Why not just regulate the price?

Nestea Plunge: Dick Cheney's cunning plan failed to pan out.

O RLY?

Are you sure about that?

Because, one might argue that record profits for the US oil industry is a good thing for certain people, despite what it might do to the average Joe's commuting costs.

WASHINGTON - The Federal Trade Commission (FTC) will announce today its plan for investigating and regulating possible market manipulation by oil companies, traders and others, Washington Sen. Maria Cantwell said Thursday.

Wouldn't a war that disrupts and destabilizes the Middle East be the most extreme of all market manipulations?

Ron Paul Revere: It wasn't a war for oil, but it was about oil.

Of course it was a factor. What other commodity is as integral to our economy, and therefor the world economy?

Ron Paul Revere: It wasn't a war for oil, but it was about oil.

It was for oil, too.

The continued de facto control of the substance, that is.

Not to flood the market with cheap oil, certainly. Who would that benefit? (I mean, who that matters?).



There is a reason this map was one of the documents reviewed in the Cheney Energy Task Force. They took a long strategic view of the energy future of this nation. And in their backward-looking eyes, the future of this nation lay with petroleum. They could conceive of no other future.

So in order to maintain our nation's strategic control of its lifeblood, they leaped at the chance to install a controlling US presence right on the biggest known remaining oil reserves.

And if you doubt where this is going, just take a look at this map:



Unfortunately for us, and for the citizens of Iraq and the greater Middle East, these 'energy experts' were blinded to the real energy future for our country



This is just one more example of how vested corporate interests are not necessarily the best source of advice on national governance.

Surprise, surprise.

I'm sure that's right. Supply has never been disrupted enough to affect price; the sole driving force is profit: People keep buying oil no matter what the price, and nobody wants to sell for less because they know they'll sell all they have no mater what they charge.

Ron Paul Revere: Dread Pirate Slasher: Why not just regulate the price?

Why not just destroy an already faltering economy? Why not take away one of the biggest sources of tax revenue from an already heavily indebted system?

Your cunning plan. I don't think you thought it through.

the economy works best when consumers can afford to consume.

Nestea Plunge: Dick Cheney's cunning plan failed to pan out.

I'd say it was working out just fine: Let us rid ourselves of the fiction that low oil prices are somehow good for the United States.

Our shiat dollar is most of the problem, although you might find a way to link that to the Iraq war...

burndtdan: the economy works best when consumers can afford to consume.

Yeah, yeah. I know it's tempting. But price controls are the worst thing a government can to do respond to inflation.

BooBoo23: I'd say it was working out just fine: Let us rid ourselves of the fiction that low oil prices are somehow good for the United States.

Well, if the cost of oil in dollars continues to skyrocket as the value of the dollar drops, it might eventually persuade OPEC to do business in something other than dollars, ending the de facto oil standard.

Headso: Our shiat dollar is most of the problem, although you might find a way to link that to the Iraq war...

You certainly could, by way of our fabulously out-of-control deficit spending to fund the whole Iraq nightmare

I have heard convincing arguments that the supply/demand theory used by the oil companies as justification for the ridiculous profits they are making, are far overstated. In fact, I recently read that if US Oil companies were to build more refineries, that action alone could significantly drop the price of gas. But from their perspective, why should they? They are making money hand over fist as things are, why should they change?

I believe it is greed, pure and simple that keeps the gas prices high. Unless the States do something about regulating the oil industry, the industry will continue to maximize its profits and minimize costs... as any other industry would.

Personally, I am all for regulation of the oil industry. Is oil any less a "utility" than electricity?

Skleenar

Oh my god! An energy policy task force contained maps of oil fields?!


My vacation task force meeting contained maps of Arizona. What does that mean for the future of the southwest?

Pride of Cucamonga: In fact, I recently read that if US Oil companies were to build more refineries, that action alone could significantly drop the price of gas. But from their perspective, why should they?

Unless I'm mistaken, a large reason why we have no new refineries is because building one is a public relations nightmare. The same thing applies to our lack of nuclear power plants.

Wow. The article had nothing whatsoever to do with subby's headline.

Not only that, there is no information whatsoever to indicate that the war disrupted oil supplies from the Middle East. Iraqi production is now higher than before the war, and prices keep on rising. In fact, the bulk of the increase in the price of crude came after Iraqi production recovered to pre-war levels!

We're in tinfoil hat country, now. It's a conspiracy by the Tri-Lateral Commission and Emperor Cheney, and has nothing whatsoever to do with flat production and increased demand. No, it was all a diabolical plot by Cheney to steal money from Joe Commuter!

Jebus.

Doctor Hooey: You certainly could, by way of our fabulously out-of-control deficit spending to fund the whole Iraq nightmare

I think you would have to be more clever than that...The total cost of the Iraq war isn't that high when compared to our total budget.

Our energy deficit is, I believe, what is causing the tanking dollar although the Iraq debacle is causing the military to burn oil at a tremendous rate...And, that money could have been used to lower our energy deficit thus causing the dollar to not tank thus causing our oil prices to be lower.

Senescent Dawn: burndtdan: the economy works best when consumers can afford to consume.

Yeah, yeah. I know it's tempting. But price controls are the worst thing a government can to do respond to inflation.

Price controls are, at best, a bandaid. Federal financial mismanagement, deficit spending and general wastage are arterial bleeding. We need to solve the real problem, not try and make ourselves more comfortable while we die.

Pride of Cucamonga: I recently read that if US Oil companies were to build more refineries, that action alone could significantly drop the price of gas.

instead of building more they should just operate the ones they have at 95-100% instead of 85%....

Pride of Cucamonga: I recently read that if US Oil companies were to build more refineries, that action alone could significantly drop the price of gas.
Headso
instead of building more they should just operate the ones they have at 95-100% instead of 85%....
Senescent Dawn
Unless I'm mistaken, a large reason why we have no new refineries is because building one is a public relations nightmare. The same thing applies to our lack of nuclear power plants

So am I reading that this theory is in fact correct? That if we either had more refineries, or operated the existing ones at higher capacity, this would have a significant effect on the price of gas?

If this is true, I think there are a great deal of families out there that would approve the construction of a new refinery at this point in time. Perhaps not in the past, but I think the pain is noticeable enough now to change many American's minds.

In regard to operating existing refineries at reduced capacity, is there any reason for this other than greed?

Price controls almost automatically become the price. Nobody will ever charge less.

You can't run refineries flat out any more than you can run powerplants flat out.

For example, there is generating capacity in the U.S. of about 1,000 gigawatts, but demand is only at about 800 gigawatts peak. Why the spare 200 gigawatts of generating capacity? Because powerplants need to be taken offline for repairs and maintenance regularly.

It's the same with refineries.

For example, gasoline prices were high in Denver metro for the last six-nine months because Suncor's refinery in Commerce City was running at 50% capacity. Why? because half the refinery had been taken offline for scheduled repairs and maintenance.

In fact, Colorado crude was discounted during this time, going for only about $60-70/barrel for light sweet crude when spot prices were in the $90 range because there wasn't enough local refining capacity to soak up local oil production. So, the crude had to be sold at a discount into Shell's pipeline for piping to Cushing, OK, or trucked to other refineries, like in Salt Lake or Albuquerque. How about that?

Lack of refining capacity actually hurt the producers just when the spot price of crude was going through the roof. Did Colorado producers bellyache and demand relief from the government? No, they sucked it up because that's part of the market for oil & gas, and that's life.

Meanwhile, the moron governor is bending over backwards trying to find some way to punish the oil & gas industry in Colorado, and many moron citizens think it's a good idea.

Bottom line: You can't run refineries at 100% capacity all the time, and building new refinery capacity will ease gasoline prices, but not by big percentages. Streamlining formulations would bring the price down more, because refineries have to seasonally and regionally adjust gasoline formulations several times/year due to the patchwork of federal and state environmental regulations. That means refinieries have to be taken offline - paused - when a new formulation is scheduled.

canyoneer
Bottom line: You can't run refineries at 100% capacity all the time, and building new refinery capacity will ease gasoline prices, but not by big percentages.

What kind of percentages are we talking about? 5%? 10%? 20%?

10% less of $4/gallon gas drops the price to $3.60/gal if I didn't mess up the math. That seems quite significant.

I for one think the high oil prices and inflation we're having right now is good for the economy.

Sure, we're going to suffer for a bit. But people seem to be waking up now. When fuel hits $5.00 per gallon this summer, people are going to raise hell, and that's what we need to get off of oil, a lot of hell raising.

Congress needs to pass a law earmarking a large percentage of fuel taxes to be spent for research and implementation of renewable fuel strategies.

FarkingSean:
Congress needs to pass a law earmarking a large percentage of fuel taxes to be spent for research and implementation of renewable fuel strategies.


Orrrr

Somebody can come up with a cheaper, more reliable alternative.

Market forces ftw!

FarkingSean: I for one think the high oil prices and inflation we're having right now is good for the economy.

Sure, we're going to suffer for a bit. But people seem to be waking up now. When fuel hits $5.00 per gallon this summer, people are going to raise hell, and that's what we need to get off of oil, a lot of hell raising.

Congress needs to pass a law earmarking a large percentage of fuel taxes to be spent for research and implementation of renewable fuel strategies.

The fuel tax as it stands goes to roads and infrastructure, and it is apparently not enough. You want to pull more money away? I agree that we need to really put some effort into alternative energy resources, but not from the fuel tax. Unless you raise it... because that'll happen.

What war disrupted the supply and destabilized the Middle East?

Pride of Cucamonga: "What kind of percentages are we talking about? 5%? 10%? 20%?"

It would depend on how much refinery capacity was built. It would be pretty close to a one-to-one relationship, less the spare capacity needed for maintenance and repairs. So, if capacity was increased by 10%, it would probably lower gasoline prices by 7% or 8%, I'd guess.

But remember: Refineries are immensely expensive facilities and refinery operations are energy-intensive and low profit margin. If oil companies drag their feet on refinery expansion (which they don't have to because of the NIMBY factor), it's not a conspiracy to gouge the customers but rather a desire not to lose money on refinery operations.

For example, Exxon-Mobil just upgraded a refinery in Britain. They replaced their 50-year-old cat-cracking unit with a new, more energy-efficient unit. Just replacing the cat-cracker cost the company north of $150 million. That's just one cat-cracker on one refinery.

Given that a good year for a refinery is to make maybe 1% or 2% profit on refinery operations, rather than actually losing money as is more usual, you can see why the companies aren't in any hurry to invest tens of billions of dollars in new refineries or expansion of existing facilities. The oil companies make most of their money on production, not refining or distribution. The reason profits are so big right now is due to the price of crude, not gouging at the pump.

Remember also that oil refineries need markets for other products than gasoline. When crude is refined, it yields LPG's (petrochemical feedstocks), gasoline, JP (aviation fuel or kerosene), diesel, fuel oil, heavy oils, asphalt, etcetera. They have to know there's a sufficient market for all these other products, or they'll really lose money on refinery operations. As publicly-held corporations, they're obligated to justify such massive capital investments to their stockholders.

Refineries are super-complex, super-expensive industrial facilities that take years to permit and build. No one wants one in their town, so even finding a place to build one is a major headache. They don't just pop up like mushrooms after a summer rain.

canyoneer

stop making sense!

Pride of Cucamonga: In fact, I recently read that if US Oil companies were to build more refineries, that action alone could significantly drop the price of gas. But from their perspective, why should they? They are making money hand over fist as things are, why should they change?

I believe the reason there hasn't been a refinery built in about 30 years is that tree huggers/regulation have pretty well prohibited it. Nobody seems to want it built in their backyard.

Ron Paul Revere

Absolutely. Anyone who still thinks that this whole mess wasn't just an elaborate (or maybe not so elaborate) plan to rape the treasury needs to do their country a favor and not vote this year.

canyoneer

You scare me.

Primus: "Absolutely. Anyone who still thinks that this whole mess wasn't just an elaborate (or maybe not so elaborate) plan to rape the treasury needs to do their country a favor and not vote this year."



cause I rely on my illusions, to keep me warm at night

canyoneer:
cause I rely on my illusions, to keep me warm at night

obviously

How many time recently has the gov investigated the oil companies and found nothing illegal? Traders and speculators on the other hand...

Headso and Canyoneer:

Two years ago the standard line as to why oil/gas prices were going up was "lack of spare capacity.." Last year it was the low refinery use rates due to break downs....

Adding additional refineries and tapping new sources of oil will go a long way to help, however, as long as the hedge funds and speculators keep their money in oil, they will always find an excuse and price will not decrease to where it should be if supply and demand were driving the price of oil.

Hobodeluxe

Listen, man: Skimming and fraud and cronyism has been a feature of every war this country ever fought.

"There is such a thirst for gain [among military suppliers]...that it is enough to make one curse their own Species, for possessing so little virtue and patriotism." - President George Washington, 1778

As long as there has been war, there have been enterprising individuals willing to take advantage of desperate or ambitious combatants. As historian Stuart Brandes notes in his pioneering history of war profiteering, Warhogs, in 1672 a South Carolina gunsmith named Thomas Ashcraft "became the first American defense contractor jailed for poor workmanship and non-fulfillment of contract." In 1675 the Puritans officially denounced war profiteering as a "Provoking Evil." By the Revolutionary War a century later, all forms of profiteering-from fraud and price gouging, to plunder and trading with the enemy-were seen as downright unpatriotic. In 1780, the North Carolina legislature moved to limit war profits after determining that "extravagant" prices were resulting from the "wicked arts of a set of men called speculators." Charges of profiteering rose again during the Civil War, this time aimed at war businesses that cut corners in furnishing provisions to military forces. Sensational price-gouging scandals and other cases of fraud, such as allegations that troops North and South were going "half-naked" thanks to cheaply-made uniforms, led to howls of public outrage and calls for reform. The Scientific American was not alone in arguing that "every dishonest contractor and conniving inspector [should receive a] trial by a drum-head court-martial and instant military execution." But it wasn't until 1898, when the United States launched its first major bid for overseas empire with incursions into Cuba, Puerto Rico, and the Philippines, that a genuine movement against war profiteering took hold. As the U.S. military rapidly expanded-despite the absence of an enemy threat, the army budget increased by a factor of 30 and naval spending increased 40-fold-populists, Progressives, religious pacifists, isolationists, and others took the critique of war profiteering one step further, arguing that not only were the "Merchants of Death" capitalizing from conflict, they were deliberately driving the nation to war. (new window)

Anyone who thinks the sole motivation for this war was simple profiteering is living in Tinfoil Hat Land. It's an old story, as is the outrage about it. Ho-hum.

canyoneer

Always enjoy your insights. :)

jpo2269: "Two years ago the standard line as to why oil/gas prices were going up was "lack of spare capacity.." Last year it was the low refinery use rates due to break downs...Adding additional refineries and tapping new sources of oil will go a long way to help, however, as long as the hedge funds and speculators keep their money in oil, they will always find an excuse and price will not decrease to where it should be if supply and demand were driving the price of oil."

Petroleum production plateaued at about 85mbpd in 2005. In spite of the steeply increasing price of crude, production is struggling to stay at about 85mbpd. Tell me this: Given a price of about $110/barrel, would you attempt to pump more oil out of YOUR oil field right now if you could? I know I would. So, ask yourself: Why aren't these high prices stimulating more production?



Please note that the price really started taking off in 2005, and is now off this chart. That means producers have had a powerful incentive to ramp up production for three years. Why haven't they?

Skleenar: Nestea Plunge: Dick Cheney's cunning plan failed to pan out.

O RLY?

Are you sure about that?

Because, one might argue that record profits for the US oil industry is a good thing for certain people, despite what it might do to the average Joe's commuting costs.

Yes that certain 1% of the population. Won't somebody please think of the ludicrously rich?

canyoneer: Petroleum production plateaued at about 85mbpd in 2005. In spite of the steeply increasing price of crude, production is struggling to stay at about 85mbpd. Tell me this: Given a price of about $110/barrel, would you attempt to pump more oil out of YOUR oil field right now if you could? I know I would. So, ask yourself: Why aren't these high prices stimulating more production?

No. Because if you keep the supply at a constant, you can reap the maximum benefit from a limited commodity. However, if you increase supply, you'll drive the price down.

OPEC is only motivated to keep the price just low enough to keep everyone buying at a happy rate. You may be pissed off about the price of gasoline, but you are likely still consuming at the same rate. If they go too high, people will consume less, leading to an excess supply.

/itching for the day when we can drive nuclear cars and build a fence around the arabs, and tell them to go fark themselves.

Typical White Person

So, you believe that there is a global conspiracy to limit oil production?

canyoneer: Typical White Person

So, you believe that there is a global conspiracy to limit oil production?

No he beleives that Opes, being a cartel, holds up production. There are only so many other oil producing nations. This is why we need to drill everywhere.

globalwarmingpraiser: canyoneer: Typical White Person

So, you believe that there is a global conspiracy to limit oil production?

No he beleives that OpesOPEC, being a cartel, holds up production. There are only so many other oil producing nations. This is why we need to drill everywhere.

FTFM

OPEC's influence on the market has been called into question. Several members of OPEC alarmed the world and triggered high inflation across both the developing and developed world when they used oil embargoes in the 1973 oil crisis. OPEC's ability to control the price of oil has diminished somewhat since then, due to the subsequent discovery and development of large oil reserves in the Gulf of Mexico and the North Sea, the opening up of Russia, and market modernization. OPEC nations still account for two-thirds of the world's oil reserves, and, as of March 2008, 35.6% of the world's oil production, affording them considerable control over the global market. The next largest group of producers, members of the OECD and the Post-Soviet states produced only 23.8% and 14.8%, respectively, of the world's total oil production. As early as 2003, concerns that OPEC members had little excess pumping capacity sparked speculation that their influence on crude oil prices would begin to slip. (new window)

canyoneer: Typical White Person

So, you believe that there is a global conspiracy to limit oil production?

Hmmmm...global conspiracy? That's a little dramatic. An OPEC conspiracy is more like it. At least some individual members of OPEC have the ability to increase production over and above their current level. However, they have no incentive to increase production, and a huge incentive to keep production low. More production = a lower price for oil. Lower production = a higher price. They just need to maintain current levels of demand.

Typical White Person: canyoneer: Petroleum production plateaued at about 85mbpd in 2005. In spite of the steeply increasing price of crude, production is struggling to stay at about 85mbpd. Tell me this: Given a price of about $110/barrel, would you attempt to pump more oil out of YOUR oil field right now if you could? I know I would. So, ask yourself: Why aren't these high prices stimulating more production?

No. Because if you keep the supply at a constant, you can reap the maximum benefit from a limited commodity. However, if you increase supply, you'll drive the price down.

OPEC is only motivated to keep the price just low enough to keep everyone buying at a happy rate. You may be pissed off about the price of gasoline, but you are likely still consuming at the same rate. If they go too high, people will consume less, leading to an excess supply.

/itching for the day when we can drive nuclear cars and build a fence around the arabs, and tell them to go fark themselves.

The real problem is that India and China's massively growing demand is creating a much better market for oil, even at a high price, so it will pretty much never go down. It can't, unless we can switch enough people to alternate fuels to offset the increased demand from almost literally half the population of the planet.

We should be encouraging the growth of hydrogen usage (using tax incentives possibly) and go into a crash course of building nuclear plants to increase our electrical capacity to handle generating the hydrogen.

Alternate fuels from land base bio-mass is a mistake, particularly using corn and soybeans, as that just drives our food costs up. Though I believe I read an article (on Fark no less) about using algae as a bio-mass, and that might be bit more practical, since we could expand our production into water covered areas that currently are not used for food production (so we are not robbing Peter to pay Paul, so to speak).

Senescent Dawn
Unless I'm mistaken, a large reason why we have no new refineries is because building one is a public relations nightmare

Wow. And... you believe that?

You believe that oil companies put public relations ahead of profitability?

Really?!?

Heh.

Nestea Plunge: Dick Cheney's cunning plan failed to pan out.

Actually the plan is right on course. The plan was to raise prices for OPEC and keep the oil in the ground in Iraq and off the market until we need it later.

EwoksSuck: Actually the plan is right on course. The plan was to raise prices for OPEC and keep the oil in the ground in Iraq and off the market until we need it later.

Right. Because liberals have always been so excited about getting US oil out of the ground.