Big Rise in Profit Places Oil Giants on the Defensive

Whiting, Indiana is a long way from ANWR.

Find an active rail line to the North Slope.

Keep in mind that most record cold days in Indiana are at least 70 degrees warmer than the average winter day at Barrow.

Actually, crude oil probably does get to Indiana via pipeline, it also has been known to travel by truck, rail, barge, and boat (maybe not to Whiting). When you deal with the logistics of moving natural gas and condensate across a state which, if split down the middle would make Texas the third largest state, numerous mountain ranges, and through temperatures and wilderness unimaginable to most of the population of the lower 48, a pipeline is the only way to go.

Without the Alsaka pipeline, the North slope development which has occurred would not have been economically viable, simply because of the logistics involved in getting the oil to market.

A natural gas pipeline has been in the works since the '70s, meeting environmental opposition every step of the way. Attempting to build, operate, and maintain a railroad in that terrain and climate to ship natural gas/condensate would be far more difficult and expensive, and meet at least as much environmentalist obstruction as the pipeline.

So between the two of them they invested 800 million for the year, but pocketed about 10 billion just for the quarter. 800 million is a lot, and I would love to have it, but with that profit, just for the quarter, this is not a substantial inventestment.

They could drop the whole thing today, and wouldn't even notice.

Maybe "BIG MILK" is next on the radar.

Actually it should be since government subsidies & policies are the biggest reasons for its high cost.

BP refines 40,000 barrels of crude and produces about 8 million gallons of gasoline a day, so they must have a pretty nice distribution network. Since it located on the Lake Michigan shoreline, I would have to assume that there was a reason for the location.

Wonder if there is a map of the pipelines somewhere?

A person would think that with their assets, these oil companies should have much more bargaining power than anyone else. They should be able to get things started if they really wanted to.

We are not looking at pure hands off capitalism at work here, if we were, many new refineries would have been built in the last 30 years. This has warped the supply and demand situation. The supply is tight because of reaching the limits of US refining capacity - in true hands off capitalism this would result in new refineries being built.
The real question in my mind is why are no new refineries being built to average out the sharp variations in the supply situation?

This is a separate problem from the warped crude supply and demand situation. Neither situation is a good example of true hands off capitalism.

Bing! Bing! Bing! We have a winner!

I think after most people get their heating bills, there will be public outrage, and the oil companies will have to do something to avoid torch-bearing mobs of angry citizens.

Yep. Blame the oil companies, shut 'em down, torch the refineries, and then burn your furniture to keep warm this winter.

Natural gas will be more expensive this winter, so will fuel oil. Part of the pressure on Natural Gas is directly from the conversion of coal and oil fired power plants to burn natural gas to comply with environmental regulations.

Fuel oil and diesel are in short supply, because refinery operations have been interrupted.

Just how often has the supply been interrupted?

Thirty percent of the refining capacity of the country was shut down. Deep water tanker terminals were shut down, not at the whim of the oil compaines, but by two storms of unprecedented magnitude in that area, which wiped out one of the largest cities in the region, and devastated hundreds of miles of coastline, and you have had all the fuel you wanted to pay for.

No one is factoring the cost of shutting down a production platform, not having product to deliver to market, the cost of shutting down and restarting a refinery, or any of that lost revenue, oh no, they are all whining about what? $60.00 a month in increased fuel costs? Less than the cost of dinner and drinks, less than the cost of a night at Bingo for Grandma, but only three hours wages for a worm roughneck in these parts.

If the orange crop gets wiped out by the weather, the price goes up, and people use less.

If you did not want to pay that much, you found a way to use less, be it orange juice, gasoline, or heating fuels.

As things come back on line, the price of gasoline has fallen--nearly a dollar a gallon around here in the past couple of months.

Keep in mind that this has been done despite the loving ministrations of the environmental lobby, government, and endless litigation to PREVENT the construction of refineries and drilling domestic areas with high production potential.

(BTW, I'm just waiting for the hellraising against "BIG CHICKEN" if the bird flu gets into America's poultry flocks. All the torchbearers will be marching on the eeeevil Tyson, Swanson, KFC, etc. for charging "too much".)

For starters, everyone seems to use the unusually (and unsustainably) low oil prices of the late '90s as a benchmark, and secondly, the oil industry has to replace reserves as they are depleted, continuously.

Investment is required to locate prospects, evaluate prospects, lease mineral rights, acquire permits and post reclamation bonds, all long before the well is even spudded. So you won't immediately see the effects of reinvestment.

If all the permits, etc. were granted to build a new refinery today, with local support and no environmentalists involved suing to stop construction, it would still take 10 years for the facility to come on line.

So how many lawyers are taking pay cuts out there? There is an obvious glut of shysters on the market, but I haven't seen any price wars there.

In the meantime, every other industry in the country charges what the market will bear, and no one is griping about it (with the exception of the drug companies, which must invest a lot to see any return on what they put out up front, too).

So between the two of them they invested 800 million for the year, but pocketed about 10 billion just for the quarter. 800 million is a lot, and I would love to have it, but with that profit, just for the quarter, this is not a substantial inventestment.

Why don't you try a little research? These are both worldwide companies. They invest a higher percentage of their profits in Alaska than they get as production from Alaska.

Yep. Blame the oil companies, shut 'em down, torch the refineries, and then burn your furniture to keep warm this winter.

I clearly identified government as the major culprit in my post, if you would reread it. However, I think the majority of Americans will blame both equally. This would be a PR disaster for any company.

Natural gas will be more expensive this winter, so will fuel oil. Part of the pressure on Natural Gas is directly from the conversion of coal and oil fired power plants to burn natural gas to comply with environmental regulations.

Yep. And Republicans are in charge and are doing nothing to reverse this. Sad.

Fuel oil and diesel are in short supply, because refinery operations have been interrupted.

It's why we need more refineries. I doubt the government or the oil industry want them much yet, however, because both make tons of money when the supply is "interrupted."

No one is factoring the cost of shutting down a production platform, not having product to deliver to market, the cost of shutting down and restarting a refinery, or any of that lost revenue, oh no, they are all whining about what? $60.00 a month in increased fuel costs? Less than the cost of dinner and drinks, less than the cost of a night at Bingo for Grandma, but only three hours wages for a worm roughneck in these parts.

Yes, the devastating costs to the oil industry are certainly apparent in the loss they all posted yesterday. Let's shed a tear for them, shall we?

Where are you getting the $60 a month figure? I bet most people are paying that much more in gasoline alone, not including natural gas this winter.

If the orange crop gets wiped out by the weather, the price goes up, and people use less.

People are not forced to buy oranges. People are forced to buy energy.

If you did not want to pay that much, you found a way to use less, be it orange juice, gasoline, or heating fuels.

I know you work for an oil company, but even you can't be so blind to see that this argument is not accurate. On any given day, I can choose not to have a glass of orange juice. I cannot choose not to heat my house or to not drive to work, or not to buy any goods such as foods that are transported using energy.

Keep in mind that this has been done despite the loving ministrations of the environmental lobby, government, and endless litigation to PREVENT the construction of refineries and drilling domestic areas with high production potential.

Totally true. Why aren't Republicans getting out of the way? Because they are the same as dems. But that's another argument.

(BTW, I'm just waiting for the hellraising against "BIG CHICKEN" if the bird flu gets into America's poultry flocks. All the torchbearers will be marching on the eeeevil Tyson, Swanson, KFC, etc. for charging "too much".)

I can choose not to buy chicken. I cannot choose not to buy energy below a certain level.

For starters, everyone seems to use the unusually (and unsustainably) low oil prices of the late '90s as a benchmark, and secondly, the oil industry has to replace reserves as they are depleted, continuously.

Investment is required to locate prospects, evaluate prospects, lease mineral rights, acquire permits and post reclamation bonds, all long before the well is even spudded. So you won't immediately see the effects of reinvestment.

I already told you how sorry we were for those 3 months in 1999 when gas was 90 cents a gallon. Must we pay for the rest of our lives for those 3 months? Surely you have at least broken even by now, right? I know 3 months of cheap gas is almost impossible to recover from, but maybe you guys can spread around that 9 billion dollars you made this quarter.

If all the permits, etc. were granted to build a new refinery today, with local support and no environmentalists involved suing to stop construction, it would still take 10 years for the facility to come on line.

And also it's in the best interest of the government and oil companies to have supply choked as much and for as long as possible.

So how many lawyers are taking pay cuts out there? There is an obvious glut of shysters on the market, but I haven't seen any price wars there.

Boy, you just love this argument, no matter how false it is. I'll explain it one more time : most Americans every day can choose not to have a lawyer. Almost none can choose not to buy energy or goods transported using energy. That's why we are pissed. We can't cut consumption below a certain level. So we have to pay whatever you guys charge, and the government gets an even bigger cut.

In the meantime, every other industry in the country charges what the market will bear, and no one is griping about it (with the exception of the drug companies, which must invest a lot to see any return on what they put out up front, too).

See, now you are starting to get it. If I don't heat my house, I freeze to death. If I don't get medicine for an illness, I die. People tend to get a little pissed when you play "what the market will bear/inelastic demand" with a product necessary to sustain life.

I am sure there are maps of pipelines, but access may be more difficult after 9/11, as a tremendous amount of product moves through them.

Location next to water may be for a variety of reasons depending on the age of the facility, which might have included shipping via water, cheap real estate (pre-Wetlands Act filled swamp), or the ability to use water in industrial processes. Any or all may apply. Living near water has not been generally desireable for most folks until the last few decades, especially if there were swamps or marshes in the area, simply because of the mosquitoes, damp, and what was perceived as potential for disease. I think the general smells associated with the seafood industry have been part of that, but as areas once considered to be declasse and industrial gain popularity for those who want recreational acccess or prestige, that focus has shifted, and even seafood industry interests are being displaced in some areas by luxury condos and marinas for pleasure craft. (Classic real estate buy low, develop and sell high strategy, making the undesireable area desireable with development to keep the high rent herd on the move--and profits up).

Money is not the only item in the equation, and despite those resources, a hostile media has made it more difficult (invoking the ubiquitous evil modifier of "Big"), as well as the tremendous resources of those organizations which exist solely to impede industrial development, and they are legion.

You might want to check the refinery math there, the average stock tank barrel of crude (42 gallons) only yields about 20 gallons of gasoline, and 40,000 barrels of crude would only give up about 800,000 gallons of gas.

To get 8 million gallons of gas, they'd need to refine more like 400,000 barrels of crude. The odds are real good that much of that is pipelined out.

Exxon Mobil has a resposibility as a publicly traded

company to make as much profit as they can for their

shareholders. It seems to me they did a pretty good job of

that. No one seems to feel too sorry for the oil companies

when they pay out the wazoo for environmental compliance

and for litigating suits from the green whackjob

organizations.

Don't like high gas prices? Quit whining and buy a

bike.

Funny, that's what they say the numbers are. Must be a misprint.

Well, have a nice weekend, I'm out of here until Monday.

Well, I'll go with you know, since you are there. Hopefully we can get some production out of there some time.

Have a good weekend.

If anyone would like the petroleum industry to keep developing and discovering more oil and natural gas, they should let the petroleum industry keep its profit and let the profit be reinvested in development and discovery, which is what the petroleum companies do along with research and development of alternative energy such as solar cells. Petroleum companies are the major manufacturer of solar cells. Taking the profits to give away to something other than petroleum discovery and development would result in less development and discovery, a bad idea when demand for development and discovery is rapidly increasing world-wide.

Just breaking:

Exxon-Mobil Employees Given Fake Flu Shots

BAYTOWN, Texas - Fake flu shots were given out last week at a health fair at Exxon Mobil Corp.'s Baytown complex and an investigation was under way, authorities said.

Exxon Mobil spokeswoman Treacy A. Roberts said Thursday that the FBI told the company that what was administered "definitely not the flu vaccine."

This is not going to help their already bad image.

See, now you are starting to get it. If I don't heat my house, I freeze to death. If I don't get medicine for an illness, I die. People tend to get a little pissed when you play "what the market will bear/inelastic demand" with a product necessary to sustain life.

I think I get it. Plasma TV: justifiable. New car every three years: justifiable. Latest whatever?: justifiable as long as it is not necessity.

Necessities go up in price, cartwheeling sh!tfit.

As for controlling how much you use, you would be amazed how much you can, but people don't want to live upstairs from where they work. They want to live in overpriced (my opinion) 4000 square ft. McMansions 40 miles from work and drive back and forth in four wheel drive vehicles that never leave pavement. That set of choices determines their energy needs to a massive degree. Different choices, different needs, you pays your money and takes your choice.

As for the actions of the Republican Congress, I am bitterly disappointed in their general lack of progress on numerous fronts, and feel they must either be seriously compromised by the content of Hillary's 900+ FBI files, or have sold out to popular opinion as expressed by the leftist media.

As for three months in 1999, oil has been underpriced for a long time, especially if you were to index the price to that of the vehicle it goes into.

Either people pay a realistic price which will sustain continued development or the industry will continue to move in a boom/bust cycle, as it has for the past three decades. Product prices, which support refinery bids for crude oil, which support exploration and development, will continue to roller-coaster. That money is made in the trading pits and on the stock market.

I, for one, would welcome the concept of stable and sustained activity, simply because it translates to sustained employment.

Enjoy!

They can always blame eeeevil "Big Drugs".....

And also it's in the best interest of the government and oil companies to have supply choked as much and for as long as possible.

I have a hard time following your assertion here. How is it in the best interest of the government to have the oil "supply choked as much and for as long as possible"? After all, taxes will go down, the economy suffers, the War becomes harder to prosecute, the President's poll ratings go down, and much, much more.

OIC said the blind man. Thanks for the correction.

OIC said the blind man. Thanks for the clarification.