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oil's well that ends well ... eventually


It was pretty cool actually. One of those terrible oil barons the libs and environmental terrorists love to hate gave it back to the Senate Judiciary Committee today - under oath at that - although I don‘t think you‘ll hear about it anywhere else.

While officiating at yet another show trial designed to convince the government-educated masses those high oil and gas prices are the fault of the oil companies, Sen. Dianne Feinstein, D-CAL (whose husband’s company made billions while she chaired the Military Appropriations sub-committee, then quietly resigned), Patrick Leahy, D-VT, and Sen. Dick Durbin, D-ILL. postured, probed, pushed, and prodded a group of oil company executives to answer their loaded questions and deflect attention from the real culprits contributing to skyrocketing oil, gasoline and energy prices - the politicians themselves.

While asserting U.S. oil companies are somehow manipulating the oil markets, that they are fat cats playing games to cheat poor motorists, that supply-and-demand forces are a myth, and that the markets are not in fact free, Shell Oil Chairman John Hoffmeister had the guts to say what most of us know already but no one seems to have the guts to admit in Washington. That is that these same politicians interrogating them have set every roadblock available to prevent the oil industry from drilling for more oil and building new refineries for decades, and that the result has been an increasing dependence on foreign oil. So yes, he agreed, the market is indeed not free.

I wonder if his income taxes will be audited this year, huh?

So let's see, the same politicians want to convince us that man-made global warming is real, that fossil fuels are the culprit, that oil drilling is bad for the environment, but that they want the oil producing countries to produce more, at cheaper cost, so Americans can drive more and pollute the environment for less money.

Are you confused. Do these people think anyone outside of an Obama moonbat takes them seriously?

If and when gas hits $6, $7, $10 a gallon, when people finally have had enough and wake up to the actual people behind the debacle that is the government-regulated energy sector, when we finally join the rest of the world and start drilling and digging for oil, natural gas, and coal where we know it is, when we start building nuclear reactors and catch up with modern countries like France where nuclear energy accounts for 70% of that country's energy, remember the likes of Feinstein, Durbin, and Leahy, and others of their ilk who preferred to play politics rather than do what was right for the economy and security of this country.

By the way, I saw where five oil producers (Shell, Exxon, Chevron, BP America Inc. and ConocoPhilips) earned $36 billion in profits in the first quarter of 2008. A record. Well, isn’t that what businesses are supposed to do in an expanding economy? By all counts, oil companies earn about a 6.9% profit margin and part of that has to be applied to the ever increasing costs of exploration and production.

If you'd cut those profits in half (not that that's possible), it would account for a total savings in gasoline, heating, cooling, transportation, food, manufacturing - all energy related products and services actually - of about 66 cents per day for each person in the U.S. Yes, I figured it out myself. Big wow.

The only way to get the giant oil exporters like OPEC to lower their prices is to produce more of our own and let them sit on their surplus. Of course our representatives won’t go for that at all. It makes you wonder who’s working for whom, doesn’t it?


( 9 comments — Leave a comment )
May. 22nd, 2008 10:11 pm (UTC)
Actually, when the cost to produce a barrel is around around $20 for hard ground drilling, up to the more costly (most costly) shale extraction around $50 or $60 a barrel, it kinda makes people say WTH?

The speculators are actually more of a problem then anyone. Much of the cost of oil hinges on how these folk feel the market is heading rather then how much it actually costs. Overseas producers are also somewhat to blame as they are the ones that control the bulk of the oil used in the US. Still one has to ponder how the oil companies can be the MOST PROFITABLE business in the US right now when the costs to the consumer is climbing so fast. The answer in part is that the consumer is expected to suffer long before the moguls and their companies do.

I also have little sympathy for the auto makers. If they would have put their efforts into more efficient models of trucks and cars they might be selling more right now. We can build some GREAT cars in the US, but not if we gut our auto industry. the technology IS there. the auto makers have said that the market had not shown interest. Well they sure the hell are now.

There is nothing STOPPING the oil companies from drilling and etc in the US. Sure the environmental laws make restrictions; but that is business in the US. Eventually we will HAVE to allow loosening restrictions; but it will ALWAYS have controls. I would not want to live in a USA where the energy companies have free reign.

Big Oil isn't the only one. All aspects of manufacturing and resource mining in the US have had pain. We have not completely gutted the industry, but like the auto industry we have tried. Again it goes back to us being somewhat spoiled rotten as a society. I really don't think that can be fairly disputed.

Look at it this way. When the Saudi Oil dries up Canada and the US will be the big holders of the black gold that's left. Of course it will all be in sand and shale which are harder to extract... but we will have it anyway. Of course we will be awash in ethanol by then won't we... ;-)
May. 22nd, 2008 10:45 pm (UTC)
Sixty-two percent of offshore territory and 92% pf federal land is banned. Bill Clinton vetoes a bill that would have permitted drilling in a tiny area of ANWR in 1994 and one of his main reasons for doing so was that it wouldn't produce a drop of oil for ten years.

Sen. Charles Schumer, D-NY said the same this just this week.

The environmentalist lobby has succeeded in throwing up every roadblock to prevent the oil companies from drilling and building new refineries and nuclear power plants and you know it. No company can plan for future business enterprises knowing they'll get regulated and litigated to death and not see a penny of profit for their investments for decades if ever.

Profitable? You mean in gross profits or profit margins? Last I checked, government collects 50 to 70 cents per gallon of gas. I'd have to look it up. How much does Coca Cola get for putting corn syrup and a litle flavoring in water? Or Pfizer? Who is to say what excess profits are anyway?

Most of our oil comes from Canada and Mexico, btw. One day, oil may become too expensive to extract but the high costs of alternative fuels makes that extremely unlikely.

The laws of supply and demand will eventually win out.

I'll go out on a limb, something most libs don't have the guts to do. As the high price of energy skyrockets even higher, economies will suffer, demand will drop, and other countries will begin to drill for their own oil. Countries like China which subsidize the cost of gasoline to stimulate their economies will be hard pressed to continue. The oil exporting countries will be awash with cash but will eventually have to lower their prices because of competition, weakening economies, devaluation of their investments, and their negative impact on political and societal stability. They may be greedy but they're not stupid. You can't suck blood for a turnip.

May. 23rd, 2008 01:21 pm (UTC)
Pointing fingers 1
Republican Jeb Bush banned oil drilling off the Florida shore line. It isn't just those darn Democrats.

I am in favor of the drilling and always have been. Truth is that there WILL be drilling in ANWR. It is only a matter of when it will happen. This is also true for Florida's offshore. It will all come down to money.

The environmental lobby is not just after the oil business. I read a report about an American manufacturer that nearly went out of business because the Chinese could produce corrosion resistant trailers cheaper then they could because of the lack of environmental restrictions in China. They were only saved because the Chinese company bought them and took over all their manufacturing.

There needs to be balance. We cannot allow the corporations that destroy habitat and environment to have free reign. London in the earlier half of the 20thC found out what that was like and placed VERY tough environmental controls into law, and now London is losing its chemical laced fogs. The greenies are not evil - just occasionally misguided or unrealistic.

The issue is not so much the % of gross or net profit, margin or even total dollar amount. The questions are about the massive increase in the profit figures at a time when consumers are being asked to absorb the lions share of the pain of the cost run ups which many in the media, politics and consumer world are calling opportunism. While I don't fully blame the oil companies I think they are partly the problem. I also MORE blame the ones who more directly effect the costs.

Who? It won't fit - so read on...
May. 23rd, 2008 04:24 pm (UTC)
Re: Pointing fingers 1
Jeb Bush "banned" oil drilling? I didn't know governors had that power. Are you sure he didn't "support" a ban? I think Bush flip-flopped quite a bit on that subject as do most politicians who don't mind endangering the environment as long as it's someone else's environment (Like Louisiana and Texas).

We now have the ability to drill with virtually no harm to the environment, even sideways, although the cost and time involved has increased.

Yes, no one wants to harm the environment but there are security and economic stakes that are so high now, some middle road must be traveled.

I'm sorry. About 70% of the price of a gallon of gasoline goes to pay for the oil to produce it. It costs about $1 to produce a barrel of oil in Saudi Arabia and about $75 for a barrel in some parts of the Gulf of Mexico.

A gas station owner typically makes about 7-9 cents on a gallon of gas and he has to pay for the cost of operation out of that (Want a coke and a fried pie with that fill-up?).

Chipping away at the profits of everyone involved in getting that gasoline to your local pump might save you a few nickels per tank. Why don't the politicians explain that instead of pouting and finger pointing?

It's easier to point the finger at the people down the eating chain, the ones doing the heavy lifting, as the source of the poor man's burden of high energy prices. Yes, there is a lot of blame to go around, and while I'm no big cheerleader for big oil, whose employees make a better than average living, I shudder to think where we'd be without them.

Perhaps the whiners would like to move to countries like China where the government subsidizes the cost of gasoline so the upper classes can afford $2 gasoline. Of course, where ya gonna go?
May. 23rd, 2008 04:36 pm (UTC)
Re: Pointing fingers 1
He actually supports drilling offshore... just not off Florida shores. Some reports show he actually did support the drilling and others say he didn't. Mostly it was a means of showing the world that he would stand up to the shrub. We have a lot more respect for Jeb here then the shrub.

The $75 a barrell is higher then any cost estimate I have read. In fact I was surprised that a dept of energy report showed the cost of offshore production (platforms) was less - yes less - then producing oil in shale and sand; and that was shown on the news yesterday at below $65 ea. This was supposed to account for shipping and refining as well, but they were not as clear on that - it was a bit ambiguous and I have work to do.

I actually knew about the gas station part. Nothing we do in the area of consumer activism will hurt anyone other then the private owners of the stations.

Politicians don't need bigger recognition then a shrug and giving detailed explanations of these details. All people want to know is how are they fixing it.
May. 23rd, 2008 04:53 pm (UTC)
Re: Pointing fingers 1
I said some of the areas in the Gulf of Mexico, and that was based on gas around $3 a gallon. My point was it costs our oil companies many many times more than it does the Saudis to produce a barrel of oil and if anyone is making an obscene profit it is they.

The fact that the politicians have done nothing since the Arab embargos of the 70's and, in fact, have supported policies that have made us MORE dependent on foreign sources of oil is not a concept that can escape anyone who bothers to understand the basic facts.

They can spin and spin but eventually people will catch on.

Oh, btw, Sen. Dick Durbin, D-ILL was blasting the oil companies for being responsible for Chicago having the highest gas prices in the country. Kudos to Chicago CBS for revealing that 79.2 cents in federal, state and county taxes are applied to each gallon of gas (at a gallon), higher than even New York and Los Angeles.

The voters of Illinois should stand up and applaud Senators Durbin and Obama, don't you think?
May. 23rd, 2008 05:01 pm (UTC)
Re: Pointing fingers 1
Oh no doubt that the Saudi are making the lion's share - and I guess it is theirs to make.

The US Government policy has been thick headed with regards to energy for a long time. Everyone knows it and everyone has said it.

People will catch on or not... I just remember the misinformation that led to the 70s crisis. That was a crisis that did not need to be. One of my first papers in High School was a research paper on the oil crisis. That was when I learned the basics of the oil biz - I have learned more from my brother working in the business and heavy reading since. In the 70s they knew the reserves were "ok", but they were forecasting availabilities for futures that were short sighted. We should have learned lessons then, but as you said... we don't (and didn't).

I have NO problem with gas being taxed and where the gas tax goes. Much of it pays my wages. I also don't have a problem with cars and trucks with high consumption being taxed. Again, it is ok to use policy to encourage desired behavior. We want folk to move from those chuggers.
May. 23rd, 2008 05:24 pm (UTC)
Re: Pointing fingers prt 2
I knew it was a lie the first week they started promoting the "shortage" mantra because my local newspaper ran a story saying that Saudi Arabia had increased their output by (as I recall) a million barrels a day. I sent letters to the editor and argued with people who (like today) thought I didn't know what I was talking about. Now THAT was manipulation of the market.

I think it's funny that you don't mind the government getting $ .80 a gallon in Chicago but you think the actual producer shouldn't get a couple of nickels because people are having to pay so much at the pump.

Of course, since you believe the government "of the people" has the Constitutional right to encourage force us to behave in ways it deems suitable and proper by punishing us when we do things it disapproves of, I'm not surprised.

And they still want everyone else to increase their oil production. Heck, they're gonna sue them to make sure they do!
May. 23rd, 2008 01:22 pm (UTC)
Pointing fingers prt 2
Well, in order of guilt:

Mother Nature - Damn her for not killing and rotting more dinosaurs and other biomass for longer periods of time. Save much save often is what I always say. How dare she slack off like that.

Speculators - covered already

Foreign Producers - Of course they are cranking up the costs. The companies and governments that produce also pocket the bulk of the earnings without distributing any of the benefits to their people. Look at Niger to see what happens when you disenfranchise such large portions of your community while living in luxury. Look at Chavez. Look at The Saudi Princes. How will they survive when the oil fields peak - and it becomes public. Will the world never learn from Louis XVI?

The shrub - because his ill planed bit of Imperial Adventuring caused supply issues for one of the world's larger suppliers of oil and related resources. Because of his isolating of the US politically in the world he has also led nut jobs like the loon Chavez to think about how much power he CAN wield on the world stage.

The domestic oil companies - for not helping out and backing off controllable expenses and not pushing harder to expand infrastructures and improve technology. It is not ALL the government after all. I read a report recently that indicated that little effort (aside from ANWR ) had gone out to improve the US abilities in production. Alternative sources are not being given research efforts (maybe government funding dried up and so I guess that is the FED's fault - but I thought the conservatives have said that private industry would do research and do it better with their own money - Bumkiss!)

China and India - Whose consumption of oil and NG has been growing at a rate that should frighten everyone. They keep this up and there will be wars in their region over who gets what resources. With the earthquake in China fueling much of the current speculations (there they are again) the costs are going even higher.

US consumer market - We are spoiled. We really are. I have seen how people live in even developed countries in the EU, and less developed places like Egypt, the Caribbean and Central America. Anyone that thinks we are not living well are sadly unaware of the rest of the world - and probably deliberatly so. We have a market model that is unsustainable. No I am not reading from Al Gore. It is simple logic. The Earth is a finite and tangible thing. We cannot expect to continuously expand and expand without limits and expect that at no point will we ever exhaust any given (and critical) supplies of the stuff that makes our lives so wonderfully comfortable.

I have said all along that I support alternative energy sources for more practical reasons then global warming. I still do. I sure wish Jax was more bicycle friendly. We rated in the top 5 LEAST accommodating for bike and pedestrians.
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