I'll be HAPPY to drive the biggest, gas hoggiest SUV I can afford and fit in my driveway if gasoline goes back to $1.79/gal.
Joel
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Oil companies look at permanent refinery cutbacks
- Thread starter Colt
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Oil companies walk a fine line -- raise gas prices too much? People drive even less. There is a point when there may not be enough business for all the oil companies to stay around. Even though people think there is not enough oil, there is still alot of it left, more than enough to have a glut still.
Originally Posted By: opus1
Originally Posted By: rudolphna
This is ridiculous. There needs to be a federal i vestigation of these oil companoes exxon in particular. Notice how high gas prices are ane also notice most of them are turning huge profits. US Govt needs to give them a swif kick in the rear to get prices down.
Posted from iphone so bad spelling sorry
There was an investigation, remember? CON-gress found that there were no irregularities and the last round of gouging was the market acting normally.
And GMBoy, for the record, I never bought into the "evil SUV" argument.....
Opus1 - sorry, wasn't really directing that at you.
I think a lot of posts here made some sense. I know the oil companies are private businesses and can do what they want..BUT when all the oil companies decide to reduce production, I think it tip-toes on price fixing, which I think is illegal. Another point mentioned above that COULD have some truth is that maybe the oil companies are really seeing the end of easy to get to oil and therefore are trying to maximize profits with what they got. I don't know, I'm no expert here but I do think something ought to be done. I mean, it's one thing to be low on resources and charge more but to purposely reduce capacity to increase prices is wrong.
Originally Posted By: rudolphna
This is ridiculous. There needs to be a federal i vestigation of these oil companoes exxon in particular. Notice how high gas prices are ane also notice most of them are turning huge profits. US Govt needs to give them a swif kick in the rear to get prices down.
Posted from iphone so bad spelling sorry
There was an investigation, remember? CON-gress found that there were no irregularities and the last round of gouging was the market acting normally.
And GMBoy, for the record, I never bought into the "evil SUV" argument.....
Opus1 - sorry, wasn't really directing that at you.
I think a lot of posts here made some sense. I know the oil companies are private businesses and can do what they want..BUT when all the oil companies decide to reduce production, I think it tip-toes on price fixing, which I think is illegal. Another point mentioned above that COULD have some truth is that maybe the oil companies are really seeing the end of easy to get to oil and therefore are trying to maximize profits with what they got. I don't know, I'm no expert here but I do think something ought to be done. I mean, it's one thing to be low on resources and charge more but to purposely reduce capacity to increase prices is wrong.
Originally Posted By: GMBoy
Originally Posted By: opus1
Originally Posted By: rudolphna
This is ridiculous. There needs to be a federal i vestigation of these oil companoes exxon in particular. Notice how high gas prices are ane also notice most of them are turning huge profits. US Govt needs to give them a swif kick in the rear to get prices down.
Posted from iphone so bad spelling sorry
There was an investigation, remember? CON-gress found that there were no irregularities and the last round of gouging was the market acting normally.
And GMBoy, for the record, I never bought into the "evil SUV" argument.....
Opus1 - sorry, wasn't really directing that at you.
I think a lot of posts here made some sense. I know the oil companies are private businesses and can do what they want..BUT when all the oil companies decide to reduce production, I think it tip-toes on price fixing, which I think is illegal. Another point mentioned above that COULD have some truth is that maybe the oil companies are really seeing the end of easy to get to oil and therefore are trying to maximize profits with what they got. I don't know, I'm no expert here but I do think something ought to be done. I mean, it's one thing to be low on resources and charge more but to purposely reduce capacity to increase prices is wrong.
+1.
Originally Posted By: opus1
Originally Posted By: rudolphna
This is ridiculous. There needs to be a federal i vestigation of these oil companoes exxon in particular. Notice how high gas prices are ane also notice most of them are turning huge profits. US Govt needs to give them a swif kick in the rear to get prices down.
Posted from iphone so bad spelling sorry
There was an investigation, remember? CON-gress found that there were no irregularities and the last round of gouging was the market acting normally.
And GMBoy, for the record, I never bought into the "evil SUV" argument.....
Opus1 - sorry, wasn't really directing that at you.
I think a lot of posts here made some sense. I know the oil companies are private businesses and can do what they want..BUT when all the oil companies decide to reduce production, I think it tip-toes on price fixing, which I think is illegal. Another point mentioned above that COULD have some truth is that maybe the oil companies are really seeing the end of easy to get to oil and therefore are trying to maximize profits with what they got. I don't know, I'm no expert here but I do think something ought to be done. I mean, it's one thing to be low on resources and charge more but to purposely reduce capacity to increase prices is wrong.
+1.
Same story with the power company. Raise prices if you use too much. Raise prices if you don't use enough. Prices are going up because the dollar is falling. The rest is lame excuses.
If prices rise then those refineries will be opened back up.
If prices rise then those refineries will be opened back up.
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They all want to be first at being geared to reduced production and consumption. The leaner refiner will yield the most profit.
Again, since they haven't allegedly built any added capacity in a long time, and had a good bit degraded due to various natural disasters, I think a good amount of the rhetoric is not entirely true.
This is more of a cushioning PR campaign than it is an accurate depiction of true conditions/reasons/statistics.
Again, since they haven't allegedly built any added capacity in a long time, and had a good bit degraded due to various natural disasters, I think a good amount of the rhetoric is not entirely true.
This is more of a cushioning PR campaign than it is an accurate depiction of true conditions/reasons/statistics.
Originally Posted By: Colt
http://www.latimes.com/business/la-f...,5317635.story
"Refineries will have to be closed," said Fadel Gheit, senior energy analyst with Oppenheimer & Co. "Unless this excess capacity is permanently shuttered, a recovery in refining margins is unsustainable."
Gheit is correct.
The oil industry has to reduce refining capacity just like GM had to reduce factories and manufacturing capacity. They can't keep production high when consumption is low.
We've criticized the 'old' GM for being inefficient, so why should we expect oil companies to run their business inefficiently?
Keep in mind that much of the expense of running refineries in the US is due to high taxes and Federal regulations. We should blame the Feds for refinery shutdowns and higher gas prices before we condemn the oil industry.
http://www.latimes.com/business/la-f...,5317635.story
"Refineries will have to be closed," said Fadel Gheit, senior energy analyst with Oppenheimer & Co. "Unless this excess capacity is permanently shuttered, a recovery in refining margins is unsustainable."
Gheit is correct.
The oil industry has to reduce refining capacity just like GM had to reduce factories and manufacturing capacity. They can't keep production high when consumption is low.
We've criticized the 'old' GM for being inefficient, so why should we expect oil companies to run their business inefficiently?
Keep in mind that much of the expense of running refineries in the US is due to high taxes and Federal regulations. We should blame the Feds for refinery shutdowns and higher gas prices before we condemn the oil industry.
Originally Posted By: LTVibe
Originally Posted By: Colt
http://www.latimes.com/business/la-f...,5317635.story
"Refineries will have to be closed," said Fadel Gheit, senior energy analyst with Oppenheimer & Co. "Unless this excess capacity is permanently shuttered, a recovery in refining margins is unsustainable."
Gheit is correct.
The oil industry has to reduce refining capacity just like GM had to reduce factories and manufacturing capacity. They can't keep production high when consumption is low.
We've criticized the 'old' GM for being inefficient, so why should we expect oil companies to run their business inefficiently?
Keep in mind that much of the expense of running refineries in the US is due to high taxes and Federal regulations. We should blame the Feds for refinery shutdowns and higher gas prices before we condemn the oil industry.
No one said they had to, or should, keep capacity ramped up to peak output. Obviously they need to curtail production if the holding tanks are full. However, there is a huge difference between curtailing production and permanently closing/destroying/dismantling/etc... refineries as they did before. When they do that, and demand increases, they then use not enough capacity as an excuse to drive prices up. There is proof they did this previously so that when demand rose so would profits. They are doing it again. This isn't about a drop in profit now( anyone who thinks the gas companies are losing money neeeds to go see a shrink or something )it is all about what they can do to really rake it in down the road like last time.
They need to just keep production capacity low and ride the bad times out like we all have to do and then increase output as demand increases. If they want to see an increase in demand then call out the speculators that drive crude and refined products to heights that are unreasonable. Demand is low because the price is too darned high! Instead they are trying to stick it to us even further by getting rid of more capacity now( with low demand as an excuse )so when times eventually do get better they can rape us again because they have yet another artificially/manipulated shortage of capacity and product.
I am no genius but this is pretty clear and easy to see. Here is what I consider to be a good analogy...
You don't disband your army entirely during peace time because there is no need for it. God help you if you do and something happens and you need that army. You can lower the standing number of men, moth ball some equipment, increase reservists, etc... so you can quickly come back to full force if needed. A country needs to have the ability there to rise up and meet whatever threat comes their way quickly. If the army was just allowed to disband and all the equipment was destroyed it would take too long to rebuild and train recruits to meet any threat. The same applies to refining capacity. If they are allowed to permanently get rid of some of these refineries god help us all when demand rises. IT will be impossible to meet it and impossible to build new refineries. They know this and are planning on it!
Originally Posted By: Colt
http://www.latimes.com/business/la-f...,5317635.story
"Refineries will have to be closed," said Fadel Gheit, senior energy analyst with Oppenheimer & Co. "Unless this excess capacity is permanently shuttered, a recovery in refining margins is unsustainable."
Gheit is correct.
The oil industry has to reduce refining capacity just like GM had to reduce factories and manufacturing capacity. They can't keep production high when consumption is low.
We've criticized the 'old' GM for being inefficient, so why should we expect oil companies to run their business inefficiently?
Keep in mind that much of the expense of running refineries in the US is due to high taxes and Federal regulations. We should blame the Feds for refinery shutdowns and higher gas prices before we condemn the oil industry.
No one said they had to, or should, keep capacity ramped up to peak output. Obviously they need to curtail production if the holding tanks are full. However, there is a huge difference between curtailing production and permanently closing/destroying/dismantling/etc... refineries as they did before. When they do that, and demand increases, they then use not enough capacity as an excuse to drive prices up. There is proof they did this previously so that when demand rose so would profits. They are doing it again. This isn't about a drop in profit now( anyone who thinks the gas companies are losing money neeeds to go see a shrink or something )it is all about what they can do to really rake it in down the road like last time.
They need to just keep production capacity low and ride the bad times out like we all have to do and then increase output as demand increases. If they want to see an increase in demand then call out the speculators that drive crude and refined products to heights that are unreasonable. Demand is low because the price is too darned high! Instead they are trying to stick it to us even further by getting rid of more capacity now( with low demand as an excuse )so when times eventually do get better they can rape us again because they have yet another artificially/manipulated shortage of capacity and product.
I am no genius but this is pretty clear and easy to see. Here is what I consider to be a good analogy...
You don't disband your army entirely during peace time because there is no need for it. God help you if you do and something happens and you need that army. You can lower the standing number of men, moth ball some equipment, increase reservists, etc... so you can quickly come back to full force if needed. A country needs to have the ability there to rise up and meet whatever threat comes their way quickly. If the army was just allowed to disband and all the equipment was destroyed it would take too long to rebuild and train recruits to meet any threat. The same applies to refining capacity. If they are allowed to permanently get rid of some of these refineries god help us all when demand rises. IT will be impossible to meet it and impossible to build new refineries. They know this and are planning on it!
It will be interesting to watch how this 'plays out'....
There is a certain 'floor' below which gos consumption won't really drop - people have to get to work and shop. No matter how high you make the price, that level of consumption will basically always be there. So a raise in prices will increase profits.
But where I think oil compnaies make more money is off holiday and pleasure driving - the summer 'driving season'. You'd think oil companies would decrease or maintain prices to encourage that, and all the spin-off benefits it gives - they keep the prices up high enough, and they basically kill this aspect of the market. They are 'locked into' whatever profits they can get from commuters....and eventually, they might figure out other ways to commute....
There is a certain 'floor' below which gos consumption won't really drop - people have to get to work and shop. No matter how high you make the price, that level of consumption will basically always be there. So a raise in prices will increase profits.
But where I think oil compnaies make more money is off holiday and pleasure driving - the summer 'driving season'. You'd think oil companies would decrease or maintain prices to encourage that, and all the spin-off benefits it gives - they keep the prices up high enough, and they basically kill this aspect of the market. They are 'locked into' whatever profits they can get from commuters....and eventually, they might figure out other ways to commute....
Originally Posted By: NHHEMI
You don't disband your army entirely during peace time because there is no need for it...
Agree with you 100% about the military.
However, check out this follow-up editorial regarding the original poster's LA Times story:
http://www.latimes.com/news/opinion/la-ed-gasoline15-2010mar15,0,5866101.story
Quote:
...consumer advocates such as Public Citizen and Santa Monica-based Consumer Watchdog think refiners are just trying to keep the price of gas artificially high by constraining supplies. Some advocates are calling on regulators to probe whether the companies are violating antitrust laws.
Yet such investigations are already ongoing. No industry faces as much federal scrutiny as the oil and gas business, due to the extraordinary public concern about fuel prices. Dozens of probes over two decades have found no clear evidence of market manipulation. A key 2005 report by the Federal Trade Commission concluded that market factors such as supply disruptions, changes in demand and world crude oil prices are the "primary drivers" of gasoline price increases.
Every business makes cutbacks when demand for its products or services falls. We could avoid such market responses from oil companies by nationalizing them or subsidizing gasoline, but that hasn't worked well in the countries that have tried it. Rather than getting mad at the oil giants for exhibiting rational behavior, we should focus on being less reliant on them.
You don't disband your army entirely during peace time because there is no need for it...
Agree with you 100% about the military.
However, check out this follow-up editorial regarding the original poster's LA Times story:
http://www.latimes.com/news/opinion/la-ed-gasoline15-2010mar15,0,5866101.story
Quote:
...consumer advocates such as Public Citizen and Santa Monica-based Consumer Watchdog think refiners are just trying to keep the price of gas artificially high by constraining supplies. Some advocates are calling on regulators to probe whether the companies are violating antitrust laws.
Yet such investigations are already ongoing. No industry faces as much federal scrutiny as the oil and gas business, due to the extraordinary public concern about fuel prices. Dozens of probes over two decades have found no clear evidence of market manipulation. A key 2005 report by the Federal Trade Commission concluded that market factors such as supply disruptions, changes in demand and world crude oil prices are the "primary drivers" of gasoline price increases.
Every business makes cutbacks when demand for its products or services falls. We could avoid such market responses from oil companies by nationalizing them or subsidizing gasoline, but that hasn't worked well in the countries that have tried it. Rather than getting mad at the oil giants for exhibiting rational behavior, we should focus on being less reliant on them.
The corporations own us (our leaders, anyway). I'm all for CAFE standards and pollution regulation (within reason), but this will kill our economy. One good thing is that it will make imports from China more expensive, so maybe our industries can compete.
And one other item that I think has been missed, the effect of the “NIMBY syndrome”.
Say a company closes a refinery, and 5 years from now demand gets to the point where they decide that they have to open one again. Never mind the time to plan a new one or plan the upgrades for the one in mothballs, where are they going to build it? No one is going to stand for a new refinery built near their house, and even if one is in mothballs, it’s going to take an act of congress to open it. The BP refinery in Whiting, IN, had mega-hoops to jump through just to expand its existing capacity, and this was when gas prices were going ballistic 2 summers ago.
IMHO, once this capacity is gone, it’s gone forever.
Say a company closes a refinery, and 5 years from now demand gets to the point where they decide that they have to open one again. Never mind the time to plan a new one or plan the upgrades for the one in mothballs, where are they going to build it? No one is going to stand for a new refinery built near their house, and even if one is in mothballs, it’s going to take an act of congress to open it. The BP refinery in Whiting, IN, had mega-hoops to jump through just to expand its existing capacity, and this was when gas prices were going ballistic 2 summers ago.
IMHO, once this capacity is gone, it’s gone forever.
Originally Posted By: opus1
So in a nutshell, all those evil SUV-drivers were sucking up gas and driving up the prices. The economy tanked, SUV's became unfashionable and saving gas was in. So now the prices will be driven up due to lack of supply due to lack of demand......
Oh that`s just terrific!!
So in a nutshell, all those evil SUV-drivers were sucking up gas and driving up the prices. The economy tanked, SUV's became unfashionable and saving gas was in. So now the prices will be driven up due to lack of supply due to lack of demand......
Oh that`s just terrific!!
All i know is my X may be a pig, but we got severe flooding(cars are 100% underwater. My truck chugged through water up to my bumper trying to get out of our apartment complex so we can sleep at my in-laws. Granted if a car was made just as high off the ground it would be fine, but the SUV did one heck of a job.
I don't advocate people go out and buy SUV's or pickup's, but they have their uses and at times can be situational.
I don't advocate people go out and buy SUV's or pickup's, but they have their uses and at times can be situational.
Refining is a hugely capital-intensive business. A parallel can be drawn with the US railroad industry. As US manufacturing dwindled in the 1970-80's and car-loadings dropped, the railroads faced with excess capacity abandoned and ripped-up many rail lines. Due to gov't regulatuions, they couldn't afford to just moth-ball routes and continue to pay high property taxes on unused right of ways.
Now, the rail business is booming and congestion bottlenecks are threatening the US economy, but the railroad companies are very leery of investing the huge capital to restore routes that they will be stuck with if/when the economy tanks again.
One solution, property-tax exemptions for moth-balled refineries that generate no revenue, like a national "refinery bank" so they can be used again if/when demend increases. (it will)
Now, the rail business is booming and congestion bottlenecks are threatening the US economy, but the railroad companies are very leery of investing the huge capital to restore routes that they will be stuck with if/when the economy tanks again.
One solution, property-tax exemptions for moth-balled refineries that generate no revenue, like a national "refinery bank" so they can be used again if/when demend increases. (it will)
Quote:
Rather than getting mad at the oil giants for exhibiting rational behavior, we should focus on being less reliant on them.
This is one reason efficient electric cars(Aptera, not Volt) will be good. The average home owner can put up a decent array of solar panels and charge a bank of batteries to charge the car overnight. No more worries about the price of gas, electricity, or any thing else. Once consumer energy prices get high enough the market will begin to shrink and almost permanently... Pretty scary for companies in the energy business.
Rather than getting mad at the oil giants for exhibiting rational behavior, we should focus on being less reliant on them.
This is one reason efficient electric cars(Aptera, not Volt) will be good. The average home owner can put up a decent array of solar panels and charge a bank of batteries to charge the car overnight. No more worries about the price of gas, electricity, or any thing else. Once consumer energy prices get high enough the market will begin to shrink and almost permanently... Pretty scary for companies in the energy business.
Oh, just wait... the next shoe to drop is finding a way to tax the electricity used to charge electric vehicles.
Case in point- you know its already illegal, and the fines are aggressively enforced and huge, to burn non-road-taxed (aka "agricultural") diesel fuel in an on-road vehicle. Highway authorities around the country are already whining and moaning that less driving and more fuel-efficient vehicles are already cutting deeply into the taxes they use to build and repair roads. But an electric vehicle contributes exactly ZERO tax dollars to the highway.... for now. Its going to be a regulatory nightmare, and will eventually most likely result in huge fines if you ever get caught connecting your Chevy Volt to a solar array that Big Brother can't tax.
Case in point- you know its already illegal, and the fines are aggressively enforced and huge, to burn non-road-taxed (aka "agricultural") diesel fuel in an on-road vehicle. Highway authorities around the country are already whining and moaning that less driving and more fuel-efficient vehicles are already cutting deeply into the taxes they use to build and repair roads. But an electric vehicle contributes exactly ZERO tax dollars to the highway.... for now. Its going to be a regulatory nightmare, and will eventually most likely result in huge fines if you ever get caught connecting your Chevy Volt to a solar array that Big Brother can't tax.
Speculators can't do near the damage the government can.
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