Posted on 06/24/2008 2:10:40 PM PDT by John David Powell
Here we are with a new week and another round of posturing, politicking, and punditry regarding the price of petroleum. As happens when folks do a lot of talking, very little is said.
I hang around educated and talented people. Each individual has at least one university degree. Most read, watch, or listen to more than one news source every day. They span generations with ages ranging from the 20s to the 70s.
Yet, not a single person among them knew the answers to some basic questions pertinent to the growing discourse regarding the rising price of oil. A few knew some of the answers, and some knew a few of the answers. To be fair, I had to look up the answers, or else I would have been among the shoulder shruggers.
For instance, how big is a barrel? Answer: 42 gallons. So, now you know that when the price for a barrel of crude oil hits $140, that’s the same as $3.33 a gallon.
What nation supplies the most crude oil and petroleum products to the United States? Answer: The United States. According to the Energy Information Agency (www.eia.doe.gov), our country supplied 41 percent of the oil we consumed in March of this year.
What nation, other than the U.S. , supplies the most crude oil and petroleum products to our country? Answer: Canada. Our northern neighbor accounts for 12 percent of our nation’s oil and 20 percent of all the oil we import. The rest of the top five include Saudi Arabia (7 percent and 13 percent); Venezuela (6 percent and 11 percent); Nigeria (6 percent and 10 percent); and Mexico (5 percent and 8 percent).
How much oil do we import from Persian Gulf countries? I’m glad you asked. Persian Gulf countries accounted for only 16 percent of our foreign oil imports each year from 2005 to 2007. In fact, our Persian Gulf imports declined most of this decade, from a 15-year high of a little more than 1 billion barrels in 2001 to 791.9 million barrels in 2007.
What’s the difference between crude oil and petroleum products? Answer: Crude oil provides, among other products, gasoline, diesel and jet fuels, heating oil, liquefied petroleum gas, lubricants, asphalt, plastics, synthetic fibers, detergents, fertilizers, ink, crayons, bubble gum, deodorant, tires, and heart valves.
One barrel of crude oil (which is 42 gallons, remember?), yields about 19.6 gallons of gasoline. The other 22.4 gallons go into the products just mentioned.
How much of the cost of oil goes into the price of gasoline. Answer: A bunch. We consumed about 390 million gallons of gas a day last year in our cars, trucks, recreational vehicles, boats, farm implements, and construction and landscaping equipment. Back when crude was $68 a barrel (that was just last year), it accounted for about 58 percent of the price of a gallon of gasoline. The rest of the price came from refining costs (17 percent), federal and state taxes (15 percent), and distribution and marketing (10 percent).
By the way, the price of crude accounts for about 77 percent of the cost of gas at $4 a gallon.
Here’s a little something you may not have considered. What products that you buy on a regular basis are sold with tax included? Answer: Gasoline. For everything else, you add the tax at checkout.
The folks in California pay 63.9 cents a gallon in state and federal fuel taxes, the most in the nation. That’s just the base, though. Motorists there also pay an additional 6-percent state sales tax, with some paying another 1.25-percent county sales tax plus applicable local sales taxes. Same in Illinois , where Chicago motorists pay 12.75 cents per gallon on top of the 57.9 cents per gallon in state and federal taxes. Some Illinois motorists also pay a 6.25-percent sales tax.
Politicians, pundits, and other TV talking heads don’t like to provide these answers, because facts get in the way of positions that pander to the mob. We don’t point fingers at Canada , because it’s de rigueur to paint the Saudis with the broad brush of blame. Folks float the idea of a moratorium on state and federal gasoline taxes without explaining its minimal impact on gas prices, or without mentioning the $3 sales tax some motorists pay on top of a $50 fill up. Policymakers don’t explain that oil trades in the dollar, which is weak vis-à-vis the Euro, because that would require solutions for strengthening the greenback.
And, it’s easier for simple minds to convince simpler minds to impose windfall-profit taxes on pension funds and owners of Individual Retirement Accounts who invest in oil companies than to take on credit card issuers charging double- and triple-digit interest rates to the millions of people using plastic to pay for food and fuel. Talk about irony.
And, we sure wouldn’t want to impose a windfall-profit tax on someone who goes from making $56,000 a year as, say, an Illinois legislator, to $165,000 a year as, say, a U.S. senator, an increase of nearly 200 percent (not counting book deals or real-estate related loans).
Mundus vult decipi (and as my magician friends add: decipiatur)
John David Powell is an award-winning writer and Internet columnist. He may be reached at johndavidpowell@yahoo.com.
Excellent info - thanks for posting!
If you want to know what's what in the 'awl bidness', you've no further to go than FreeRepublic. Ask FReeper thackney (a real live petro engineer), or Smokin' Joe (hands on in the Bakken formation(s)), or Eric in the Ozarks (long-time trader of lower-end product), to name a few.
Others here might offer a thought or two on the actual (as opposed to the public perception of) workings in the crude and products. Some of us have even written books on the subject.
BTW, did you know that there's no such thing as a physical 'barrel' of oil? Doesn't exist, and the reason for it traces back to the kerosene mkt in the 1880s.
There is another aspect the “we need to focus on alternatives because oil is bad” crowd doesn’t consider. Oil is more than just gasoline. There are few aspects of modern existence that don’t depend on petroleum based products.
BTTT! Great article!
First time at the plate and hits one out of the park. Way to go!
Maybe the author never buys any form of alcohol but it also has the taxes included, not added at the checkout stand.
Since they can't outlaw American's SUVs and force them to ride public transportation, keeping energy prices high is another way to achieve their goal.
If American's lose their jobs due to cutbacks related to high energy cost, then too damn bad. Mother-Earth comes first.
Way to go, John. Once again, we geeks, with just a little bit of research, have no trouble completely trouncing even the most above-average lib. They are - well, they’re marshmallow-major, latte drinking lib arts sponges.
Exactly what I was thinking.
I can attempt seismic survey questions: 5 years in the GOM on a seismic ship and another 12 as a software engineer developing seismic processing software for a seismic company here in H-Town.
And cigarettes?
“Maybe the author never buys any form of alcohol but it also has the taxes included, not added at the checkout stand.”
Also, tobacco taxes are included in the price, and then many places, the sales tax is added on top of all that. No breaks for the tobacco users.
Good job!
“Folks float the idea of a moratorium on state and federal gasoline taxes without explaining its minimal impact on gas prices,”
And isn’t the federal gasoline tax used, or is supposed to be used, primarily for highway construction and maintenance?
That idea strikes me as silly, though it has appeal to many.
:^(
I saw a show the other day about the Bra industry. You guessed it...petrolium and ofcourse the almighty silk worm.
Very interesting show.
The same can be said for most of the other "trivia facts".
That taxes at all levels is greater than the obscene profits of the oil companies is very relevant when the idiot politicians zero in on "obscene profits" or "gigantic executive salaries". At least the oil companies are producing something useful for the amount of profits they make. And it is not irrelevant that those profits are distributed among millions of shareholders of oil company stock.
When was the last time government shared "their" obscene income (profit)?
Knowledge is always power, and being able to recognize BS when we hear it is useful, but so far has contributed zero towards solving the problem. The politicians still argue irrelevancies, suggest old and tired alternatives and, bottom line, contribute zero towards solving the underlying issues.
Isn't that wonderful?
If we BS our problems to death we lose our homes and our jobs and starve. If politicians do it, they can do it forever with no price to pay whatsoever!
What's wrong with that picture?
Thanks for the post. great info.
I just wish some of you would speak up to the likes of that jackass Rahm Emanuel, who's busily whining about oil companies not drilling some large number of leaseholds. Why not? Because there's no effing crude to be found on 90%+ of them, and the 'awl bidness' knows this is so because YOU chaps have looked. Sheesh.
;^)
Judging by the bridges falling down and the pothole epidemic nationwide, the robbing of taxes earmarked by law for highway construction and maintenance has been a fraud for at least a decade now.
Ordinary mortals are susceptible to charges of fraud and misrepresentation; politicians are not.
He answers——accounted for only 16 percent of our foreign oil imports each year from 2005 to 2007.
The writer is being disingenuous when discussing the Persian gulf.
It's not so much about the Persian Gulf per se but about OPEC which is controlled by the Saudis.
We are dangerously controlled by OPEC aka the Saudis.
2.1 billion barrels from OPEC (all but 3 Muslims producers and two of those are Venezuela and Ecuador) 2007
2.7 billion barrels from NON OPEC nations 2007
http://tonto.eia.doe.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbbl_a.htm
“Ordinary mortals are susceptible to charges of fraud and misrepresentation; politicians are not.”
I thought highway funds were being misused, just as SS and who knows what other earmarked funds find their way into the black hole of the federal budget.
But, as you point out, there’s no doubt those funds are sorely needed for infrastructure maintenance and replacement.
Now there is an industry we can't afford to let down with crazy oil prices....I slay myself sometimes, LOL!
I don’t smoke, but you are right.
Incorrect. Those products are currently manufactured using crude oil as the raw material. But they could just as easily -- and in many cases, more easily -- be made from any other organic substance.
Oh really? without unintended consequences?
I suppose that in a free market society, the market avoids "the more easy" way because they would rather keep their costs high.
Are you serious?
It’s a start.
How much of the price of NYMEX crude is du to speculation?
How much oil could be produced domestically if every spare resource were put to work producing oil?
Actually, at least in California, the sales tax is added at check out.
Of course. There are alternatives, after all.
The current method may be cheaper and simpler, and some manufacturing adjustments would have to be made, but we could always have the ladies chuck the lycra and the spandex and bring back the whalebone corset...
Thanks for your comments.
I do take exception, though, at your synonym for “a lie.” I mentioned the Persian Gulf countries because we continually hear about our dependence on “Middle Eastern oil.”
If one really wants to get down and dirty about OPEC, let’s make sure we take aim at Venezuela and that blustering, Castro-sucking, little peasant freak they have for a president
Good, I’ve got one for you. Two actually. The first is easy and I think I know the answer already but here goes. Has there ever been a survey of our coastal waters outside those areas we currently drill in? Specifically the East coast of the US.
Second, after reading all the hype about all those leases the oil companies hold that they haven’t exploited I wondered how in depth are the surveys the oil companies conduct in the areas they lease beforehand. According to the oil company execs that replied to the criticism some of those leases contain nothing leading me to believe that accurate surveys aren’t conducted until after the lease is purchased.
That's refreshing, to say the least.
(Wellsite geologist working the Williston Basin and the Rockies since 1979, conventional, directional, and horizontal wellbores in carbonate, clastic and fractured volcanic reservoirs)
Hmm. It’s been a bit since I stopped drinking vodka every night, but I think here in Texas they tack on sales tax at checkout. Same with smokes.
Hey, now I have an excuse to go out and buy some potato juice. Research!
Better have some of the crew building refineries and other infrastructure as you go, and shuttling a few off to work on some nuke plants would do a lot to cut the heating costs for those who use natural gas in the winter.
This (energy in general) is a problem which has been largely ignored while things were cheap, or hammered by the econazis, and we have a bunch of catching up to do all around.
If crude keeps heading for the stratosphere, it's just a matter of time until the replacements are economically viable.
With any luck, oil's reign is winding down.
Or we could step in the 21st century and stop using a dirty, polluting substance that was only used for fuel originally because it was so easy to get to, and that isn’t all that great as a raw material for organic derivatives.
Actually, I view mankind's resource usage, historically, as a progression, and understand that oil is now, somewhat after coal, after wood, after animal dung/fat or bunches of grass, etc.
At some point, humanity will be using what is next, although some of the older technology will always be present.
Funny, how in all that time, despite finding different ways to transport it and use it, we are still building a fire. Even our use of nuclear fuel is to build the 'fire' which we use to heat water to make the wheels go round and generate electricity we can send down the wire to make the wheels go 'round...
So, yes, we could use a few fundamental changes in the way we do things, just to be more efficient. Perhaps when we master gravity or spacetime we can move people and things large distances without building that fire, without tires or roads, lubricants, or gaskets, or seals to keep the wind and wet out.
If we are there yet, no one said so.
In the meantime, we use the energy we have. But if you have something new, something that doesn't build a fire (however you build it, wherever you build it) to make the wheels go 'round, I'm all ears.
You see, we use oil because the alternatives, by and large, coal, wood, animal fat/dung, were even dirtier, and in their heyday, even more polluting.
As far as a raw material for organic derrivatives, I'll defer to the folks who know more about that than I.
Is there an organic chemist in the house?
We should be worried - no, panic stricken about OPEC. OPEC is funding machine for international terror INC.
I merely suggested that by not mentioning OPEC and its stranglehold on us you were leaving out the elephant in the room.
And what I neglected to mention earlier: yes a fine article albeit incomplete. Too many in conservative circles are shamefully enamored of the “Arab sheiks” and Muslim “democracies” such as the one in the parastate of Turkey.
Excellence In Freepcasting bump
NO.
It goes into the general fund.
The USGS (U.S. Geological Survey) works with each state's Geological Survey department and they do seismic surveys to determine minerals, oil, gas, etc. The state of Florida has its own seismic research ships. As to how extensive and how recent these surveys are in the areas in question is something I don't know. The private sector has done surveys in those areas before the moratoriums.
My best guess is that they have rough approximations of the crude oil reservoirs. Today, the private sector is much more advanced in both the type of surveys done and the processing of the data for the subsurface imaging. I doubt the USGS can come close to what we can do. There needs to be new seismic surveys performed in my opionion.
I currently work with one geophysicist who was invloved in the ANWR survey with Exxon back in the 1980s that estimate 10-16 billion barrels and he says that the area most likely has 4-5 times that amount. The sismic survey and processing technology back in the 1980s was poor compared to today.
"Second, after reading all the hype about all those leases the oil companies hold that they haven’t exploited I wondered how in depth are the surveys the oil companies conduct in the areas they lease beforehand."
A new area of interest will usually start with a less expensive 2D seismic survey just to get an idea of what major features are below the subsurface and if there is anything interesting then they proceed further to more expensive 3D seismic surveys. This can take years. The next step is to do log wells and get a slice of the actual earth to match it to the seismic imaging to see if the seismic image is accurate to the actual slice. If they don't match, then something went wrong with the seismic processing. If all things seem good and they see features of interest then test wells are drilled to see if there is oil and to test flow pressures to determine the amount of oil underneath. (this is beyond my experience, I am seismic only).
Lease 181 in the eastern Gulf of Mexico which is 100 miles off the Florida panhandle is being looked at. It will take time and it's in deep water. Getting deep water rigs today is near impossible and some of the depths have never been drilled to such depths. Much easier to get a land rig and drill the ANWR. Lease 181 could take 10 years before a rig is in place.
"According to the oil company execs that replied to the criticism some of those leases contain nothing leading me to believe that accurate surveys aren’t conducted until after the lease is purchased."
Those leases either contain nothing, not much oil, or like lease 181 which will take years to explore and even more years to build the type of deep water rigs that can actually get to those extreme depths. And lease 181 has nowhere near 1 billion barrels much less 10-16 billion like the ANWR. I think lease 181 is estimated to have 150 million barrels. And that is in extreme deep water, which ironic enough, is more environmentally challenging with potential for total uncontrolled disaster than a simple land rig in the ANWR.
The ANWR with 16 billion barrels and producing 1 million barrels per day would last for 43 years. This would cut oil imports by about 10% and drastically reduce the trade deficit, which in turn would strengthen the dollar, which in turn would drive world wide crude oil prices down. Just cutting our trade deficit (not flooding the world with dollars) would drive oil prices down. Democrats are too stupid to know this as is McCain, unfortunately.
In the meantime, as I write, the industry is headed over to Dubai along with good paying jobs. It's a real shame.
The USGS (U.S. Geological Survey) works with each state's Geological Survey department and they do seismic surveys to determine minerals, oil, gas, etc. The state of Florida has its own seismic research ships. As to how extensive and how recent these surveys are in the areas in question is something I don't know. The private sector has done surveys in those areas before the moratoriums.
My best guess is that they have rough approximations of the crude oil reservoirs. Today, the private sector is much more advanced in both the type of surveys done and the processing of the data for the subsurface imaging. I doubt the USGS can come close to what we can do. There needs to be new seismic surveys performed in my opionion.
I currently work with one geophysicist who was invloved in the ANWR survey with Exxon back in the 1980s that estimate 10-16 billion barrels and he says that the area most likely has 4-5 times that amount. The sismic survey and processing technology back in the 1980s was poor compared to today.
"Second, after reading all the hype about all those leases the oil companies hold that they haven’t exploited I wondered how in depth are the surveys the oil companies conduct in the areas they lease beforehand."
A new area of interest will usually start with a less expensive 2D seismic survey just to get an idea of what major features are below the subsurface and if there is anything interesting then they proceed further to more expensive 3D seismic surveys. This can take years. The next step is to do log wells and get a slice of the actual earth to match it to the seismic imaging to see if the seismic image is accurate to the actual slice. If they don't match, then something went wrong with the seismic processing. If all things seem good and they see features of interest then test wells are drilled to see if there is oil and to test flow pressures to determine the amount of oil underneath. (this is beyond my experience, I am seismic only).
Lease 181 in the eastern Gulf of Mexico which is 100 miles off the Florida panhandle is being looked at. It will take time and it's in deep water. Getting deep water rigs today is near impossible and some of the depths have never been drilled to such depths. Much easier to get a land rig and drill the ANWR. Lease 181 could take 10 years before a rig is in place.
"According to the oil company execs that replied to the criticism some of those leases contain nothing leading me to believe that accurate surveys aren’t conducted until after the lease is purchased."
Those leases either contain nothing, not much oil, or like lease 181 which will take years to explore and even more years to build the type of deep water rigs that can actually get to those extreme depths. And lease 181 has nowhere near 1 billion barrels much less 10-16 billion like the ANWR. I think lease 181 is estimated to have 150 million barrels. And that is in extreme deep water, which ironic enough, is more environmentally challenging with potential for total uncontrolled disaster than a simple land rig in the ANWR.
The ANWR with 16 billion barrels and producing 1 million barrels per day would last for 43 years. This would cut oil imports by about 10% and drastically reduce the trade deficit, which in turn would strengthen the dollar, which in turn would drive world wide crude oil prices down. Just cutting our trade deficit (not flooding the world with dollars) would drive oil prices down. Democrats are too stupid to know this as is McCain, unfortunately.
In the meantime, as I write, the industry is headed over to Dubai along with good paying jobs. It's a real shame.
The USGS (U.S. Geological Survey) works with each state's Geological Survey department and they do seismic surveys to determine minerals, oil, gas, etc. The state of Florida has its own seismic research ships. As to how extensive and how recent these surveys are in the areas in question is something I don't know. The private sector has done surveys in those areas before the moratoriums.
My best guess is that they have rough approximations of the crude oil reservoirs. Today, the private sector is much more advanced in both the type of surveys done and the processing of the data for the subsurface imaging. I doubt the USGS can come close to what we can do. There needs to be new seismic surveys performed in my opionion.
I currently work with one geophysicist who was invloved in the ANWR survey with Exxon back in the 1980s that estimate 10-16 billion barrels and he says that the area most likely has 4-5 times that amount. The sismic survey and processing technology back in the 1980s was poor compared to today.
"Second, after reading all the hype about all those leases the oil companies hold that they haven’t exploited I wondered how in depth are the surveys the oil companies conduct in the areas they lease beforehand."
A new area of interest will usually start with a less expensive 2D seismic survey just to get an idea of what major features are below the subsurface and if there is anything interesting then they proceed further to more expensive 3D seismic surveys. This can take years. The next step is to do log wells and get a slice of the actual earth to match it to the seismic imaging to see if the seismic image is accurate to the actual slice. If they don't match, then something went wrong with the seismic processing. If all things seem good and they see features of interest then test wells are drilled to see if there is oil and to test flow pressures to determine the amount of oil underneath. (this is beyond my experience, I am seismic only).
Lease 181 in the eastern Gulf of Mexico which is 100 miles off the Florida panhandle is being looked at. It will take time and it's in deep water. Getting deep water rigs today is near impossible and some of the depths have never been drilled to such depths. Much easier to get a land rig and drill the ANWR. Lease 181 could take 10 years before a rig is in place.
"According to the oil company execs that replied to the criticism some of those leases contain nothing leading me to believe that accurate surveys aren’t conducted until after the lease is purchased."
Those leases either contain nothing, not much oil, or like lease 181 which will take years to explore and even more years to build the type of deep water rigs that can actually get to those extreme depths. And lease 181 has nowhere near 1 billion barrels much less 10-16 billion like the ANWR. I think lease 181 is estimated to have 150 million barrels. And that is in extreme deep water, which ironic enough, is more environmentally challenging with potential for total uncontrolled disaster than a simple land rig in the ANWR.
The ANWR with 16 billion barrels and producing 1 million barrels per day would last for 43 years. This would cut oil imports by about 10% and drastically reduce the trade deficit, which in turn would strengthen the dollar, which in turn would drive world wide crude oil prices down. Just cutting our trade deficit (not flooding the world with dollars) would drive oil prices down. Democrats are too stupid to know this as is McCain, unfortunately.
In the meantime, as I write, the industry is headed over to Dubai along with good paying jobs. It's a real shame.
Contact your Congress critters to let them know that you are tired of high gas prices.
Gas for the car tank. Gas for the man tank. Same thing.. :)
It is diabolical though; paying taxes on taxes.
Thanks for that reply. Most interesting was your belief that ANWR may contain a lot more oil than the number always bandied around. If there were truly 30-40 billion barrels of oil that would certainly reduce the resistance to drilling there. We’re not likely to find out though since both candidates oppose drilling ANWR.
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