Thread: The recent increase in gasoline prices

Most Americans (myself included) have no love for Big Business. Including Big Oil. So it is very easy to blame Big Oil, as well as nameless, faceless "speculators" for the recent surge in gasoline prices.

But is it entirely fair?

A column by Bob Beauprez in Townhall.com sums it up rather nicely, in my opinion.

"As voters around the country wince at rising gas prices, panicked Democrats, in a rush to cover the failure of their all-or-nothing bet on the alternative energy industry have started singing a familiar tune – blame the oil and gas industry. Instead of facing the reality of his owned failed policies, President Obama is calling for an end to the 'tax giveaways' he claims amount to $4 billion in 'subsidies' to the energy industry.

"This tactic isn't surprising given the effect that rising gas prices have on the President's approval ratings and his obsession with re-election. But, less than truthful innuendos and political spin hardly helps American working families that are getting hammered at the pump.

"If our leaders are going to have an honest discussion about energy, it's important to clear up a few rumors, misconceptions and outright falsehoods being perpetrated about the oil and gas industry. Let's begin with three of the more common ones:

"1. The industry doesn't receive any taxpayer funded subsides. None.

"2. Rampant speculation and Wall Street tricks aren’t driving up gas prices.

3. The oil and gas industry is not dodging the taxes they owe and withholding 'their fair share'."

And the link to the entire article: http://finance.townhall.com/columnis...ut_oil_and_gas

Obama gonna fix it...

Obama announces steps to speed oil production
5/14/2011 WASHINGTON — President is trying to address ongoing frustration at rising gas prices

Amid growing public unhappiness over gas prices, President Barack Obama is directing his administration to ramp up U.S. oil production by extending existing leases in the Gulf of Mexico and off Alaska's coast and holding more frequent lease sales in a federal petroleum reserve in Alaska. But the moves won't calm spiraling prices at the pump any time soon. Obama said Saturday that the measures "make good sense" and will help reduce U.S. consumption of imported oil in the long term. But he acknowledged anew that they won't help to immediately bring down gasoline prices topping $4 a gallon ($1 a liter) in many parts of the country, and an oil industry analyst agreed.

"There is practically nothing that Washington can do that would materially change the price of fuel in this country," said Raymond James analyst Pavel Molchanov, noting that the United States produces about 5 percent of the world's petroleum while consuming about 20 percent. "Given that imbalance, there is simply no policy shift that could plausibly come from the federal government that can significantly change that dynamic." An oil industry group praised Obama's move as a first step with a "couple of positive nuggets" but contended that more was needed to boost oil production. Erik Milito, upstream director for the American Petroleum Institute, called in a statement for more access to key shale reserves and construction of a pipeline that would import crude from Canadian oil sands.

Democratic Sen. Robert Menendez of New Jersey, who is opposed to drilling off the Atlantic coast, expressed concern about possible dangers to the environment. "I think it is disappointing he would pursue a strategy that comes with considerable risk while offering no hope of driving down gas prices," Menendez said in a statement. Obama's announcement followed passage in the Republican-controlled House of Representatives of three bills — including two this week — that would expand and speed offshore oil and gas drilling. Republicans say the bills are aimed at easing gasoline costs, but they too acknowledge that benefits won't come fast.

The White House had announced its opposition to all three bills, which are unlikely to pass the Democratic-controlled Senate, saying the measures would undercut safety reviews and open environmentally sensitive areas to new drilling. But Obama is adopting some of the bills' provisions.

More http://www.msnbc.msn.com/id/43032162...s-white_house/

I don't blame them. Their average profit margin is around 9%.
I heard that recently on a talk radio program out of Durham, NC.

Info is not real easily to find, but I did find this cite:

Between 2007 and 2009, profit margins at ExxonMobil and Royal Dutch Shell ranged from a high of 10.0 percent to a low of 4.4 percent. Dominion, a regulated utility company, had an 11.5 percent profit margin in 2008 and an 8.7 percent margin in 2009. Norfolk Southern, one of the nation’s largest railroads, had a profit margin between 13 percent and 16.1 percent each of the three years.
http://www.politifact.com/virginia/s...mpanies-raked/

I blame our environmentalist driven energy policy of the last several decades. It's inhibited drilling, and construction of more refineries in America. That's jobs, folks !!!

Looks to me like the oil companies make money off VOLUME, not profit margin. Think about that.
So of course they want to drill more. And the increase in volume would drive down the price at the pump, because speculators see a plentiful supply. That's just simple economics and common sense.

Stockholders make money.
Jobs are created.
We get cheaper gas.

We all win.

the world pays twice as much as americans do and most of them don't (*)(*)(*)(*)(*) about it more than americans do

BUT

no one drives as much as americans do for work so I can understand

Saudis seek higher OPEC output...

Saudis seek higher OPEC output quotas
June 8, 2011 -- Opec's oil ministers are expected to raise their output quotas when they meet; Analysts cautioned that this would not necessarily translate into more supply for the market

Opec's oil ministers are expected to raise their output quotas when they meet in Vienna today, but analysts cautioned that this would not necessarily translate into more supply for the market. Saudi Arabia, the de facto leader of the oil producers' cartel, will propose the first upward revision of quotas for almost four years, with the support of Kuwait and probably the United Arab Emirates. Those countries assess that high oil prices are damaging their interests by harming the global economy and curbing future demand.

Last month, the International Energy Agency said there was a "clear, urgent need for additional supplies" from Opec. A barrel of Brent crude, the most important benchmark, sold for $116.78 on Tuesday, compared with an average of $80 last year. Mohammed al-Hamli, the UAE's oil minister, warned of a still tighter market. "We have to meet and look at the numbers before we decide. We need to really look beyond the second quarter -- it's going to be tight," he said in Vienna.

The most relevant number is the projected "call" on Opec's crude. As the refinery maintenance season ends, this figure is expected to climb in the course of the summer. Opec's usually cautious secretariat estimates that the "call" will rise by 2.1m barrels per day between the second and third quarters, meaning that inventories will decline by 1.1m b/d if output stays unchanged. Saudi Arabia and its allies believe this requires higher production, particularly as Libya's civil war has removed a net 1.3m b/d from the market. The kingdom's Rabigh refinery, able to process 400,000 barrels of crude per day, will return to service later in June after maintenance. This alone may necessitate more Saudi production.

"They will increase quotas probably by between 1m and 2m barrels per day," said Amrita Sen, a commodities analyst at Barclays Capital. Opec's present constraints bind 11 members -- Iraq is still exempt -- to produce no more than 24.85m b/d. In practice, the countries in the system pumped 26.15m b/d in April, according to the IEA, or 1.3m b/d over the limit. If quotas are raised by anything up to 1.3m b/d, they would only formalise the existing level of overproduction, without allowing a real increase in (*)supply.

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Originally Posted by mapleleafer8

the world pays twice as much as americans do and most of them don't (*)(*)(*)(*)(*) about it more than americans do BUT no one drives as much as americans do for work so I can understand

It's not just driving, 56% of the oil we consume is used for things like airplanes, trains, home heating, industry, and production of electricity.

America consumes 17 million barrels a day (28% of the world production of 61 mbd). Although we produce about half of that oil in America, we are a very important customer to oil producing nations. If you bought 28% of the product any company produced, wouldn't you expect to get the best price?

Yippee! Obama gonna lower gas prices, Granny gonna vote fer him again `cause he's standin' up to dem Arabs an' mean ol' oil companies, Uncle Ferd gonna put the turbocharger back on his pick'em-up truck...

U.S. to release oil from strategic reserve
June 23, 2011: The U.S. Department of Energy said Thursday it will release 30 million barrels of oil from the Strategic Petroleum Reserve to alleviate Libyan supply disruptions -- driving already sinking prices lower.

The release, which will be done over 30 days, represents half of a 60 million barrel supply hike announced by the International Energy Agency, which includes the United States as one of its 28 member nations. The world consumes 87.5 million barrels of oil a day. Of that total, the United States consumes about 19 million barrels per day, according to Tom Kloza, chief oil analyst at the Oil Price Information Service. The United States produces about 9.8 million barrels so it winds up importing about half of what it produces. The Energy Department said the reserve is at a "historically high level" of 727 million barrels.

"We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery," said Energy Secretary Steven Chu. "As we move forward, we will continue to monitor the situation and stand ready to take additional steps if necessary." Libya is still locked in civil war, as rebels, aided by NATO airstrikes, try to unseat Moammar Gadhafi. Oil prices, which were already sliding Thursday, fell even further after the announcement. "Oil prices are getting assaulted on two fronts today," said Kloza.

In fact, oil and gas prices have been falling for the past several months. The price of a gallon of gas nearly broke $4 in May. Gas prices were selling at $3.61 a gallon Wednesday, according to motorist group AAA. Most experts attribute the price declines to expectations of weaker demand as the economic recovery continues to slow. On Wednesday, Federal Reserve Chairman Ben Bernanke gave a grim assessment. "Bernanke's statement about the 'slowing pace of recovery' was the key to this down move," said Dan Dicker, a former oil trader and author of "Oil's Endless Bid: Taming the Unreliable Price of Oil to Secure Our Economy."

Oil prices plunged $4.29, or more than 4.5%, to $91.12 per barrel after the news about the supply increase. At one point, they plummeted more than 5% to less than $90 per barrel for the first time since Feb. 22. "There is plenty of supply," Kilduff Group partner Mike Fitzpatrick told CNNMoney. "They want to push prices down to help the U.S. economy. Saudi Arabia called for this at the last OPEC meeting." The price of Brent crude -- the European benchmark -- also declined by more than 5%, with prices sliding $6.54 per barrel to $107.67.

Source

Silver lining to recession...

The upside of economic worries: Lower gas prices
Sep 25,`11 - Soaring gasoline prices are in the rearview mirror.

For the first time in months, retail gasoline prices have fallen below $3 a gallon in places, including parts of Michigan, Missouri and Texas. And the relief is likely to spread thanks to a sharp decline in crude-oil prices. The national average for regular unleaded gasoline is $3.51 per gallon, down from a high of $3.98 in early May. Last week's plunge in oil prices could push the average to $3.25 per gallon by November, analysts say.

Economist Philip Verleger equates it to "a stimulus program for consumers," leaving them more money for clothes, dinners out and movies. Over a year, a 50 cents-per-gallon drop in gasoline prices would add roughly $70 billion to the U.S. economy. Arthur De Villar, a 48-year-old safety inspector for the Federal Aviation Administration, paid $2.96 for gasoline near his home in Manchester, Mo., a suburb of St. Louis - and he recently replaced his SUV with a four-door sedan. With three boys at home between the ages of 11 and 14, the money De Villar saves on gas still gets spent. But it goes to the amusement park, a Cardinals baseball game or the movie theater. "It's far better to be able to put (the money) anywhere other than in the gas tank," he says.

Prices for oil, gasoline and other commodities dove last week along with world stock markets over concerns the global economy is headed for another recession. When economies slow, demand for gasoline, diesel and jet fuel falls as drivers cut back on trips, shippers move fewer goods and vacationers stay closer to home. Oil fell to $79.85 per barrel Friday, a drop of 9 percent for the week. Oil reached a three-year high of $113.93 on April 29. Economists caution that gasoline savings, while welcome, won't matter much to people if the worst economic fears come to pass. "Yes it produces some relief, your bill at the gas pump goes down, but it's going down because there are worries that people won't have jobs," says James Hamilton, an economics professor at the University of California, San Diego. "The news has not been good."

And gasoline prices remain historically high. Gasoline has averaged $3.56 this year, the highest yearly average ever. Americans have cut back driving in the face of high prices, but they are likely to spend more on gasoline in 2011 than ever before - close to $490 billion, according to Tom Kloza, chief oil analyst at the Oil Price Information Service. Kloza says the latest drop in prices will stick around through most of the fall. And while that may only add $20 a month to a typical commuter's wallet, drivers say it matters.

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It is a mystery how supply and demand work. The world is using the same amount of oil and the supply is the same but the price changes 25%. Goldman Sachs bought and sold $800Billion in oil futures over the past year only to insure it could get enough heating oil for its headquarters this winter. Speculation has nothing to do with it. Goldman Sachs was not speculating in oil futures, no sirree, not at all, not them, they would never do that just like they said they wouldn't when they applied to be allowed into the oil futures market in the first place so many years ago.