized and more ma and pop type stuff. We're far too spread out for public transportation. I use it, and its great, but the buses are going non-stop all day and 3/4 of the time there is one person on it or less.

[Partial]

And why should the government get a cut at all? What are they providing in the process?

Well, roads for one thing.

OK, and that can't come out of the trillion other tax dollars? Gas has ridiculous tariffs on it because its essential. If you were paying twice the price you should be for your clothing or food would you think its ok?

[3irty1]

And why should the government get a cut at all? What are they providing in the process?

Well, roads for one thing.

OK, and that can't come out of the trillion other tax dollars? Gas has ridiculous tariffs on it because its essential. If you were paying twice the price you should be for your clothing or food would you think its ok?

I've noticed that you excel at this type of speculation. The taxing system and government budget are created by experts. Its outrageous to make claims that they should tax less as if it were just that easy.

That's like me going up to an intersection and bitching about the red light. Some engineer set the timing on that light, took into account all the other intersections around it and calculated how to make the whole system work.

Sure we all bitch about gas prices and red lights but to say how other people should do their job while knowing nothing is pretty retarded.

[Partial]

That's not what I am saying at all. Gas is taxed like crazy. Think stamp act crazy. Yet I don't see a Boston Tea Party. All the companies are based in Texas for a reason. No state income tax. They charge very high prices for a reason. To make money. Why do they need so much revenue to make money? Because half of their income is going to the tax man. Then, you've got double 12% social security for the business on earnings. It's ridiculous. Not only is the consumer paying almost 20 cents a gallon to the federal government, they're paying another 40+ to the state. At 3 dollars a gallon that is 15% taxation to the consumer, and what about all the taxes on the crude oil, the importing, the taxes on the profit of the business, etc. Dumb dumb dumb.

You know first hand that I'm a pretty liberal son of a bitch who just runs his mouth for fun on here, but when it comes to punishing businesses I'm 110% against that. It is a regressive way of doing things.

It's just ass backwards to me that the person who gets screwed the most is the business owner providing the gas to the public. They see very little profit, and any chance they have of giving themselves a few more customers is nullified with Wisconsin's minimum mark-up laws.

I don't blame the oil companies for having record profits. The population is growing, we're becoming more of a selfish nation where every man, women and child needs an automobile. It makes sense. What is ridiculous is how the government tries to make the provider of many jobs pay way more than their fair share, while also making the consumer pay a hefty tax in addition to forcing the prices higher for the consumer.

[MJZiggy]

And why should the government get a cut at all? What are they providing in the process?

Well, roads for one thing.

OK, and that can't come out of the trillion other tax dollars? Gas has ridiculous tariffs on it because its essential. If you were paying twice the price you should be for your clothing or food would you think its ok?

Nah, that money's going to fund the war. By the way, you might want to find out what they're paying for their cheap gas in Europe while you're at it...

[Freak Out]

There Is No Gas Shortage
But Washington, Wall Street, and ethanol and oil and gas companies want you to think there is, says automotive expert Ed Wallace

by Ed Wallace

"They see speculation in the market, I see decline in global inventories. I don't think this is a big surprise, that we've had a jump in price when there has been a decrease in crude inventories."— Energy Secretary Sam Bodman, Bloomberg News, Mar. 5, 2008

"It should be obvious to you all that the [gasoline] demand is outstripping supply, which causes prices to go up." — President George W. Bush, Associated Press, Mar. 5, 2008

One wonders if verifiable facts ever get in the way of this administration's statements on issues that are critical to the average American's wellbeing. After all, last time I checked, when politicians are elected to public office, or appointed, as is Energy Secretary Samuel W. Bodman, they must take an oath to the American people before assuming their new positions. How can they forget a sacred oath so quickly? Were they daydreaming when they took it, so it never meant anything to begin with? Maybe it's just another promise you have to make to get into office: When you're securely incumbent you can ignore even solemn oaths you took.

Obviously, the two quotes that led this article came from discussions concerning the current high price for oil on the futures market. Bodman appears to be protecting the speculators in oil, as opposed to looking after the interests of all Americans. President Bush, apparently, has never talked to the Energy Dept.'s Energy Information Agency to see whether gasoline demand is actually up. More troubling, the writer of that particular Associated Press article obviously didn't look up the EIA's numbers to verify the President's assertions. They weren't accurate.

1. There Is No Shortage

Gasoline reserves on hand are at the highest levels since the early 1990s, which is remarkable considering the nation's refineries have been cutting back on the production of gasoline because their margins have declined. In fact, average gasoline reserves on hand have risen since this past October, while oil reserves in this country have gone up virtually every week this year—and only fog in the Houston Ship Channel that kept oil tankers from unloading their crude one week kept it from being every week.

In the same Bloomberg article that quotes from Bodman's CNBC appearance on Mar. 4, he also said that it was thanks to ethanol that the gasoline problem isn't even worse. He then added that the fact that making ethanol is forcing up prices of other farm commodities, including hog and chicken feed, is "nowhere near as important as trying to relieve pressure on [gasoline] supplies."

Of course, there is no pressure on gasoline supplies in this country as of today, but Bodman's statement must have made eyes roll among the executives at Pilgrim's Pride PPC; the Pittsburg, (Tex.) poultry producer announced 1,100 layoffs on Mar. 13, closing one processing plant and 6 of their 13 distribution centers because their company's outlay for chicken feed went up $600 million last fiscal year and was on track to increase by another $700 million this year.

Here's the scorecard, in case you missed it. There's no shortage of gasoline or oil in the U.S. today, and we have near-record reserves on hand. Meanwhile the Congressional mandate for ethanol has jacked up the price of chicken feed for Pilgrim's Pride, which is the U.S.'s largest processor of chickens and turkeys—by $1.3 billion. And that's for just one company processing chicken. This is what passes for acceptable to our Energy Secretary?

2. Demand Is DOWN, Yet Prices Are UP

Just so we can all get on the same page, here are the verifiable facts on oil supplies, production, and gasoline demand.

In January of this year, the U.S. used 4% less petroleum than we did a year ago. (Oil demand was down 3.2% in February.) Furthermore, demand has been falling slowly since July of last year. Ronald Bailey of Reason Online has pointed out that worldwide production of oil has risen 2.5% in the first quarter, while worldwide demand has grown by only 2%. Production is expected to increase by 3.3% in the second quarter, and by as much as 4.1% by the third quarter. The net result is that the U.S. daily buffer for oil production against demand, which was a paltry 1.5 million barrels as recently as 2005, is now up to 3 million barrels in excess capacity today.

So what is going on here? Why would our Energy Secretary say there's a supply and demand problem when none exists? Why would he say that speculators have little or nothing to do with the incredibly high price of oil and gasoline, when it's clear they do? President Bush—a former oilman—gives the ever-growing demand for gasoline as the primary reason prices are so high, yet that notion can be dispelled with one minute of research. That's the problem with rhetoric; it rarely matches the facts.

3. Speculation is Up, and the Dollar Is Down

On the same day the President and our Energy Secretary made those foolish comments, no less an authority than ExxonMobil (XOM) Chief Executive Officer Rex Tillerson was quoted by Marketwatch as saying, "The record run in oil prices is related more to speculation and a weakening dollar than supply and demand in the market." He added, "In terms of fundamentals, fear of supply reliability is overblown."

As for the speculators, in 2000 approximately $9 billion was invested in oil futures, while today that number has gone up to $250 billion. Now, if any publicly traded company had an additional $241 billion put into its stock in the same period, its stock would rise out of sight too—even if the company was not worth anywhere near that amount of market capitalization.

Moving on to the weak U.S. dollar as a primary cause for skyrocketing oil prices—there is "some" truth in that statement. But consider this: The dollar has depreciated 30% against the world's currencies since 2002, while the price of oil has gone up 500%. So is it the weak dollar that has caused a 500% increase in the price of oil, or is it the extra $241 billion worth of speculation? You can make the call on that one.

Possibly just to ensure oil prices don't respond to real-world market conditions, Goldman Sachs (GS) forecast on Mar. 7 that turbulence in the oil market could cause oil to spike as high as $200 a barrel. This flies in the face of all known information—but then again, Goldman Sachs is the world's biggest trader of energy derivatives, and its Goldman Sachs Commodities Index is a widely watched barometer of energy and commodities prices.

What Is Washington Thinking?

Rounding out the list of experts discussing our oil and gasoline situation is Bill Klesse, head of San Antonio (Tex.) Valero Energy (VLO). He spoke in San Diego a week after those comments from Goldman Sachs, the President, and Secretary Bodman. Believe it or not, Klesse said poor margins may cause Valero to sell one-third of its refinery operations; he stated that poor margins in recent months had caused planned refinery expansions—which would have produced 500,000 more barrels per day—to be canceled. Moreover, according to a report from Reuters on Mar. 11, 2008, Klesse recently released the information that gasoline production has been curtailed in response to slowing demand.

Imagine that: Refiners cut gasoline production, yet gasoline reserves have grown to their largest since late 1992. So much for "surging demand."

Klesse also called for the government to start imposing a tariff on imported gasoline to protect U.S. refiners' profits. Protectionism? As famed economist John Kenneth Galbraith correctly said, "In America, the only respectable form of socialism is socialism for the rich."

Which takes us back to the original question: Why is Washington doing everything it can to convince us there is a shortage when there isn't one? After all, the only people they're protecting are those heavily invested in oil futures—and that's to the detriment of all other Americans.

We're Paying for What?

When it became undeniable that poor decision-making by company executives had put a respected 85-year-old U.S. institution in financial peril, why did the Federal Reserve rush in to save investment bank Bear Stearns (BSC)? Of course, we need to restore confidence in our financial institutions, but why protect the personal assets of those who were responsible for the mess? Both the corporation's officers and its board members should contribute their personal assets toward saving the bank they put in the ditch—the bank all of us are going to pay to bail out.

Instead, the Bush administration is protecting those responsible for creating yet another speculative bubble in oil futures, and is protecting investors in the ethanol industry—much to the detriment of food-processing companies such as Pilgrim's Pride. And the net result of all this is that the prices of crude and gasoline rise ever higher thanks to a "shortage" that does not exist, while food costs are soaring thanks in part to the ethanol mandate.

The Federal Reserve lowers interest rates, but the cost of mortgages goes up six weeks in a row—and last month Bank of America (BAC) credit-card holders started being charged more than 24% interest on new purchases.

This is what they call "Republican Prosperity?" Ronald Reagan was both right and wrong when he said, "Government is not the solution, government is the problem." And government is still the problem. Instead of a fair and open market they gave us a free-for-all marketplace with no regulations at all, which lately these "bubble boys" have sent south for all of us.

One would guess that Washington missed the obvious: Protect all U.S. consumers and you're also protecting business expansion.

Ed Wallace holds a Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA. His column heads the Sunday Drive section of the Fort Worth Star-Telegram, and he is a member of the American Historical Society. The automotive expert for KDFW Fox 4 in Dallas, Wallace hosts the top-rated talk show Wheels, Saturdays from 8 a.m. to 1 p.m. on 570 KLIF AM in Dallas.

[Little Whiskey]

"17% of all Statistics are made up on the spot"

[Scott Campbell]

And why should the government get a cut at all? What are they providing in the process?

Well, roads for one thing.

OK, and that can't come out of the trillion other tax dollars? Gas has ridiculous tariffs on it because its essential. If you were paying twice the price you should be for your clothing or food would you think its ok?

It's a use tax P. The people using the roads most have to pay the most. Makes perfect sense to me. This is one tax I can support. It's regressive!

[retailguy]

Ok, I can't sit back and read this thread any longer. I knew it was just a matter of time before the "conspiracy theories" got posted. I guess it was inevitable to a certain extent.

The posted article from the "expert" is as slanted for what it doesn't say as it is for what it does say. Clearly, the main purpose is to bash the President. Hey, nothing new there, he's been the "popular" punching bag for about 3 years now.... But, this article really shows it's bias by what it DOES NOT say.

There is a clear explanation why gasoline stocks are at their highest stock levels. It's really simple. The gasoline market is in contango. What is contango? It is a market structure that shows that gasoline will be worth more in the future than it is today. It is about the ONLY petroleum product that has this market structure for the past six months. When it exists, the people that buy and hold, buy and hold. That's what they're doing. It is no different than buying and holding a mutual fund because you believe the fund price will increase.

Crude is, and has been, severely backwardated (not in contango) for the past six months. He doesn't mention crude stocks, but they are probably at their LOWEST levels in recent memory. Why? The market structure has suggested that crude will be worth less in the future than it is today. So, refiners buy what they need to keep the refinery in production, and little extra... Makes business sense, NO?

Perhaps this "expert" should stick to his Saturday morning auto program and leave politics to someone without a huge bias against our President. Wait, if that were the case there wouldn't be ANY political news....

Back to oil. Here's my take from 15 years following and working in the business. When this country makes a "strategic" decision NOT to drill for oil in some of the most plentiful places on earth - (Alaska, the coast of California, the Coast of Florida, the Gulf of Mexico...), then by default, you become more dependent upon those countries that DO decide to drill for the oil they have. Those countries also have "more influence" over commodity prices than you do, and hence you pay what you have to pay, when you have to pay it. We made a choice, now we must live with it. Perhaps someday, the American public will try to educate itself before it complains and criticizes. Nah, that's another pipe dream...

If this Government, (with the support of it citizens) came out and announced that we would "explore" drilling in Alaska, oil prices would FALL overnight, before we even had the chance to start the permitting process.

This is not really complicated. It's basic supply and demand. Crude comes in many forms from really sweet to really sour. Really sour crude is plentiful, BUT, the yield per bbl of Gasoline is lower and emissions are higher. That's common sense, right? That means the refiners have to work harder to get the same amount of gasoline (and run more crude, and get extra, more undesirable products too, ie. Sulfur, Asphalt, Coke, etc), and also produce higher emissions, and we get higher prices because it's more difficult and expensive work, which in some cases requires retrofitting a refinery to run it.... Case in point, BP just spent a couple of billion (yes, billion) refurbishing their refineries in Toledo Ohio, and Whiting Indiana to run Canadian crude, which is so heavy and nasty that it requires being mixed with condensate just to be fluid enough to flow in a pipeline...

Now, back to retirement....

[Freak Out]

If this Government, (with the support of it citizens) came out and announced that we would "explore" drilling in Alaska, oil prices would FALL overnight, before we even had the chance to start the permitting process.

So were not exploring and drilling here?

[The Leaper]

So were not exploring and drilling here?

Nope. The Alaskan Pipeline is full of nacho cheese sauce.

[retailguy]

So were not exploring and drilling here?

Nope. The Alaskan Pipeline is full of nacho cheese sauce.

Yep, that same cheese sauce that the Caribou stand under during the winter to stay warm.

Yes, we are actively taking crude out of Alaska, but, really, how much remains that we have chosen not to go after? What new drilling are we doing? That was my point.

Of course, I know you guys know that, but just want to be combative.... Enjoy the nachos jokes.

[Harlan Huckleby]

that was a joke?

[Scott Campbell]

When this country makes a "strategic" decision NOT to drill for oil in some of the most plentiful places on earth - (Alaska, the coast of California, the Coast of Florida, the Gulf of Mexico...), then by default, you become more dependent upon those countries that DO decide to drill for the oil they have. Those countries also have "more influence" over commodity prices than you do, and hence you pay what you have to pay, when you have to pay it. We made a choice, now we must live with it.

Great post. Here's my take. We don't have a whole lot of options to get out of this mess. I only see 2 things you can do.

1) Reduce our dependency on foreign oil. (Drill more of our own.)
2) Reduce our dependency on oil. (fund research on alternative energy.)

That's it. The little congressional dog and pony show critisizing profit levels does NOTHING to address the problem. All it was intended to do was enhance approval ratings.