Gas Prices

Yes Michael, that is correct. That was my fourth fact listed above.  400,000,000 multiplied by 5 cents is $20,000,000.  It does sound like a lot but much of that is returned to shareholders, retirement accounts and other investment vehicles linked to the commodity.

It is also split between 10 major and another 15 or more smaller companies. It sounds large but if you take Citgo, 90% of those profits go back to Venezuela.

When you hear $20,000,000 people think of oil like it is one company. In the scheme of things it is really not that great of an amount.

People pay 5-8 cents to the oil company, that is their profit margin per gallon. In 2007 around 5.9% which is not a huge return. The average person has no idea of what it costs to drill for oil and the investment required. They just see "Big Oil" which is the battle cry on both sides of the aisle which strikes an emotional response.

To make a tiny profit per gallon, the oil company has to invest so much. I read an article on line by a guy who explores and sets up drilling operations for oil. He tells of how most of the huge reserves are drained but what is left would last between 250-400 years. He also tells of the hard work required to set up drilling operations and the time it takes; generally around 3 years.

Another piece I read talked about emissions and how we can drastically reduce them but it would cost another $1000+ per auto to do so. Now that is a reasonable approach. Still another article was about how a V6 engine can get 60 MPG; again a reasonable approach but it would cost another $1000+ per vehicle. I guess the average person has to ask themselves if they are willing to pay that extra. To me, it would be worthwhile if we did not have to change our current lifestyle. Why not?

Originally, the federal tax was earmarked to be used on the roads, etc. It is now added to the slush fund of a budget that we are faced with and has been since the Nixon years. At $160,000,000 per day that is quite substantial. What McCain and Clinton propose would put us further in debt and save us very little.

Clean coal is another alternative to fossil fuel consumption in many cases. There are groups out there that now complain about the mining versus the emissions. They have changed their tune on why coal is not a good source either.

The real issue is that those who want us off of oil have no plan except drastic cuts in consumption. Some consumption cuts are necessary but that has got to be coupled with continued oil discovery as well as alternative energy development.

So far, they have not found anything that will produce the BTU's beyond nuclear and no one wants that. It costs more fossil fuel to produce ethanol than the energy it expends and bio fuels produce more emissions than gasoline.

If people did the research they would not necessarily blame "Big Oil". We have to stop blaming the other guy and take responsibility. Even Bill O'Reilly blames "Big Oil". People need to do the research.

The story that was the most balanced that I read was a transcript from NPR, surprisingly, and they covered many of these points with a conclusion that there is not price gouging in any way, shape of form. The facts are the facts but they are tough to decipher through the emotion.

Once again, Americans paid low prices for years and years and now there is an adjustment. I do not like it any more than anyone else but just because we don't want to pay something does not mean that those who provide it to us are evil or greedy.

But where are these huge increases in profits coming from? You know the 25% increase over a the previous quarter or year's profit? Gas goes us 60 cents a gallon in one quarter, and profits go up 25%? The math is fuzzy, me thinks.

The costs incurred by the oil companies are not fixed.  It take energy to create energy, energy to deliver it, not to mention the public relations campaign that they have to wage to stay level in public opinion due to the misinformation special interest groups who campaign relentlessly against them.

Profits can increase without gouging going on.  Maybe they eliminated middle management or found a more economical way to do something or closed a refinery that was losing.  The profit margin on the commodity stays the same.

Are we supposed to analyze their profits and decide what is fair and what is not.  Congress is not qualified to do so and neither is the average citizen.  Profit is a private matter that is driven by demand.  If Microsoft makes a 37% profit margin, does anyone care??

If the hot dog guy running a cart on the corner increases his weekly income by $250, does anyone care.  If the price of hot dogs is soaring and he works extra hours, raises his prices to make up the difference or cheapens the bun are we supposed to cry fowl?

The numbers that oil companies make in a day are staggering and beyond the average persons ability to comprehend so we automatically assume someone is getting away with something.  This issue has to placed in perspective. 

Just like milk, which is a product that has soared in price the last few months.  If the farmer lets an employee or two go and does the work himself and makes a larger profit even though the product is going to market at a higher price due to fixed costs, is he gouging?  I think not.  He is working smarter, harder and longer hours to make more for himself.

That is the way the system works.  Is he supposed to make those adjustments and hand on the difference to you and me???  Because we don't want to pay that price.  Should he be regulated because he made smart business decisions??

I equate this to the health care debate.  I know plenty of people who want universal health care because they want someone else to pay for it.   They don't want to spend $5,000 to $10,000 per year for health insurance and health care.  Yet many of those same individuals go on expensive vacations, drive new cars and enjoy the immediate pleasures of life.

Health care in an eventual obstacle that we all will face.  We don't plan for it and we don't want to pay for it so the easy solution is universal health care paid by everyone so that we can relax and not worry about it; going on to fill our immediate needs.  Once again, with health care, if people can not afford it then let's help them out.

Fuel is more of an immediate need but I equate it to going to the dentist.  You can't chew if you have a bad tooth so you reluctantly have to have it drilled and filled. The price has tripled to do so over the last 15 years but it is something that we need to do.

Now, equate that to oil consumption.  Would anyone want to regulate what a dentist makes?  Some might but at the end of the day, we can't regulate what everyone makes and how profitable companies will be.  If we start to do that then we might as well surrender to Marxism and all settle for life with no challenges, responsibility and live under totalitarian rule.

Oil is a political issue kicked around  like a football.  Like health care, it emotes radical and reactionary responses from all sides.  We just need to look at it initelligently.

Ok, lets see: Gas at $3.50/gal

Refiners: $ .08
Stations: .10
Taxes: .40
Distribution: .12 4% of $3.50/gal

Total: $ .70

Balance: 2.80 Oil profits? So if these other costs are steady, then it would appear to me that Big Oil is making huge money when gas goes up .80 in one quarter.

The answer is simple, the cost of the raw product.....that $2.80 is primarily comprised of the cost of crude and transport to our shores.

Did oil not rise around $15+ per barrell.  Once again, we can all be angry about the price but it is not that simplistic.

Like the lady from Gilford who wrote a letter to the Monitor wishing oil and oil executives and their business such an ill fate.  That is pure ignorance of how the market and world works.  We just can't change the rules of supply and demand.  If she thinks she has it rough now, what if we made it harder to get and use oil.

We can not and should not regulate profits.  I know that people think that as the dollar is devalued on the world market that oil companies should take the hit and keep the price stable for consumers but imagine if farmers did that. There would be no milk, eggs or meat.

What is vegetable growers took that approach...we would all starve.  But with oil, it is somehow different.  That is why I equate it to health care.

They are two things we take for granted until we really rely on them and then we think that some how we are entitled to them.

But what about the taxpayer welfare to Big Oil and farmers? Shouldn't that come to an end as well, it your capitalistic world view, or is that just part of the fascist agenda neocons support?

I take it that you are referring to subsidies?  Subsidies are good and bad.  If we pay farmers to not grow crops, that is wasteful.  If we pay oil companies subsidies for who knows what, that is also bad.

However, most subsidies are tax breaks.  My guess is that if an organic farm that would employ 100 persons came to Warner that most citizens would be in favor of giving them a tax break to get them into town to help the economy.  It is the same principle.

I do believe that they should be targeted breaks give to develop new energy.

Corporate welfare is a myth perpetuated by spin meisters.  Tax breaks stimulate industry and the economy.

To really solve the problem with corporations and to stop jobs from going overseas is to control the impact that unions have on businesses.  I can tell you first hand unions are to blame with much outsourcing.  The little I have had with dealings of unions, the rules they operate by are rediculous.  Production goes down and the cost of goods goes through the roof.

We can look at the steel and automotive to see the impact unions.  Yes, there were other causes for their demise but wages and benefits and union rules were front and center in their demise.

Labor is the single most costly expense in most businesses.  Once people get greedy and yes, unions perpetuate greed in the workplace much like the greed that you accuse corporations of; companies start to look at cheaper ways of operating.

Do they go too far....absolutely, but there has to be a middle ground on which everyone can meet.  What that is, I do not know. 

This relates to oil only in the case that to give them incentives to develop new oil fields as well as alternative energy it will created a bunch of new jobs. We should be encouraging the oil companies to grow and expand into new ventures...that is good for the economy.

Michael & Bill;

I love the debate you have going on on this timely subject.  Our country has grown leaps and bounds not only in people, but in the energy we use since our last oil refinery was allowed to open, over thirty years ago.  Environmentalists have been hard at work establishing new laws and regulations restricting oil exploration and oil refinement, and are partly to blame in this latest round of price increases.  if we had the available oil fields and the ability to refine enough oil for our consumption, oil prices per barrel would be much, much lower.

We desparately need another oil refinery in the US.  And we need to continue to drill for oil in OUR country.  Florida won't let refineries drill within seven miles of shore, because it could be a 'detriment' to the view.  I'd rather see an oil rig out in the Gulf of Mexico, than to import oil into our country.

And the exploration of oil is not what it was even ten years ago.  The footprint of a oil well is actually very small, and once the well is in, the 'grasshopper' itself is greatly smaller.  The idea of environmental hazards is severely mitigated by the size of the initial well, and the size of the potential oil pocket.

One item you didn't address Bill was the fact of mineral rights, and administrative costs.  The oil companies do not own the land upon which they drill, most of the time.  The oil companies pay royalties to landowners, which can vary from $5-10,000 per acre to as little as $250 per acre.  Administrative costs are huge in this industry, due to the oversight by local, state and national regulatory agencies.  The costs of permitting a well (even before drilling begins) are huge.

The emerging nations of China and India are also driving up the price of our oil.  These nations are using oil at record highs, and they continue to increase their usage of oil every year, again impacting our economy.

Yes indeed, another expense of doing business.  The average American only understands the price at the pump.  That is the issue.

If I sold bananas and made a $1.00 per banana and all of a sudden they found that eating a banana a day would stave off cancer, I would sell millions.  Would it make me greedy if I raised the price to $1.50 because of transportation costs???

One thing I also forgot to mention was the United Nations "Treaty of the Seas" which was up for ratification by Congress.  In that treaty everything within some restricted mileage off of all coasts would revert those mineral rights to the United Nations.

I believe that it infringed on our shores.  If the United Nations owned the mineral rights we would all be screwed.

I totally agree, if we don't drill they we will freeze.  Drill, drill, drill.  Experts estimate that there could be 400 years worth of oil out there; maybe more.  That means that this wild urgency to solve the energy crisis in 2008 is a bit premature. 

According to recent reports, refineries have only been running at 85% capacity and there are surpluses of gasoline. I think it has more to do with the falling value of the dollar and greed.

I have read that as anecdotal information on the blogosphere but that is not hard news or evidence.

The margin is the margin is the margin.  If profit is X you can complain about X being too much profit but in this case it is 5-8 cents out of $3.69.  The government takes 40 cents out of $3.69.

Now tell me, who is greedy?

Check with Trailways and Greyhound, their ridership is up .07%.

Sorry, there is plenty of oil and the prices came down when Bush lifted the off shore drilling ban.