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barrister
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Oil
So yesterday on the way home, I was, as I occasionally do when sports talk is boring, listening to the Michael Medved show. His guest was a Harvard professor. He explained the oil situation better than I have heard before.
First he pointed out that we have a misconception about oil drilled domestically as "American oil" which will help us reduce our independence on "foreign oil". There is in fact no such thing as American or foreign oil. It only belongs to us until the international corporation which is the oil company takes it out of the ground and puts it into the international oil supply. It doesn't matter if the company is BP (British), Shell (Dutch) or Exxon (American). Oil is fungible and it all goes into the World supply which is where the price is set. That is why drilling ANWAR will have little effect on the price, the amount added to the world supply is simply too small to make much of a difference.
Second, he pointed out that the money from the sale of gas doesn't go all that much to the country from which the oil came. Much of it is cost of production, much is taxes, a smaller amount is profit for the oil companies, which goes to the shareholders all over the world. Moreover, by the United States reducing its oil consumption, we really won't have much effect on the oil revenues going to countries like Saudi Arabia or Iran because there is plenty of pent up demand that will be happy to buy what we presently buy. We may not be dependant on them if we go to alternative fuels like nukes, electric, coal , solar or hydrogen, but they will still be getting lots of cash from other places. The good thing is that by doing so, our shareholders will still reap the benefits of prices while not having to pay them, which result in a wealth transfer INTO the United States.
Third, speculation accounts for about 1/3 to 1/2 of the "cost bubble" right now and when that bubble bursts, the oil companies and their shareholders are going to be in a world of hurt. It is inevitable, just like the dotcoms and the mortgage brokers.
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6/24/2008, 2:51 pm
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steveatl
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This pretty much matches the non-partisan information I've been reading lately. I don't know why we aren't cracking down on speculation, though.
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"McCAIN-PALIN: A BRIDGE TO NOWHERE"
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6/24/2008, 2:55 pm
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barrister
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Yeah, I don't understand that either. It seems neither the oil producers nor the oil companies are the real villians here, its the dang speculators, and their deeds are inevitibly going to hurt us all.
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6/24/2008, 2:58 pm
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steveatl
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But it doesn't add up that the oil companies are making record profit while consumers are paying these prices (via speculators).
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"McCAIN-PALIN: A BRIDGE TO NOWHERE"
One House One Spouse Obama 08!!!
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6/24/2008, 2:59 pm
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ckirmser
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Re: Oil
quote:
Barrister wrote:
Third, speculation accounts for about 1/3 to 1/2 of the "cost bubble" right now and when that bubble bursts, the oil companies and their shareholders are going to be in a world of hurt. It is inevitable, just like the dotcoms and the mortgage brokers.
The bubble I've been talking about for about two months, now - something like that.
The left demands the oil companies pay windfall taxes on their evil profits.
When the bubble bursts and they are hurting, will the left equally call for them to be bailed out?
I don't think so.
--- I am wracked with such hearty guffaws that in addition to rolling to and fro on the floor, my posterior has separated itself from my body.
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6/24/2008, 3:03 pm
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steveatl
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Who should be given special attention and bailouts, ck, the consumers (you and I) or oil companies?
I dare you to guess at the salaries of the CEOs who's companies are bailed out with our tax dollars.
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6/24/2008, 3:04 pm
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barrister
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Re: …
quote:
steveatl wrote:
But it doesn't add up that the oil companies are making record profit while consumers are paying these prices (via speculators).
Sure it does. Profits are a function of PERCENTAGE. If the mark up on oil is 4% (which it is) and it cost you $1 a unit, you make 4 cents. If it cost you $2 a unit, you now double your profit to 8 cents. The oil companies are, by virtually every credible source I have seen, only making a 4% profit. That is not unreasonable. If you reduce that, they will simply take their assets and stop using them in the oil industry and put them in a secure investment where they can make a higher percentage return.
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6/24/2008, 3:04 pm
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agente2
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Re: Oil
One of my friend has a oil dealing company. (GT Traiding ) When oil is drileed and it is in a tanker they start to make trade of that.
The tanker start from Dubai and heads to Texas. After a day they sell it to somebody and the tanker heads to new buyers city. While the oil price goes up they may buy the same oil again and the tanker changes it's route again to Texas but next day they sell it at and the tanker heads to Rotterdam....
The same thing with already refined products but there are some limits. Here diesel oil can't include sulfur but somewhere else it can etc...
Last edited by agente2, 6/24/2008, 3:07 pm
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6/24/2008, 3:05 pm
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steveatl
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How was the sauna? I'm jealous. I'm still stuck at my desk.
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"McCAIN-PALIN: A BRIDGE TO NOWHERE"
One House One Spouse Obama 08!!!
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6/24/2008, 3:10 pm
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TCP111
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Re: …
quote:
Barrister wrote:
If you reduce that, they will simply take their assets and stop using them in the oil industry and put them in a secure investment where they can make a higher percentage return.
Their assests are oil rigs, drilling rights, tankers, refineries, etc..... can't re-invest them elsewhere. The 4% you speak of would be merely on the investment of cash that is used to purchase the oil and the associated costs.... this turns over several times a year... probably as much as monthly... so that particular asset is earning approximately 48%... they're not going to get that elsewhere.
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6/24/2008, 3:13 pm
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