Oil Profits: $17 Billion in (3) Months...

Discussion in 'The Powder Keg' started by Marine1, Apr 29, 2008.

  1. Marine1

    Marine1 Guest

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  2. Parrothead

    Parrothead Guest

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    I'm no fan of high gas prices and I don't own stock in anything, but I don't see why this is looked down on. I just did the math and if this profit was spread over half the population of the U.S. alone (150 million people), it works out to $113.33 per person. These appear to be worldwide profits which means it's a lot lower per person than that.

    Call me crazy (my friends already do), but I see companies making profits from doing what they set out to do legally. I don't see a difference between this and Smith & Wesson selling guns. I've had friends and neighbors who were seriously rich, but I just figure that if I want to put in the time and innovation I can do the same. Honestly, I'm just too lazy. If someone comes up with a way to compete, great! If not, then why not buy stock in the companies and get some of that money in dividends?

    Something else I think people miss is that the oil companies don't set the prices for oil. Commodities traders do that on supply, demand, and speculation based on the factors that effect those.

    One thing I really dislike is the concept of "windfall profits taxes." I feel it's like changing the rules while the game is being played. Think about a baseball game or a NASCAR race in progress with someone really out in the lead - they're nine runs ahead in the sixth inning or two laps ahead of the next car at the 300 mile mark in a 500 mile race. How would you feel if you'd done everything right and suddenly the rule makers decided that you were just too good and that you really didn't need such a big lead, and ya know, everyone should be a bit more equal, so we're going to take back six of those runs or a lap and a half off your lead.

    But that's just me and everyone's entitled to their own opinions :)
     
    Last edited: Apr 30, 2008

  3. Gee. What a surprise...who'd have ever thought?

    I've seen people defend the profit margin of energy companies by saying it's a reasonable percentage of their costs. But guess what? X percent of twice the cost is 2X...as long as they're getting the same percentage markup, the higher the costs the more they make. Particularly when they're buying the crude from themselves to begin with.

    Back when I was contracting, people would sometimes offer me a cost-plus deal, where I'd get the cost of plans, permits, labor, materials, etc., plus fifteen percent or whatever. I probably lost a lot of money over the years, by pointing out to them that such a contract wasn't exactly an incentive for me to hold down costs.
     
    Last edited: Apr 29, 2008
  4. Parrothead your certainly entitled to your oppinion, but I can't agee with it nor can many here at G&G.
    There are a lot of people in this country that are spending there grocery money, there money to pay bills to buy gas instead. Gas shouldn't cost what were paying.

    There's 2 independent Oil Refinerys here where I live and they laugh all the way to the bank.
    A.H
     
    Last edited: Apr 29, 2008
  5. TXplt

    TXplt Gun Toting Boeing Driver Forum Contributor

    +1 Parrothead--had similar post on the $10.00 thread.....

    We can and should break the links between oil and politics (and not give oil companies any special breaks), and not allow oil compaines to inhibit energy development or alternative cars/fuels, but oil is still a private market unto itself. If I own a bunch of oil, I don't have to sell it to you if I don't want to.

    Windfall profits taxes don't work--they're just passed on to the consumers just like any other cost. The core issue is complacency and over reliance on oil for everything vice using all the energy resources we have here. Since oil is traded on the global market, there's really nothing (other than developing other energy sources and prohibiting foreign companies from purchasing oil hedges to drive the price up) government can do save let folks drill everywhere to get supply up (and somehow encourage refinery development in the near term).

    That's not entirely correct--we could take over other countries and take their oil for ourselves. Let's hope it doesn't come to that.
     
  6. The oil companies may not have to sell to us, but right now we have no real choice but to buy from them. The public sometimes needs to be protected in that sort of unequal relationship, I'd say. That's why they had to start regulating auto insurance prices in California: because it was legally required that drivers have it but not that the insurance companies sell it to us at a reasonable price, they ran amok.

    I doubt windfall profit taxes would help the average consumer much if any, although it might help Washington's bottom line a little. But I'd sure like to see our government stop giving the oil industry tax breaks and incentives for exploration and development; I thought one of the things companies were supposed to do with profits was to reinvest a portion of them in that sort of thing. And every dollar given to them is a dollar that either drives the deficit even deeper, or has to be replaced with one from my pocket and yours.
    It's already come to that, but the bunch in charge screwed up even something that basic. You didn't really think we went into Iraq to find weapons of mass destruction, or to liberate the Iraqis from an oppressive dictator and bring them the joys of democracy, did you?:)
     
    Last edited: Apr 29, 2008
  7. Parrothead

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    ArkansasHunter - I know there are people who are being pinched by the gas prices and I'm one of them. I remember when I was selling cars in San Diego and we thought the world was going to end because gas hit $1.50 per gallon and it cost the dealership over $45 to fill up a new Avalanche or Silverado when we sold one.

    I'm not pointing fingers here because I don't know anyone here all that well, but I see too many people at work who complain about the high gas prices and yet they see no problem with spending over $100 per month for cable TV and cable internet and have no problem going and buying $100 worth of booze for the party they're having in their electrically heated ($$$) hot tub over the weekend. They also pay big bucks for the latest cellphone and a high usage data and voice plan. Don't even get me started on Starbucks!

    People at work wonder how I can afford my AK-47, Steyr M95, Hi-Point C9, ammo, gas to go out in the desert to shoot, Rolling Stones tickets, Jimmy Buffett tickets, dinners out and some slots a couple of times a month, a GPS receiver, camcorder, and a nice digital camera when my commute for the past two years has been 23 miles each way. I explain it to them. I drive a 2002 Cavalier that I sold to myself and paid off in October of 06. I have a simple cellphone with a relatively inexpensive plan. I surf the internet on dialup at home (it's a free fringe benefit from work), and there's a set of rabbit ears on the TV to pick up broadcast TV stations. I live with my roommate in a nice, but inexpensive apartment that's not in a "luxury developement." I might not be spending grocery money on gas, but then again, I realize I've got a lot of other discretionary spending I can still cut.

    One thing I forgot to mention in this thread is that I will refuse to complain about the oil companies and will trash the politicians even more until one big thing changes. THE GOVERNMENT MAKES MORE MONEY IN TAXES FROM THE OIL COMPANIES THAN THE OIL COMPANIES MAKE IN PROFITS! If that changes, I'll start complaining if there's illegal collusion. The other governmental/political thing was touched on by TXplt (thanks for covering my six there ;) ) - increase domestic production and refining capacity. IIRC, we export Alaskan oil because we can't refine it all and we import refiined gasoline because we can't produce enough of it. I think it's time we get over it and start drilling!

    Oh yeah, don't forget the price of environmental regulations in the cost of gasoline and diesel. Refiners have to make several different blends for each season and if in CA, a different blend for that state. They also have to make super low sulfur diesel which costs more.

    And then there's China buying up oil for strategic reserves (higher demand) and unrest in Nigeria and Hugo in office in Venezuela (supply issues).

    As long as it's legal, I have no problem with the quantity of profit made by anyone or the way in which it is made.

    I'm about to miss NCIS, so have fun for an hour and I'll check back in when it's over :09:
     
  8. TXplt

    TXplt Gun Toting Boeing Driver Forum Contributor

    Troy--I guess point two validates point one then :) -- if we start involving the gov't in oil here we'll really have a mess on our hands.

    Insurance is a bit different; it involves your responsibility to be able to pay someone else for the liability for something you did (not, like oil, pay for a resource you're consuming yourself). Under a true market and true accountability we wouldn't have to require it. If you did alot of damage to someone and were uninsured you'd have to pay forever. If there's a law requiring you to have insurance (because there are folks who'll crash into you and say "sorry, I'm poor and I can't pay you") then we incur a duty to regulate the insurance you're required by law to have.

    I'm all for having the oil industries stand on their own, not receive any tax breaks anyone else donesn't receive, and cutting the links between oil money and Washington. However, I really don't see any good way out of this save the development of other power and energy sources--nuclear, renewables, coal, etc. (as well as opening up what oil we can here). I'm not at all for holding resources like oil in reserve while other countries "cash in" and use this to buy property, companies, and influence here. If we regulate price we'll just see the shortages like we did in the 70's. I really don't see any government initiated action toward oil that can fix the situation or "protect us." It's possible a dollar for dollar tax could build new power plants in a TVA-like setup, but given our government's propensity to waste $ I have serious concerns with this (look at the TSA)--I want 6 guys digging not 5 guys supervising 1 guy digging. Futures regulation could possibly help with regard to preditory stockpiling driving price up, but this is a drop in the bucket. Incentives for individual co-generation are fine, but the power sources need to economically stand on their own.

    In short, I really don't see a good way out of this soon unless our energy policy changes and we start building energy sources which aren't oil based.
     
    Last edited: Apr 29, 2008
  9. tlarkin

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    That would be all in well only $113 per a person if we all made the same amount of money.

    Also I think your math is off, I thought there were 300 million people in the USA, not 115 million. Mind you that is only for a matter of months and that is profit, not net.

    Gas only costs just under $4.00/gallon around here but in some places in the country it is like what, $7.00/gallon, and the cost of living goes way up.

    Our pay scale on wages has not scaled right with our costs of living. 40k/year is hardly enough to get by in the cities anymore at all. I am making more than that and I live from paycheck to paycheck at times. My gas bill was $200 in January for a damned apartment!
     
  10. Seabeescotty

    Seabeescotty G&G Evangelist Forum Contributor

    I didn't read all this, but it looks like a monopoly in play, to me!! And we in this country have laws against monopolies, because they hurt the country, the citizens, and the economy! Why isn't anybody doing anything? They all talk, but not one raises the question !
     
  11. tlarkin

    tlarkin Guest

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    Our laws do not transcend into every foreign nation, and when your world head quarters is based out of some ring of international islands, the USA has no jurisdiction what so ever.

    It is messed up I agree.
     
  12. danny29

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    Their huge profits are based on the fact that they are foreign companies using Euros and Pounds for currency. We're paying for everything in dollars which OUR government has let slide into the gutter over the last 7 years. Our currency is becoming more worthless and the foreign corporations are profiting on the windfall. A few years back the dollar was worth more than a Euro. Now it takes a dollar and a half to buy a Euro. Oil sales are in dollars per barrel. If the dollar was worth what it was a decade ago oil would be selling for $65 a barrel not $115 and gas prices would be in the $2 range not approaching the 4's. While the oil companies are not shining examples of corporate goodness by any means, a large portion of the blame rests on the devaluing of the dollar over the last few years by our government.
     
  13. Parrothead

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    Sorry, I've corrected the population figure from 115 million to 150 million - it's half of the U.S. population of 300 million that I was using and the 115 was a typographical error. I figured that if I use half of the U.S. population, I'm excluding children and people who don't make all that much money.

    I understand it's for three months and it's profit. 17 billion divided by 150 million still comes out to $113.33 per person. I was taking the worldwide profits and dividing them by half of the population of the U.S. as an example. If we break that down to monthly profit divided by half the population, it's $37.78 per person per month. If we multiply $37.78 per person per month by 12 months, we still get $453.36 per person per year.

    There's a reason I didn't mention income - it's not relevant. I'm strictly talking about the profits in the headlines and showing how relatively low that number really is when spread over a relatively small group of people when considering the six billion people on Earth - half the population of the U.S.

    I stand by my position of not looking down on someone for legally making a profit, no matter how great that profit might be.

    I also stand by my position that before criticizing the oil companies for their profits, we should remember that the government makes more in taxes from the oil companies than the companies make in profit and that those profits go to the shareholders, many of which are mutual funds and retirement funds which are collectively owned by a large number of average people.

    If the profits above offend anyone, I have a few suggestions. Make more money yourself through your own creativity, innovation, or skills in a competitive free market. Maximize that income by investing in high return investments. Lower your tax liability through investments and your choice of where you live - Nevada has no state tax for example.

    Basically, I say that people should work more towards improving their lives instead of criticizing someone else (this includes corporations) for their success.

    Actually, we don't have to buy anything from them and we have choices about how much and if we buy. Carpooling, riding a bike, or taking a bus are all good ways to reduce personal expenditures.

    While I disagree with the above statement, I think we should stay away from the whole Iraq war topic - it's too divisive and will likely take this discussion far away from it's original topic.

    Seriously, let's keep this thread on topic. Oil companies made a lot of money and in my view, some people don't like those who make more than they do. That's the way I see it.
     
  14. .22hustler

    .22hustler G&G Evangelist

    I heard on CNN, I believe, that oil couild possibly hit $200 per barrel by the end of the year. This statement was made by the head of OPEC. The middle-eastern countries that produced the majority of oil, in my opinion, will keep on raising the price of oil until we get out of the middle east, or until the opec nations destroy our economy.They don't have to destroy us will bullets, they're going to do it with barrels of oil.At $4 bucks a gallon, and being 100% disabled, I can't fill the tank of my chevy truck. It has a 34 gallon tank, do the math.
     
  15. TXplt

    TXplt Gun Toting Boeing Driver Forum Contributor

    Their base stock makes more $, hence the profits.

    Price controls would knock supply down, and exacerbate the problem. There would be shortages. Likewise for rationing; a black market of gas rations would develop and the overall cost would greatly exceed what we pay now. I guess you could try to force an oil company to provide supply at a fixed $ but this wouldn't work either -- they'd close up shop and move offshore (to Dubai ?) and we'd wind up paying more to more non-American interests as the oil filtered thru middlemen. For the resource itself (short of the government running the extraction of oil from American wells--which I have no doubt they'd screw up economically like everything else and we'd all pay all kinds of $--would you really trust a corporation to function efficiently whose books are 9 Trillion in debt ? Not me. ) there's no real way to sell oil below the market price. Even IF the government itself drilled in ANWR, and somehow made a go of it (let's say selling oil at $50 a barrel), some enterprising individuals would buy a whole bunch of oil and find a way to filter it back onto the global market at a profit for himself (even greater than the percentage profit of the oil companies--maybe even untaxed because it could be on the black market). All of the regulatory schemes for oil pricing by a government would, in practice, only serve to make the situation worse. This doesn't mean that the states have no claim to the oil resources--one could argue that because oil sits underneath a given state that the oil is the rightful property of the people of that state. However, the best way to address this is for the state to work out a deal with an oil company who finds and extracts this resource, both sides making a negotiated profit dependent on market conditions (the states' profit going back to the people of the state, like AK).

    There is some justification for governmental involvement in oil markets, however:

    1. Oil has significant externalities not reflected in the market price (i.e. we have to fight wars to keep it flowing. This costs lives and $).

    2. Prices in oil markets can act irrationally.

    3. Oil companies may be enjoying increasing returns to scale. -- while not a monopoly per se this is not economically efficient and prevents forward looking for energy sources.

    BTW, there's no "100 MPG" carburetor or magic technology for existing oil. For gasoline, if you run the numbers, you'll find that if you want to get a 4500 lb car up an 8% grade at 70 MPH the absolute minimum engine for a hybrid would put out a little over 100 hp--even with a gas turbine and regenerative batteries you're looking at 40-50 MPG due to running up against the 2nd law of Thermo. Lighter and diesel and slower driving maybe a little better (+10 to 20). This is all at higher installation costs, which could be paying for a fair bit of gas.

    The trick is the "how" for any government involvement--can we make it better? If not, don't intervene because we'll make it worse. Price caps/rationing/quotas, etc. won't work. We can open up land and relax oppressive environmental regulation (to something that makes sense) to boost supply and build refineries (NOT provide subisidies, but stop "getting in the way"). We can stop the huge disparity in gasoline quality for "designer blends" in Chicago or California, etc. We also can fund and build energy sources which don't depend on oil. We can prevent promising non-oil technologies from being "locked up" by oil companies (I don't know if this is happening or not but I doubt it--someone somewhere would be trying to build these if it was irregardless of the oil companies and would force them to try to shut them down).

    Once hydrogen fuel cell or electric cars hit the road, you'll see oil prices tumble. However, we'd best have the power plants in place by then to support them--parts of our grid are pretty maxed out right now.

    But there's NOT an easy answer to this that I can think of.
     
    Last edited: Apr 30, 2008
  16. Rave

    Rave G&G Evangelist

    "As long as it is legal." With the thininking of "Big business trumps peace",you can bet that no matter what they do it will remain legal.No matter how high it drives fuel and everything else it will remain legal,oh well we made our bed now we will have to sleep in it.:drive:
     
  17. Windwalker

    Windwalker G&G Newbie

    Troy 2000, If the Iraq war was about oil, why is the U.S. not getting it or the money for the sale of it?

    Our Country must stop our dependence on foreign oil. We need to build a minimum of 12 Nuclear power plants across the Nation and we need to start now. We need to limit the ratio of gasoline powered vehicles vs. alternative fuel vehicles which are built or imported into the United States. The first year the ratio of 15% alternative fuel to gasoline vehicles. The second year, 25% alternative fuel to gasoline vehicles. The third year, 50% alternative fuel to gasoline vehicles. The fourth year 75% alternative fuel to gasoline vehicles. The fifth year 100% alternative fuel vehicles. No more gasoline vehicles produced or imported. Within 5 years importing foreign oil could be a thing of the past, but we need to start now.
     
  18. roadie

    roadie G&G Newbie

    Now that's a good idea, but unfortunately it'll never happen, or I just don't see it coming anytime soon enough.
     
  19. I don't want to drag this into a discussion of the war, so I'll refer you to my original statement, and let it go: they screwed up even something that basic. Iraq is producing signicantly less oil now than it did before we invaded.

    I don't like the idea of heavyhanded government interference in vehicle sales. How do you propose to limit the ratio of gasoline-powered to alternative vehicles, without driving the prices through the roof, and how would you do it? Make the dealers take delivery of a certain number of alternative vehicles, whether they sell or not?

    How would you decide who gets to buy the gasoline vehicles, and who has to buy the electric car that won't get them 200 miles to their weekend cabin or the river, without an overnight stop to plug it in? And what's to stop the price of ethanol from skyrocketing, when people are forced to use it whether they want to or not?

    Frankly, I'd tell 'em to kiss my heiney and keep driving my Nissan pickup for the next twenty years, unless they could show me something that will get comparable mileage for the same amount of money spent.

    I agree we need to move to alternative fuels, but I don't think more government mandates and interference are the way to do it. Now, if you want them to pay for research and development to be shared openly with any U.S. company that wants to use it, I'll go along with that.
     
    Last edited: Apr 30, 2008
  20. Parrothead

    Parrothead Guest

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    TXplt, Windwalker, Roadie, and troy2000 - I can't agree more with everything you'vejust written.

    Rave,

    The problem I have with that thinking is that we've dealt with out of control big business in the past - look at antitrust legislation.

    As for the rest - we're a nation of laws which we need to follow. If something's legal, then it's legal and live with it. There are no laws in the U.S. that I know of regarding how many rifles or guns anyone can own. How would any of us feel if someone arbitrarily came in and said that one of us has too many guns, we need to give some to some other people who don't have them, and no matter if there's not a law against it, do it anyway?

    Like I've said before about my personal situation - I'll stand by my beliefs and I will bear the consequences. I believe that which someone has earned legally should legally be theirs to keep.