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Because of tax differences among states or varying transportation costs, some parts of the country seem to be experiencing prices that are higher than in other areas. Where I live in Henderson, Nevada, gas prices are around $3.20 for regular and $3.40 for 91 premium. Here’s a link:
OPEC has been insisting that the world oil supply market is currently in balance and that increasing oil production would only bring greater profits to refineries while depressing world prices which would, in turn, reduce its own revenues. Even if OPEC increased oil output, U.S. refineries would not be able to process it timely to make any significant impact on domestic gas prices. On the other hand, refiners contend that OPEC’s cut in oil output last fall contributed to 38 cents of the $1/gallon increase since mid-January.
Money News: - Despite High Gas Prices, OPEC Not Boosting Output - AOL Money & Finance (broken link)
OPEC output steady, no reason for change: delegate - Yahoo! News (broken link)
Oil rises on OPEC's decision to leave production quotas unchanged - Forbes.com (http://www.forbes.com/business/feeds/afx/2007/06/07/afx3799223.html - broken link)
OPEC Head Says No Need for More Crude - Forbes.com (broken link)
Gasoline and oil are sold on an open market. The gas and oil producers of OPEC place their products on the open market for auction to the highest bidders.
The major gas companies produce only 30% of all the petroleum products we use. They were pushed out of OPEC states years ago and replaced with state-controlled companies. Exxon-Mobil is not the largest oil company in the world, Saudi Aramco is and they put the oil on the market for purchase by the likes of Exxon-Mobil and others.
There is very little excess capacity in the oil production system, but the largest factor guiding oil prices is what the situation is with mid-east politics. Right now, the situation in Iraq and Iran are causing prices to rise. Buyers are wondering where their next barrel of oil will come from and thinking that they had better stock-up now in case Iraq or Iran cause oil flow from the region to cease.
Another factor is the increasing oil demand from Asia, particularly India and China. With so little excess capacity, we are seeing more and more buyers showing-up to buy the same amount of oil on the market. As a result, a successful bidder has to bid against more bidders to get the product they want. It's like any other auction.
If you see the perfect Sheraton dining set and don't believe there will be more coming on the market any time soon, and many other bidders want that dining set, then the only way you're going to get it is to bid higher than the others are.
This situation isn't going away anytime soon. We will see price fluctuations but even if we found a bonanza oil field tomorrow, it will take 7-10 years just to get it producing.
Another problem is the Gulf of Mexico production. The gulf operations are running at 10-30% under capacity (depending on who you ask). The reason isn't because of Katrina, it's because the OPEC states outbid our relatively smaller oil and gas companies for the rental of the oil rigs. The oil companies don't own their rigs. They lease them from other operators and consistently those rigs are being towed out of the Gulf of Mexico and moved to the middle east and southeast Asia. It does not help that we have so little refining capacity.
Wonder why gas in New Jersey is so cheap? It's because they have petroleum refineries where they can make gasoline. California won't allow any new refineries to be built. Instead they're building them just over the border in Mexico and, of course, that means that Mexico controls them. Further you are from a refinery, the more you pay.
List of the world's largest petroleum companies (circa 1998) followed by their production numbers in millions of barrels. Keep in mind, the state companies have been growing where the independent companies have been shrinking relative to each other:
* Saudi Arabian Oil Company 3028
* Petroleos Mexicanos 1278
* Petroleos de Venezuela 1258
* China National Petroleum 1168
* BP Amoco + Arco 963
* ExxonMobil 894
* Royal Dutch/Shell 859
* Nigerian National Petroleum Company 772
* Iraq National Oil Company 770
* Kuwait Petroleum Corporation 757
* Chevron + Texaco 756
* Valero 380
Barring any leap in technology or discovery of several giant oil fields (both unlikely), any relief you see will only be temporary.
What's the problem with getting Hovensa on St. Croix, which is a U.S. possession, to refine more actual gasoline? Right now they supply 80% of the jet fuel used in the U.S. - and that island is definitely lacking industry. That's a joint effort between Venezuala and the U.S. - seems to me they could expand production there and give some relief, give some jobs to islanders and "ex-pats" moving there, and boost the economy (which is horrendous).
Honest question - since I really don't understand all I know but lived with Hovensa in my back yard for a little over a year...and gas prices are about a quarter cheaper on St. Croix, but ridiculously high on St. John and St. Thomas, which can be seen from the north shore of STX. Crazy.
I'm not sure how to find out specific data, but from relatives retired from the oil business in Texas I've been told that the return on capital employed (ROCE) is significantly higher when refining is done at ports that pump crude from tankers. The enormous infrastructure and logistics of transport is much reduced in that type of operation. Replacement of outdated equipment, investment in R&D for new technology in refining techniques, and improving infrastructure and logistics at all existing refineries at ports seems to be a much better way to increase earnings per share--from this layman's point of view anyway.
And, the management of oil companies no doubt contains some visionary people with high intellectual abilities. They command a non-renewable resource and understand the implications better than anyone. I don't imagine that the push for alternative energy was not considered long ago in their VERY long-term plans. Such alternatives extend the life of that astronomically valuable non-renewable resource.
If only the oil companies themselves would assist in the creation of alternatives and then make even higher ROCE on lower sales from fossil fuel, we might achieve the goals of much lower oil demand much sooner. Notice I did not say higher ROCE from higher prices from fossil fuel; lower demand will bring lower prices, but earnings can be increased by cost reductions in various ways from the lower production required combined with better refining techniques.
And if the alternative energy industry is part of the planning for short-term and long-term investment, then the employees displaced from reductions in production will have opportunities for continued long-term employment in the newly created operations.
Drilling more wells serves no purpose but to lull us into believing we aren't facing catastophic economic circumstances near-term. With a sharp reduction in demand over the next several years and significant investment in upgrading refining techniques we can buy from our friends all that we need when combined with our present production (or increased productivity from improved refining). But without the significant decrease in demand, it all comes apart in the not-too-distant future.
I'm not sure how to find out specific data, but from relatives retired from the oil business in Texas I've been told that the return on capital employed (ROCE) is significantly higher when refining is done at ports that pump crude from tankers. The enormous infrastructure and logistics of transport is much reduced in that type of operation. Replacement of outdated equipment, investment in R&D for new technology in refining techniques, and improving infrastructure and logistics at all existing refineries at ports seems to be a much better way to increase earnings per share--from this layman's point of view anyway.
And, the management of oil companies no doubt contains some visionary people with high intellectual abilities. They command a non-renewable resource and understand the implications better than anyone. I don't imagine that the push for alternative energy was not considered long ago in their VERY long-term plans. Such alternatives extend the life of that astronomically valuable non-renewable resource.
If only the oil companies themselves would assist in the creation of alternatives and then make even higher ROCE on lower sales from fossil fuel, we might achieve the goals of much lower oil demand much sooner. Notice I did not say higher ROCE from higher prices from fossil fuel; lower demand will bring lower prices, but earnings can be increased by cost reductions in various ways from the lower production required combined with better refining techniques.
Well stated!
The problem with doing the farsighted thing is that isn't how Wall Street, or investors, work. They want quarter-to-quarter profit statements. They want projections, they don't like risk. If the company makes more by increasing margin, then that's what it does. Long-term strategic planning takes a long back seat to the quarter-to-quarter demand for increased revenue. This, along with Sarbanes Oxley, is one of the prime motivators for so many big public companies going private. Take a look at the amount of corporate stock buy-back going on. It's one of the prime movers of the stock market. Public corporations are generally awash in profits and they're using those profits to buy back stock and use that as a foundation to go private later on.
. . . The problem with doing the farsighted thing is that isn't how Wall Street, or investors, work. They want quarter-to-quarter profit statements. They want projections, they don't like risk. If the company makes more by increasing margin, then that's what it does. Long-term strategic planning takes a long back seat to the quarter-to-quarter demand for increased revenue. This, along with Sarbanes Oxley, is one of the prime motivators for so many big public companies going private.
Agreed. Short term gains and let-it-ride tactics; good for them—not so good for encouraging investing in manufacturing of goods and services for export.
Quote:
Originally Posted by Jason_Els
Take a look at the amount of corporate stock buy-back going on. It's one of the prime movers of the stock market. Public corporations are generally awash in profits and they're using those profits to buy back stock and use that as a foundation to go private later on.
As for Big Oil, won’t it be nice to have all that re-purchased stock in hand when shortages begin to occur to help justify higher margins. They can’t get hurt even with alternatives finally coming to market and demand going down. Pretty slick, those oil salesmen (and –women).
The average price of gasoline fell nearly a penny the past week to $3.209 a gallon, the government reported Tuesday, the first drop in its nationwide average in five weeks.
The decline tracks recent drops reported separately by travel organization AAA, which said the U.S. average Tuesday was $3.201, down from the nominal record of $3.227 that AAA posted Thursday. The government says the inflation-adjusted record is $3.292, today's equivalent of $1.417 in 1981.
"We're on the verge of real relief," says Tom Kloza, senior analyst at the Oil Price Information Service. "We need to bury, at least for now, the notion of $4 gasoline and the notion that we just keep marching higher."
It very recently dropped 30 cents in my town. When I saw it at first I thought that i had to be a mistake, but nope...gave me a big ol smile ^_^
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