Posted on 07/20/2007 10:47:37 AM PDT by gpapa
Gasoline prices are likely to continue rising, and it's not just because crude oil prices have risen above $75 a barrel.
Oil refineries, which usually buy their oil at a price below that headline price, have seen their discounts virtually disappear. So the price they pay for oil is up twice -- once because the headline price of oil is higher and a second time because their discounts have just about vanished. You can bet that those two price increases will be passed along to anyone filling up at the gas pump.
Very little oil actually trades at the number that shows up in the headlines. That number represents the price of the futures contract, an option to buy oil in the future, on a specific grade of light sweet crude oil. So, for example, on July 16, when the headline number read $74.15 in the futures market, in the cash market the prices for two widely used benchmarks, West Texas Intermediate and Brent crude from the North Sea, traded at $74.16 and $79.73, respectively.
(Excerpt) Read more at articles.moneycentral.msn.com ...
If we don’t increase the supply of oil - by drilling for more - and increasing refinery capacity - by encouraging private companies to expand refinery capacity - we will guarantee this problem will get worse. Demand for oil is increasing every day throughout the world and the supply cannot keep up with demand. What follows is ECON 101.
Oil companies are doing a fantastic job keeping gas flowing at the pumps. God forbid the government get involved again as in the days of the peanut farmer President.
“The oil industry is stuck in exactly this tight spot. Oil companies are generating record profits — but they don’t have a good place to put those profits back to work. A big share of today’s oil exploration and development capital expenditures are unlikely to earn back a reasonable return on the money invested. The prices paid for today’s assets are too high, the costs of development are rising too fast and the risk that politics will prevent full production in the future is too great. That’s why you see companies across the industry buying back shares or increasing dividends and waiting – hoping, really — that the price of investing in future production growth will fall.”
The thing to do is to pay out big special dividends now. The 15% tax rate on dividends might not last forever. The stockholders who receive these dividends could invest them far more intelligently than oil company executives, who typically only know oil.
If oil companies know that the only oil out there is expensive and fraught with risk, they have two choices.
They can sit on their collective @sses and do nothing, which usually results in governmental intervention.
Or they can drill for the expensive oil and field company militias to fend off any pissant third-world crackpot dictators attempt to extort them.
One decision is low risk, but leads to stagnation and oblivion.
The other leads to more profits and increased supply, but at an increased risk.
One can see by the decisions that our oil companies... that they will most likely be just one more sector of American business that’ll be ‘outsourced’.
Within the next 5-10 years, I’ve heard that gas prices will go up dramatically for the consumer. With the government pushing electric cars, biofuel vehicles and the like, the consumer will use less gas. The oil companies will sell less gas also. They aren’t going to loose that income. They’ll simply raise the price of a gallon.
So when the demand for a product is reduced by competing products, producers raise the price to compensate for lost revenues? Doubt it.
That is the report of the oil industry for the next two decades published this week.
I want 'em drilling here.
My “prediction” is that even if there are replacement sources for transportation, the emerging economies of China and India alone will take more oil than is being produced anyway. Those new forms of energy expected to be used to power vehicles are still experimental, even in the next 10-15 years, will be expensive, relatively undependable until perfected and unavailable to most.
In 5-10 years there will be even more vehicles on the road. Not only here, but everywhere else in the world.
The oil companies will be selling more fuel no matter how efficient the cars will be or what hairbrained fuel scheme is the gov't is pushing at the time.
Start pokin' holes in ANWAR and the oil shale! Suck 'em dry!
I think the oil companies will not any problem selling as much oil as they can produce. While some may switch to bio-fuels and such, the world growth and demand for oil will continue.
We cannot raise enough corn to even put a dent in the oil consumption. Switching every field in the US to corn may help to small percentage. Then there’s always that little problem of feeding the nation. Not to mention the tons and tons of corn and grains that we ship overseas which would have to be eliminated.
As always, the market will dictate the price of gasoline. And the oil companies will still make money.
The author must be kidding. XOM is trading like an internet stock. XOM has increased its mkt capitalization about $100 billion in the last 60 or so days.
Someone care to explain why oil prices are around $75? Don’t give me the “supply/demand” argument. The OPEC criminal cartel has repeatedly said they want prices lower (they have thrown around $50-60 range more than once) and supposedly adjust production to match their price point.
So, as I have said before, the oil market is being manipulated by factors far beyond supply and demand. The profiteers (and I have no problem in the idea of profit) are manipulating the price. Similar manipulation in the securities markets would get you put in jail...
But I agree - we MUST ramp up our own oil production and refining capacity. We are already so reliant on the rest of the world for so many things our security is already in jeopardy. We MUST take responsibility for our energy reserves. AT $75 a gallon (and Gasoline back near $3) there is NO excuse for us sitting on our butts doing nothing. Libs/enviro-nazi crackheads need to just shut up.
Drill ANWR like a $10 hooker
The short answer is that oil discoveries peaked in the 1960s.
Since then we have been pumping those fields for the vastly higher demand of today. Oil fields deplete. The best fields deplete at a faster rate as high permiabilty means that a higher percentage of what will ultimately be produced gets produced sooner. At 1000 bbls per second, the oil market is living off those super productive fields.
Some of this is indeed peak oil at work [the U.S peaked in about 1970 and almost undoubtedly will never produce that much conventional crude oil again — the East Texas field ain’t what it used to be.] It’s a good bet that the North Sea has peaked. Cantarell in Mexico has peaked [there is probably a lot smaller fields waiting to be discovered in Mexico.] The fields that have produced to date in Russia have probably peaked. Burgan in Kuwait has probably peaked. Prudoe Bay has peaked. Danquing [spelling?] in China has peaked.
How much more can the world find and where are we if we don’t find more super giant field — open questions:
Has Saudi Arabia peaked [or is it very near peak]?
What potential does Russia have in Eastern Siberia?
How about Arctic oil?
What about the western part of Iraq?
What about Iran?
Unless the answers to all of the above are positive, don’t plan your future around $20 or even $40 oil. Don’t be shocked by $100 oil
Even if all of the above are positive, we need to get going on alternatives because 125 million bbls per day would require finding 4 new Saudi Arabias right on schedule. The odds on state lotteries are IMO much better.
Take a optimistic estimate — say 10 billion bbls. A true giant oil field. Figure roughly 100 million bbls per day of world wide oil consumption [85 now but growing to 100 million based on projections by the time ANWR could be brought on stream. The answer is 100 days added to the world supply if it could all be produced on command.
I’m not against drilling ANWR, but don’t expect a miracle.
BTW, please be careful with those 10 dollar hookers. :<)
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