Don't Blame those "greedy oil companies"

[ndn]

High IQ / Kelley Wright5/24/2008 12:01 AM ET
Don't blame those 'greedy' oil companies
As you fill your tank for your next summer trek, consider what stands in the way of a lot of domestic oil development: Congress.


As you fill your gas tank for your next summer trip, ask yourself how gas prices have reached current nosebleed levels. For many, the easy answer is to curse the "greedy" oil companies. Consider for a moment an alternative reason.

Oil is a commodity and therefore is subject to the laws of supply and demand. In the simplest of terms, when demand begins to put pressure on supply, prices go up; simple Econ 101. In a supply-and-demand situation, there are really only two options; lower demand or increase supply. I don't anticipate that the demand for oil will decrease, as Americans love their cars and love to drive. This leaves us with increasing the supply.

I know there are other fuel and energy alternatives, but none are mature enough or as readily accessible as oil and its byproducts at the present time. They may be in the future, but that doesn't help us out at the gas pump today. While research and development of fuel and energy alternatives will and must go forward, the supply of oil in the interim can be increased and America has vast resources that can be tapped into today.

Blocked in D.C.
Investors Business Daily estimates there are 1 trillion barrels of oil trapped in shale in the U.S. and Canada. Retrieving just a 10th of it would quadruple our current oil reserves. There is a pool of oil in the Gulf of Mexico that is estimated to be as large as any in the Middle East. There is an equally large pool believed to be in Alaska.The Chinese are attempting to tap into the Gulf oil supply by drilling diagonally from Cuba. I wonder what environmental safeguards they are using?

The fact is that there are environmentally safe methods of extracting oil from shale and drilling in both the Gulf and Alaska. Congress, however, continues to block these efforts. Just last week, the Senate voted to block any extraction from shale in Colorado. In essence, they voted to make your trips to the gas station more expensive, to make air travel more expensive, and to make heating your home more expensive.

That's something to think about in an election year.

Another topic: Social Security
Another issue that concerns many Americans these days is the sustainability of major entitlement programs like Social Security and Medicare. With all of Congress' talk about "saving and preserving" these programs, consider these facts about Social Security:

When Social Security (FICA) was introduced it was promised:

Participation in the program would be completely voluntary.

Participants would only have to pay 1% of the first $1,400 of their annual incomes into the program.

The money the participants elected to put into the program would be deductible from their income for tax purposes each year.




The money the participants put into the independent trust fund rather than into the general operating fund, would be used only to fund Social Security, and no other government program.

Payments to the retirees would never be taxed as income.

The millions who have paid into FICA for years and are now receiving a Social Security check every month -- and who then find they are getting taxed on 85% of the money they gave to the federal government to save for them -- may be interested in the following:

Social Security money has been removed from the trust fund and put it into the general fund so that Congress could spend it.

The income tax deduction for Social Security withholding has been eliminated.

Social Security annuities are now taxed.

Now contrast this with the fact that, after violating the original contract, the Congress passed a 100% retirement benefit for members who have served at least one term.

As President Ford said, "A government big enough to give you everything you want, is strong enough to take everything you have."

So instead of spending countless hours agonizing over which candidate to pull the lever for in November, you might be better served by asking your representatives and senators this question: Mr. or Mrs. Senator/Congressman: you are making a claim on what I have produced, which is to say you are asking me to serve you. How have you served me?

[kevinb]

Do you fish? This is a fishing website....not a place for misleading or uninformed propaganda. I will say this again. I WAS a former member of the Washington State Republican Party and remember believing this crap. I then pulled my head out of my a$$. I certainly don't have a problem with a good debate but when oil companies report record breaking profits,theirs a big problem. I'm growing tired of paying these prices at the pump,you and I both know the money we spend is going into these companies.

[A9]

The Chinese are attempting to tap into the Gulf oil supply by drilling diagonally from Cuba. I wonder what environmental safeguards they are using?

The fact is that there are environmentally safe methods of extracting oil from shale and drilling in both the Gulf and Alaska. Congress, however, continues to block these efforts. Just last week, the Senate voted to block any extraction from shale in Colorado. In essence, they voted to make your trips to the gas station more expensive, to make air travel more expensive, and to make heating your home more expensive.

I do not know if there is/aren't environmentally safe methods of extracting oil, but do the oil companies care about being environmentally friendly when it's just going to slow their drilling down and cost them more? No, of course not. Exxon still has yet to pay for the Exxon Valdez spill up north. That spill messed the lives of so many fishermen and ruined the ecosystem up there. Yet they still haven't paid the people who they are supposed to in the settlement. And the effects of it are still widespread today.

No, they didn't vote to make our trips to the gas station more expensive. Oil is traded on a world market. That means darn well the oil that is drilled in the gulf could go elsewhere, and there is a legit chance that it would if it is drilled.

If we want prices to go down we have to reduce our dependency on oil. Americans consume something like 25 barrels of oil per person? Absurd. Much higher then any other nation. We need to cut back our usage if prices want to go down, not just drill everywhere. I still am not opposed to just importing oil from all over the world where we don't have to drill in our backyard. Much of the oil reserves here are different then those in the middle east and require more work to get them into being the liquid gold we buy/consume....

[fish4brains]

. I certainly don't have a problem with a good debate but when oil companies report record breaking profits,theirs a big problem..

Yeah, because 8% profit is freaking CRAZY. Just who do they think they are making a whole 8%?! I saw on the TV that oil companies are bad so I am going to go with that.

[kevinb]

. I certainly don't have a problem with a good debate but when oil companies report record breaking profits,theirs a big problem..

Yeah, because 8% profit is freaking CRAZY. Just who do they think they are making a whole 8%?! I saw on the TV that oil companies are bad so I am going to go with that.

This is to easy.....

[A9]

. I certainly don't have a problem with a good debate but when oil companies report record breaking profits,theirs a big problem..

Yeah, because 8% profit is freaking CRAZY. Just who do they think they are making a whole 8%?! I saw on the TV that oil companies are bad so I am going to go with that.

On something like oil? That's huge. Nike's profit margin is something like 10%, and that is us buying shoes/clothes from outsourced labor sources in east Asia where conditions would be what many would consider sweatshops.....

[Drewp]

Drilling aint gonna do chit in the short term - though McCain and Bush would like you to think so. It would likely be ten years before offshore drilling would have any noticeable effects on gas prices. I can see the need for drilling but if Mr. Billionnnaire McOilson wants to drill, they should also be required to invest in R & D on alternative types of fuels. The only way to truely get away from these wicked gas prices is to get away from gas altogether. Though that won't happen overnight, it will take even longer if all we do is continue to try and find more oil.

As much as our gas prices suck, a lot of the world has been experiencing these gas prices for a long time. It's a global problem now that more and more humans are using oil as the population grows and particularly the middle class grows. Pitching offshore drilling as a means to find relief at the pump tomorrow is just a deceiving salesman talking. Even if McCain were elected president (which I'm pretty hopeful he won't be), and even if he were elected two terms, and even if he were able to get the drilling going while he was in office, there is no way the effects of offshore drilling wouldn't hit the market before he left the white house. So where does that leave us ten or even fifteen years down the road? Higher gas prices with no other viable energy options in sight? Sounds like a plan to me.

[lskiles]

Drilling aint gonna do chit in the short term - though McCain and Bush would like you to think so. It would likely be ten years before offshore drilling would have any noticeable effects on gas prices...Sounds like a plan to me.

President Bush had an energy plan when he first came to office that included drilling in Alaska. If his plan had been followed we would be still be. imo, under $2 a gallon. We did not drill in Alaska because the bleeding hearts and artists all screamed and yelled it would be bad. So the Democrat information service (TV news) told us all that it was bad. So congress said no.

fish4brains...I think you hit the nail on the head.

[Drewp]

McCain is against drilling in ANWR. If there's as much oil offshore as they say there is, we shouldn't need to drill in a place as fragile as ANWR.

[Gisteppo]

You asked for it, so please, go get a cup of coffee or a cold beer, sit down, and read this.....

The Chinese are attempting to tap into the Gulf oil supply by drilling diagonally from Cuba.

This is a falsehood. What the Chinese have done (and this was over a year ago, so not necessarily news) is requested a form of permit from the Cuban government to do a research study on the oil drilling capacity and ability to reach oil from the Cuban coastline. Firstly, they wont be able to get the appropriate angle unless they drill horizontally, and secondly, you are talking about a 5-10 year research effort, followed by prospecting, which takes another few years. Don't plan on it, but its nice to use yellow people to give John Q 6 Pack someone to point the finger at.

Just last week, the Senate voted to block any extraction from shale in Colorado.

This made me curious, so I checked on it. This was a 15 to 13 committee vote. The reason they decided not to blanket-open drilling in Colorado is the oil company hasn't done the federally-mandated environmental impact study. They have to do these everywhere, on every project. It doesn't cost the company much money (generally a study like this is a 3 month, $100k project, which we all know is a drop in the bucket), and very little time, but they seem to want to use the desperation of the public to allow the withdrawal of what minimal environmental safeguards we have left. It drives me insane that they use this tactic when they know full well that a quick EIS is easy and cheap. Sen Mary Landrew will be working on getting this moratorium lifted once the oil companies get things handled on their end.

Yes, oil companies get 8% profit margins. This is lower than Nike, Microsoft, Chevrolet (oh wait, they are in the toilet right now thanks to no cars with decent mileage), furniture makers, and Sony. Guess what, these companies are selling LUXURY items. These are not things we need because they are a necessity, they are things we WANT. Profit can be larger for items which are not needed to be productive or survive.

Oil companies are profiting substantially on INFRASTRUCTURE. Their product is not a luxury, its required for us to move in and around our cities, it is required to get us to and from work. It is necessary for goods and services to get from where they are to where they are needed. Oil is directly related to our food supply. Profiting 8% on a required item is actually a little high. Electric utilities? Water districts? Farmers and growers? Fishing and meat producers? NONE of them make 8% profit, it is generally closer to 5%. They do this not because they want to make less money, but because their product is a function of daily life, and it needs to remain affordable to the masses to keep the rest of the economy flourishing.

Lew, you just keep tee-ing up the easy ones to me, man....

President Bush had an energy plan when he first came to office that included drilling in Alaska. If his plan had been followed we would be still be. imo, under $2 a gallon. We did not drill in Alaska because the bleeding hearts and artists all screamed and yelled it would be bad. So the Democrat information service (TV news) told us all that it was bad. So congress said no.

ANWR is one of the most remote and untouched places on our fine planet. Shouldn't we leave it that way?

So here is your $2 fuel theory<Tom Doggett, Reuters>:

The Energy Information Administration, which is the Energy Department's independent analytical arm, estimated that if Congress had cleared Bush's ANWR drilling plan the oil would have been available to refiners in 2011, but only at a small volume of 40,000 barrels a day -- a drop in the bucket compared with the 20.6 million barrels the U.S. consumes daily.

At peak production, ANWR could have potentially added 780,000 barrels a day to U.S. crude oil output by 2020, according to the EIA.

The extra supplies would have cut dependence on foreign oil, but only slightly. With ANWR crude, imports would have met 60 percent of U.S. oil demand in 2020, down from 62 percent without the refuge's supplies.

If it went into full production at the earliest possible date, it would be 2020 before we saw a 2% decrease in foreign oil imports. 18 YEARS from its inception!!! What is the point of drilling such a small reserve and perpetuating the issues we have with the current Alaska Pipeline for that small of a benefit? Even if we stuck a well in every single oil field in the US, we would just barely meet 100% of the demand. Once we had all this oil flowing, we would still be at the mercy of the oil execs because they would blame congress for the inability to build refineries (which they know is total BS because they have been slowly closing them since the 70s) and retain their fundamental choke point for price control.

Don't believe the propaganda that supply needs to increase to meet demand. Demand needs to decrease to force other technologies to the forefront. I used to think that controlling the oil companies would be effective, but they grease too many pockets in Washington DC. We need to completely eradicate them from our daily lives, or at least drop our necessity to the bare essentials.

E

[kantill]

I really don't know what upsets me more; the fact that someone would write such a load of BS or the fact on how many people will now believe it. Blaming the people for the gas prices, that is just sick and just shows how much we as a country is controlled by the oil industry.

[A9]

Drilling aint gonna do chit in the short term - though McCain and Bush would like you to think so. It would likely be ten years before offshore drilling would have any noticeable effects on gas prices...Sounds like a plan to me.

President Bush had an energy plan when he first came to office that included drilling in Alaska. If his plan had been followed we would be still be. imo, under $2 a gallon. We did not drill in Alaska because the bleeding hearts and artists all screamed and yelled it would be bad. So the Democrat information service (TV news) told us all that it was bad. So congress said no.

Sorry lskiles, but if they drilled in ANWR it would only lower the price per barrel of oil maybe $.75 cents at most. With barrels of oil well over $100, the effect on gas prices would be unnoticeable.

[kantill]

Just like when you have to trouble shoot any issue you need to look at the big picture, more oil will solve the symptom and not the cause. As it has been said on this forum and many more others that I belong to, we need to rethink how we are doing things and a complete change is not the answer. If we solved the oil problem tomorrow and the answer is to have anybody go this new car how many of us could do this? Now if the answer to the oil problem was an add-on to the cars on the world how much more likely could that happen. The only problem is the second answer will not get anybody super rich; it would just hurt oil industry. That includes their employees, people with jobs and families.

After my first bit of rage over the original post I thought about it there is a bit of truth to his statement, but not in the way the author was meaning. I know you will hate me for this statement but let me explain:

To say that we are the reason that gas prices are so high is like saying the reason the drug dealer is so rich is due to the people that buys them. I am not saying that the drug isn't evil or wrong but the "people" do give him his power the same way we give the oil industry power. So in fact yes because if we keep "needing" gas they will keep rising the prices. I know using the drug dealer seems somewhat extreme and I could have used almost any supply and demand instead.

The reason the oil industry profits keep going up every year is not a big shocker, in any company if you have a profitable year the goal is to have a better one next year and so on.

So to sum up drilling for oil will not help us now, too little too late.

[lskiles]

I guess we could all bring out our quotes, but the point is mute now about ANWR. The Dems screwed any chance we had to advance there.

Electric utilities? Water districts? Farmers and growers? Fishing and meat producers? NONE of them make 8% profit, it is generally closer to 5%. They do this not because they want to make less money, but because their product is a function of daily life, and it needs to remain affordable to the masses to keep the rest of the economy flourishing.

I am so thankful for these industries and wish the big-mean oil companies could be this beneficent.

I agree that we need to reduce our dependance on oil, but I do not agree with blaming the oil companies for current prices. As was mentioned they are only making about 8% which is healthy, but not over the top. The price of gas has not even increased enough to cover the rise in price for crude yet...or so I am told.

Generally cash farm profit margins vary greatly from farm to farm, but on an average most Nebraska farms earn profits ranging from 10% to 20% of total cash farm income.

According to a survey by the National Association of Home Builders the
average profit margin of a new home is 9.8%.

Connecticut Attorney General Richard Blumenthal is asking state utility
regulators to cut rates for Connecticut Natural Gas customers by $14 million, saying the company exceeded its permitted profit in a 12-month period that ended April 30.

In a Wednesday statement, Blumenthal said that based on six months of filings with the state Department of Public Utility Control, the Energy East subsidiary is "earning significantly higher profit than the DPUC authorized" in a 2007 rate case.

The AG said CNG had a profit margin of 14.27% in the year that endedApril 30, above its authorized profit margin of 10.1%.

Sorry, E...I got to call BS on you for that one.

[A9]

I guess we could all bring out our quotes, but the point is mute now about ANWR. The Dems screwed any chance we had to advance there.

There was very little if ANY potential there!!!](*,)

Why tear that Wildlife Refuge up for a small pool of oil underneath it???

I do find it intriguing that gas prices go way up and Exxon posts record profit numbers.....Still don't wanna put even just a little blame on them?

[Gisteppo]

Oh Lew, you mighta stuck your foot in poo here:

...on an average most Nebraska farms earn profits ranging from 10% to 20% of total cash farm income.

Buddy, your statistic includes two major maladies:

1) total cash farm income, which includes things like custom farming, equipment co-op and leasing, CRP land (federal conservation program), and contractual obligations with maintenance and equipment purchasing.

2) Nebraska is one of the most heavily subsidized states in the US! They have these profits because they are growing ethanol corn, not food product. Find me a statistic based on wheat, canola, soybeans, cauliflower, string beans, or any other common nationwide crop.

And here, you are making my own point for me:

Platts News Service--19Jun2008 wrote:
Connecticut Attorney General Richard Blumenthal is asking state utility
regulators to cut rates for Connecticut Natural Gas customers by $14 million, saying the company exceeded its permitted profit in a 12-month period that ended April 30.

In a Wednesday statement, Blumenthal said that based on six months of filings with the state Department of Public Utility Control, the Energy East subsidiary is "earning significantly higher profit than the DPUC authorized" in a 2007 rate case.

The AG said CNG had a profit margin of 14.27% in the year that endedApril 30, above its authorized profit margin of 10.1%.

Because of the oversight, thanks to the regulations in place on a utility, they were found to be profiteering, and were handily controlled within 12 months. Proof that governmental controls on an industry can and will control costs...............................................

Oh, and the point is moot in ANWR....

Funny thing is, to what role does the oil company play? Are they just a toy of whimsy, pushed and pulled through life by market forces, always at play? Or are they like every other vertically aligned multinational (owning everything from the raw product all the way to the pumping station like Exxon does) which make sure they place enough people in enough places that they retain control of the commodity.


Germany has put forth a legal intent to remove oil from commodities markets. They are not the first, and if the G8 can get together on this thing, they might be able to at least remove one source of price inflation. With any luck, it will fail, gas will go to $8 a gallon, and all the idiots still driving 5mpg gigantic vehicles 100 miles a day will finally change their ways.

E

[lskiles]

E, you missed the whole point of my reply...or side-stepped it?!?

You said "NONE of them make 8% profit, it is generally closer to 5%" and I was calling BS on that statement alone.

I just can not resist when people make wild general statements like that...

I know, I know...I make wild general statements too and expect to be called on them.

Our own wild general statements are acceptable to make a point while other's tend to make everything they say suspect.

[Marc Martyn]

ANWR is nothing more than a political carrot dangling in front of the American voters in an election year:

Estimates of oil reserves

In May of 2008 the Energy Information Administration released the following report:

"The opening of the ANWR 1002 Area to oil and natural gas development is projected to increase domestic crude oil production starting in 2018. In the mean ANWR oil resource case, additional oil production resulting from the opening of ANWR reaches 780,000 barrels per day in 2027 and then declines to 710,000 barrels per day in 2030. In the low and high ANWR oil resource cases, additional oil production resulting from the opening of ANWR peaks in 2028 at 510,000 and 1.45 million barrels per day, respectively. Between 2018 and 2030, cumulative additional oil production is 2.6 billion barrels for the mean oil resource case, while the low and high resource cases project a cumulative additional oil production of 1.9 and 4.3 billion barrels, respectively." [23]),

This means that if drilling in the ANWR was to start in 2008 that the first barrel of oil would arrive in 2018 and that the oil arriving has a 50 percent chance of being 2.6 billion barrels. The United States currently uses 8 billion barrels per year.

The report also states:

"Additional oil production resulting from the opening of ANWR would be only a small portion of total world oil production, and would likely be offset in part by somewhat lower production outside the United States. The opening of ANWR is projected to have its largest oil price reduction impacts as follows: a reduction in low-sulfur, light crude oil prices of $0.41 per barrel (2006 dollars) in 2026 for the low oil resource case, $0.75 per barrel in 2025 for the mean oil resource case, and $1.44 per barrel in 2027 for the high oil resource case, relative to the reference case." [24])

For the average case, drilling in ANWR would reduce crude oil by 75 cents, out of a current $130, in 2025. This amounts to about a 0.5% change. The total production from ANWAR would be, in 2024, approximately 1% of the United States needs.

McCain is against offshore drilling. ......wait, now he is for off shore drilling. Another political carrot.

[Jesper]

There's no logical reason for not drilling off shore, aside from some misconception that the big oil companies apparently almost intends to spill some oil on purpose. Denmark, Norway, Holland & Germany; countries generally considered at the top of the list when it comes to being environmentally conscious all have drilled off shore for decades, and without any major accidents as far as I'm aware.

I'm all for saving energy and using alternate energy sources such as wind mills etc, but most oil these days is used for commercial freight/travel by ships and planes. Last time I checked there's no alternate for these vessels, and there won't be for a foreseeable future.

To lower the price on oil, you can either increase supply or lower the demand. Doing both would be even better.

[kantill]

I'm all for saving energy and using alternate energy sources such as wind mills etc, but most oil these days is used for commercial freight/travel by ships and planes. Last time I checked there's no alternate for these vessels, and there won't be for a foreseeable future.

Most commercial freight ships run diesel so we alternates for them aka bio-diesel.