Oil, will it be the last straw for America?

Cavolina

There are many more factors than what you are considering. OPEC controls the price of the oil they sell, regardless what the oil companies decide to do. And the reason they have the power to greatly influence the price is because they have enough of the supply to control it. Additionally, newly discovered oil is becoming harder to find, and more expensive to produce, thus not enabling oil companies to undercut the price of OPEC to bring the price down. Also, oil is a commodity like other commodities that are traded according to what supply and demand dictates. Much oil can only be produced in the U.S. at higher prices because some wells may not be huge producers and are therefore marginal, and they may require more costly stimulation techniques to squeeze more production from mature fields.

You are ignoring all the other aspects of the operation of an oil company. First of all, if you simply pump the oil already discovered out of the ground at a profit, you are not replacing your reserves and you simply bleed your company out of existence in a few years. Huge sums of money need to be plowed back into research and exploration for new reserves. It is simply not a matter of drilling for new oil either. Political, environmental, and technical obstacles abound. For drilling deeper and for extracting difficult or unique reservoirs, money needs to be spent on new and better exploration and drilling techniques.

Then after the oil is found and successfully produced, educate yourself on the multitude of obstacles or hurdles to bring the gasoline or other fuel to market, including transporting, refining, and marketing. Then after all of that is done, deal with the politicians who place a tax on your product that is several times more than the profit you make from all of your work on each and every gallon of gas, all during the time they are accusing you of making obscene profits. I think this is an insult to hard working people.

Bottom line, the oil companies make less profit than many other business sectors in the country. They do not deserve to be singled out and possibly taxed even more, as some politicians are currently suggesting, which would only accomplish the exact opposite to what the public needs.

Profit (or added value) is an adder, not a multiplier, so an extra $15 gets passed on as an extra $15, not $105. Are you going to write chapter 3? I'm with you through two chapters, but I think we will disagree on the impact of oil price on society as we move into the '80s.

source

And last but not least:

Update 5: Bush Orders Probe Into Gas Price Cheating

Maybe a slight difference is Bush simply not refilling the reserves to replace depletions quite according to schedule, whereas Clinton was depleting the reserves?

cavolina, Where do you think oil companies buy their oil from? If their raw material cost changes from $35/bbl to $75/bbl, the margin of profit at ten percent changes from $3.50 to $7.50 - or more than double. That's the reason oil companies are showing such huge profits compared to when oil was selling at $35/bbl.

Engineer

In the oil company I worked for profit was not an adder it was a multiplier.

The markup was 700% or 7 times on a refined product.

Senator says Senate must study breakup of oil firms

RAW STORY
Published: Tuesday April 25, 2006

In a speech today on the Senate floor, Sen. Charles Schumer (D-NY) proposed considering the breakup of oil firms.

"We also have to reexamine whether having only a handful of giant oil companies can coexist with the needs of the American consumer and a rational energy policy in this country -- I do not believe it does," Schumer declared. "And so I'll be offering an amendment to the supplemental that will require a complete examination as to whether or not we should break up the big oil companies."

"Enough is enough," the New York senator added. "We have no competition. There are signs of it. I've talked to business leaders who buy oil and gas products, major, conservative Republican business leaders, and they don't believe the market is on the level."

Schumer's full speech follows.

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"The president today just spoke about high gas prices. And to listen to the president, you'd think that it's the local gas station that's the problem. We all know it's the big oil companies who are causing these massive price increases that go way beyond what supply and demand would merit.

"There were five words missing from the president's speech today: Get tough on big oil. The president refuses to do that.

"All the gouging bills that we've heard about that are coming from the other side don't mention the big oil companies. They act, again, as if the local gas station -- talk to your local gas station people. They're getting these prices from the big companies, and they have no choice to do what they do.

"The president doesn't touch his friends at the big oil companies. It's nice that the president is finally talking about gas prices, but talk is cheap and gas isn't.

"So America's security won't end with protecting our ports. We have to become energy secure as well. Gas prices are skyrocketing. And anyone who tells you that it was supply and demand that raised the price 40 cents in the last month, is not looking at the numbers of supply and demand, which did not change terribly dramatically.

"If $75 a barrel, $3 a gallon isn't a wake-up call to this country, then what is?

"And prices are going to continue to go up. If we do nothing, we'll look back at the days when it was $3 a gallon, and say, "Boy, that was a lot better than it is today."

"So we need to do three things -- and we are pushing for three things in the real security package that the House and Senate leadership -- Democratic leadership on both sides -- have put together.

"First, we have to dramatically increase conservation. We're not doing any of that. The fact that China has higher mileage standards than we do should make us weep. And China is not a country caring about the environment -- they're doing it just to keep their economic strength.

"We need to develop new energy sources -- a crash program for alternatives, a Manhattan Project.

"And we also have to reexamine whether having only a handful of giant oil companies can coexist with the needs of the American consumer and a rational energy policy in this country -- I do not believe it does. And so I'll be offering an amendment to the supplemental that will require a complete examination as to whether or not we should break up the big oil companies.

"Enough is enough. We have no competition. There are signs of it. I've talked to business leaders who buy oil and gas products, major, conservative Republican business leaders, and they don't believe the market is on the level.

"So on the supplemental that comes up, we're going to focus on port security, we're going to focus on energy independence, and oil prices, and we're going to do everything we can to see that America becomes secure in every way that it should."

Okie

My children and their cousins will inherit two oil wells that lie in a field in Michigan. These wells were dug in the late 50's or early 60's by Texaco and leased from my ex-wife's family. To date not a drop has been taken from these wells.

It is my belief that like the diamond merchant DeBeers, our loyal oil companies are holding back and artificially holding up the price of oil.

Do you know if there's oil there or are they dry wells?

Xingu

I had the opportunity to see them about 30 years ago. At the time they were capped and we were told that they weren't pumping because there was too much natural gas in the wells.

If they were economicly productive wells and the oil could be transported to a refinery at a profit, you can bet the wells would be producing. Accusations like yours are constantly made by people that know nothing about the wells they speak of. Good examples in Oklahoma, there are wells all over the country that are marginal. Many are owned by small operators because they are too small of potatoes for majors. When the price rises to a level that allows a possible profit, the operators attempt to produce the wells, sometimes by working them over and stimulating them. The wells might produce at a marginal rate and make some money, which might be attractive for a small operator, but some wells end up losing, at which time they may be capped. This of course elicits comments from bystanders like yourself, that the companies are capping the wells to produce a shortage to drive the price up, which is totally inaccurate.

When the price goes up, small operators abound and activity abounds in many oil and gas areas of Oklahoma, and when the price goes south, many fields with marginal wells simply cannot produce at a profit, so things stagnate for a while. More prolific fields with wells that produce more per day can continue to operate in the down times. It depends on the fields and the wells.

Now to clarify, I am certainly no expert, but there may be cases in some areas where a well or field is mothballed for a time until a more efficient transportation system comes on line, such as a pipeline or something, but I have never bought the conspiracy theory that a company intentionally caps wells for the sole reason of driving the price up.

P.S. I think Chuck Schumer is ignorant when it comes to oil. If he wants to do something positive instead of strutting his self importance by putting oil companies on trial, how about voting for drilling in ANWR.

The Sooners ain't doin' too well. Maybe okie issending 'em his plays.

He's right, though. Eastern Oklahoma, at least, is covered with little stripper wells. Sadly, when revenues fall below the costs of production, they are either shut in (I have never once heard the term "capped" by any of our customers) , or plugged and abandoned. Casing corrodes and the formation and well bores can fill with water, both of which increases the cost of returning a marginal well to production.

On the subject of water in formation, I'm surprised no one has mentioned all the pump jacks, just pumping to beat the band, when oil is in short supply. In gas fields like the San Juan Basin of NW NM, what they are pumping is water. Often, there is so much water in formation that the gas simply won't rise. The pumping process can take several years.

You assume I'm a sooner fan. Remember the "cowpokes" or cowboys, formerly the aggies, from Oklahoma State?

P.S. Another comment about oil. When the price goes up, some things are negative such as the price of gasoline, but there are some positive things that happen like a very stimulated economy in the oil patch, more jobs in that sector, and the side benefit of royalties paid to farmers and landowners, which in many cases might save the farmer or landowner from bankruptcy or having to sell the property and move to town. Looking at oil and gas over the last 100 years, it has been a very, very major, positive economic impact on the rural communities of America. Also, another way oil and gas can be beneficial is I know of some areas in Kansas where natural gas has been used by farmers to fuel irrigation pumps to irrigate crops, which are then very prolific, but which would not be economical to do if the gas was not right there at their disposal at little or no cost, and the crops without water would hardly provide a yield to make a profit otherwise. For so very many reasons far beyond casual mention here, the oil and gas industry is truly a golden goose. Hopefully, the politicians won't try to kill it.

Okie
You certainly show your bias. The wells I spoke of were proven and piped. I don't know your work history, but i wonder out loud if you ever were on an oil company payroll close enough to the head shed to know of what you speak or are you just regurgitating the coffee shop talk coming out of the oil patch?

The oil in ANWAR is earmarked for Japan. That is fact. There is less than 6 months worth there. That is also fact. ANWAR is like your Rubicon. You cross it and you own it all.

The facts that are pertinent to this discussion are that we are at war! The oil companies are making record profits in the face of seriously escalating costs. There is something wrong with this picture.

But high gas prices is a double edged sword. As long as gas prices are cheap Americans will buy gas guzzlers. Because of higher gas prices public transportation is being used more and Americans are looking for more gas efficient means of transportation.

Higher gas prices is something that is bound to happen so it's better now than later. This country has to change it gas guzzling habits and high gas prices is the only way it can be done.

Chpt 3

Momma is in the work force and financial equilibrium has returned to our middle calss family. Except a few things have changed. Dinner isn't on the table, dust is. Clean clothes are not there everyday, the ironing board is put away, and the children's lunch has to be made by Dad.

Momma is working and Dad is pissed. No financial friction, but in many homes there is cultural friction the likes of which this country has never seen.

Many women who were a captive audience to their husbands; no way out financially, were now becoming independent and not taking abuse as many did before.

By the 80's and stagflation, the divorce rate had skyrocketed.

Xingu

Consider this. Prices do rise. It is part of the economic cycle. However, the rate at which prices rise is subject to competition, demand, availability,etc.

Where oil is concerned, all these factors leave the room. There is no competition. There is always demand. And, contrary to what we are being fed, the is availability.

Yes I did work for an oil company long time ago, but not in the oil patch. I became acquainted with geologists and engineers in the oil patch. Some of the smartest and hardest working people found anywhere by the way. You are so off base on ANWR, and basicly wrong with figures. It would be one of the largest reservoirs ever found in the U.S. With your thinking, no wells would have ever been drilled. Much more than 6 months supply by the way. Your figures are wrong. Also, your comment about the oil going to Japan without any benefit to us shows you do not understand how commerce works.

By the way, it would be nice if a few more people would work for an energy company for at least a while and maybe there would be some intelligent talk about it. Ignorance abounds, and the result is mostly demagoguery.

The wells are "proven and piped." Will they produce any oil of enough quantity to transport to a market? Is there a refinery near? Are the wells part of a field that is or has produced in the past or recent past, or are they 2 old isolated abandoned oil wells?

I will give you this. Executives for oil companies, all corporations, are way overpaid. Where are the boards of directors in controlling the nonsense? We need some tax reform or laws governing corporations reform to change the landscape in this regard.

Demand remains strong and will get stronger as the supply becomes tighter worldwide. Definitely. This has been predicted for decades by experts in the field. Nobody has been listening, including the politicians. They've ignored the problem. But in every cloud, there might be a silver lining. Price is the one big factor that will ultimately bring out a significant alternative energy source into the market in a legitimate way.