Why The Petrol Market Is Not Working
March 27th, 2008 by jack
We all know how expensive gasoline is these days. We have also heard about the oil companies’ making enormous profits. According to ExxonMobil’s 2007 Annual Report, the company’s return on average capital employed was over 30% for 2005, 2006, and 2007. That is staggering.
Now, I am not begrudging the oil companies’ making a profit — whatever the market will bear. I am not accusing them of collusion to keep prices up. The problem is not the companies, but the market. In a normal market, when returns are that high, a company will lower its prices to sell more of their product. In the long run, this lowers prices to the consumer and increases the profits to the company.
The reason the oil companies are not lowering their prices is that they simply have no more gasoline to sell. Their refineries are running at capacity. Normally, a company whose plants are running at capacity would build more plants. Unfortunately, because of short-sighted government officials and rampant NIMBYism, no new refineries have been built in the United States for years, and none will be for years to come.
The best the oil companies can do it to increase productivity at existing plants, and that will simply not be enough to meet the increasing demand. Might I recommend a Dividend Reinvestment Plan?
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March 27th, 2008 at 3:27 pm
DRILL in ANWR! Oh, and offshore — there’s plenty of oil offshore here in Virginia.
March 27th, 2008 at 3:29 pm
That will affect the crude supply, but the oil must still be refined.
March 27th, 2008 at 3:47 pm
The petrol market is working fine by me, my investments are paying off handsomely. This is the best to way I have found to offset rising pump prices.
You are correct Jack, this is what happens when demand goes up, and the supply cannot follow.
March 27th, 2008 at 5:13 pm
I don’t think we have built a new refinery in the U.S. in 30 years. Ya think thats a good idea?
March 27th, 2008 at 5:22 pm
Yes, we do need to build a few more, problem is we have waited far too long. I also think we need to build a few more nuclear power plants as
well.
Time to move on from the flawed rationales of the 60s and 70s.
March 27th, 2008 at 5:55 pm
Dan,
We need a for real energy policy. That means we need to get into a HUGE, HUGE building program for nuclear power, and doubling our refinery capability. That is for starters.
Windmills are not going to cut it.
March 27th, 2008 at 7:55 pm
If we could harness the wind from our politicians, we could power the world!
March 27th, 2008 at 9:14 pm
Speaking of energy, did you gents see this :
http://www.technoride.com/2008/03/bmw_diesel_beats_prius_in_econ.php
The wind from our politicians is all hot air, and rises too rapidly to be of any value.
More nuclear is coming online. North Anna I believe is bringing another reactor online soon. Considering that this plant is 30 years old, this is long overdue.
Imho, windmills are ok for small point of use installations, but do not scale very well
I also don’t believe that consumers are really that concerned about energy, other than bitching and moaning about gas prices. How many actually use SEER ratings to determine the appliances they buy ? How many forgo the new big screen plasma for another flat panel type that uses 1/4 of the electricity ? Those big city nighttime skylines make really nice postcards, but why don’t they turn all but the emergency lights off when these office buildings are empty ?
Lastly, many take issue with the windfall profits that the energy companies make on gas, but the tax windfalls which are exceptionally higher are overlooked ? Why is that ?
March 28th, 2008 at 1:29 pm
We need a vision and plan to become oil free. Of course, that’ll never happen as long as the oil “inmates” are running our government “asylum”.
Tax windfalls! Ha ha! The oil companies get more tax breaks than almost any other industry. “Wot a fonnee gy!”
March 28th, 2008 at 2:09 pm
inSanity,
Visionary? How about just less stupid. France, Japan, Germany all get goo-gabs of power from nuclear energy. That did not require vision. It required not listening to the kooks in the hippie fruit-loop anti-nukular crowd. Remember the movie, “china syndrome” thank you Jane Fonda again.
France gets 80% of its electricity from nuclear power. Why don’t we, because we sold out to the flower power kooks back in 70’s. Who was in charge back then?
March 28th, 2008 at 3:10 pm
TMI had more than a smidge to do with it.
I agree that we should do more with nuclear, but the majority of our oil ends up as automotive fuel. Now if we could just come up with an inexpensive nuclear generator that would fit in your trunk…
I’m surprised to hear you praising the French. Weren’t you on the “freedom fries” bandwagon?
March 28th, 2008 at 3:52 pm
The safety precautions at TMI did exactly what they were supposed to do. The reaction to TMI is like a person who gets into a car crash, the safety belts work, the airbags deploy, and no-one is injured, but they decide never to buy another car because all cars are unsafe.
March 28th, 2008 at 4:10 pm
Good bye to Saudi oil?
“America is sitting on top of a super massive 200 billion barrel Oil Field…(that) until now has largely gone unnoticed. Thanks to new technology the Bakken Formation in North Dakota could boost America’s Oil reserves by an incredible 10 times…”
http://www.nextenergynews.com/news1/next-energy-news2.13s.html
March 28th, 2008 at 7:23 pm
Sanity,
What was the valuation of these oil company tax breaks for FY2007 ?
March 28th, 2008 at 8:01 pm
Ted - The report you quote is a pipe dream. Even if there’s oil, would anyone want to see the landscape spoiled to such a degree? Drove through the Texas panhandle in the 80s and saw the crumbling oil rigs all over. Off the highway the small towns were depopulated; borded up gas stations, store fronts, mangy dogs sleeping on the sidewalks,
In the 15 June 1973 issue of SCIENCE, the organ of Amerian Association for the Advancement of Science, Philip H. Abelson wrote:
“The United States, with 6 percent of the world’s population, uses a third of the energy output. At one time, no special opprobrium was attached to this practice - we were squandering our own resources. The situation has changed. We are now importing a third of the petroleum that we consume. Our huge imports will eventually deprive others of a key commodity and are now forcing upward the price of oil for all, while undermining the value of the dollar.”
Sounds familiar? This was written 35 years ago.
March 28th, 2008 at 8:13 pm
inSanity,
Part I.
Just because someone I don’t like does something smart, it does not mean I will then find reasons to discount it or demean it. You might try that paradigm sometime old bean.
BTW France under that loser, low-life Chirac was a place I did not like. Sarkozy was to me just another cheese eating surrender monkey until he gave that amazing speach. The guy gets it. The following is the American experience distilled down to its essence:
“America did not tell the millions of men and women who came from every country in the world and who—with their hands, their intelligence and their heart—built the greatest nation in the world: “Come, and everything will be given to you.” She said: “Come, and the only limits to what you’ll be able to achieve will be your own courage and your own talent.” America embodies this extraordinary ability to grant each and every person a second chance.”
That is a line that should be memorized and recited by every American before they are 12. America should use that paragraph as a greeting. It should be drummed into our thick skulls.
Part II.
As for powering automobiles with nuclear power it can be done. Here is how …
1. using electricity from a nuclear power plant break water down into its two components the result is H2 and O2.
2. distribute the H2 to fuel stations by any number of means.
3. Use automobiles that run on H2, the by product from the combustion is water vapor.
The O2 has a myriad of industrial, military, medical and scholastic uses.
March 28th, 2008 at 8:43 pm
“DRILL in ANWR! Oh, and offshore — there’s plenty of oil offshore here in Virginia.”
See…that’s the kneejerk reaction of the underinformed.
There is plenty of fuel (despite what the liberal media spins as a short supply. That breeds this hysteria, and has caused the futures to rise, which is the second part of the increase.) to process.
That is the key word here. We need to refine it before it can be used by internal combustion engines. In that I’ve been told that diesel is easier to refine than gasoline, I’m concerned that ignorance in diesel futures is driving the smaller independent truckers out of business, in that it is somewhere around $4.30 per gallon.
Anyone familiar enough with the process to refute or confirm that?
March 29th, 2008 at 1:10 am
Jacob, Very good point about hydrogen cars. Btw :
http://www.autobloggreen.com/2006/09/12/bmw-officially-announces-the-bmw-hydrogen-7/
I read some time back that this car set a new land speed record for a hydrogen powered vehicle of over 300kph. BMW’s approach seems to be very simple; now that we have engineered the internal combustion engine into the technological marvel that is today, why would we throw all of that engineering away and start over ?
What North Dakota and her residents decide to do with their landscapes is certainly no business of any NoVa posters here. You cannot compare mid 20th century oil field technology with that of today. But from a long term strategic standpoint, would it not make more sense to hold our untapped supplies in reserve ? Think about, 50 years from now, we have most of the earth’s oil and fresh water reserves.
10 feet tall, Yes, diesel is less costly to refine than gas, and the cost of building refineries for diesel is also less. Rudolf Diesel’s first engines ran on peanut oil, and he expected his engines to run on vegetable and seed oils, as he built it to run on a variety of locally available fuels. That is the beauty of the design. Popular Mechanics had a very good article recently on the new diesels soon coming to our shores. VW has a 70 mpg diesel engine that with the newer ultra-low sulfur fuels has equivalent or lower emissions than current hybrids. Imho, because of advances in diesels and the technologies like the hydrogen Beamer above, hybrids will go the way of the 8 track.
March 30th, 2008 at 8:33 am
I’m aware of Deisel’s first fuel, and have often wondered how we got off that track. It has alot to do with the fact that back then, oil and byproducts actually cost less than the peanut oil. THE DAY that the crude was about to outpace peanut oil, we should have been on a tear to reintroduce peanut oil to thse engines, since the technology had been perfected decades before.
I’m glad to see VW doing thier thing, but in all honesty, no matter what it emits or does not emit, it still runs on a limited fuel source. I’d like to see it on a renewable source, to tell you the truth. If we could get far enough ahead to provide renewable fuel to the whole process of providing the renewable source….i.e. from harvest to refining all run on the very fuel that they produce.
And I won’t even get into the whole thing about needing acres to grow on here— or IMPORTING sugar cane and other bio fuel sources from Columbia, Argentina and others. Didn’t we learn anything from having to import our oil??
March 30th, 2008 at 12:42 pm
10ft-
There is growing evidence calling into question the belief that oil is a non-renewable resource. Maybe one day soon we may know for sure one way or the other if it is dead dinos, or is the product of ongoing processes right under our feet.
Also, bio-diesel is far from being a limited fuel source. The question that remains here, is do we want to grow our fuel, or our food ? Do we want to de dependent upon foreign nations to drive or to eat ? That’s the million dollar question. Me, I would rather ride a horse with a full belly, than drive a Ferrari on a beggar’s diet.
March 30th, 2008 at 4:23 pm
That’s my point. We can do this here. All we need is a couple hundred thousand acres that support housing right now. Return the water from five major cities to the plains so it sevew us all. And promote farming as a dignified vocation instead of looking down our noses at those who’ve kept us fed over the decades. Possible?
Naw. We’re going to be buying from South America, and we’ll like it, gosh-darn-it.
March 30th, 2008 at 6:29 pm
10 cm
“I’m aware of Deisel’s first fuel, and have often wondered how we got off that track.”
Simple, it takes way less energy to get it out of the ground than it does to distill the oil out of the legume. The bang for the buck is just not there when compared to oil product out of the ground.
March 30th, 2008 at 8:49 pm
Get back in the bag, dude. Jeez.
It was the original fuel, man. You run the peanuts thru a press, genius.
Oil USED TO BE CHEAPER than the peanut. That changed around 1950 or so, but evidently, we were hooked by then, and never bothered to unhook from the oil companies marketing campaign.
March 30th, 2008 at 10:47 pm
Read an article many years ago about the “nuclear pea” automotive engine. The tech and design exists. They just aren’t going to put nuclear pellets in the hands of civilians!
If diesel is cheaper to make then why does it cost more then regular gas? Ships, trains and trucks run on diesel for the most part. They are also the major transporters of commerce and goods. I know who is paying as the end user but who is making these profits? Yes, we do need more nuclear but we also need to do something with the “waste”.
As far as 10 proof wanting to be “oil free”-do you understand what petroleum is used for and in? Building materials, chemicals, cleaning solutions, plastics, medicines. Oil free? You kidding me?
March 31st, 2008 at 3:34 am
10cm and totally clueless,
Gasoline at the pump costs around $3.50
peanut oil with is cheaper according to you costs about $10.20 a gallon. Hey genius, I guess according to you 10.20 is less than 3.50. What is that … new math?
So, according to you “Oil USED TO BE CHEAPER than the peanut [oil]. That changed around 1950 or so”
Gasoline, an oil by product, and therefore MORE expensive than straight crude oil is still cheaper than Milk or Orange juice, let alone Evian in the 16oz bottle. All of which are less expensive than peanut oil, or corn oil, etc. So what world are you in … genius?
Furthermore to get the oil you don’t just crush the peanuts, boy, thats peanut butter you fruit loop. After the press the butter is often then heated to get the remaining oil to rise above the heavier solids. The process of removing a light liquid from a heavier one by using heat is called distillation. So stop blowing smoke, genius.
Try this, when someone has the temerity to disagree with you, be polite even if by some small chance you are right for a change.
March 31st, 2008 at 3:59 pm
Nah. I like flamefest better. And you did not dissappoint.
April 2nd, 2008 at 7:23 pm
I would point out that we were discussing deisel…and that’s $4.30 a gallon out here.
And I haven’t priced a gallon of pure peanut extract, so I’ll have to trust you.
April 2nd, 2008 at 9:33 pm
10cm and 80-proof,
Go on line. Thats what I did. The best price I found was $10.20
April 2nd, 2008 at 9:46 pm
10FTB,
Yes, the diesel price disparity does seem odd. Wonder if is due to the volume sold ? I have read where up to 50% of the cars in Europe are diesel.
http://www.aaroadwatch.ie/eupetrolprices/
I doubt that peanut oil is $10 a gallon outside of the grocery store. I would think that $125-$150 a barrel is more realistic. Anyone up for digging up the prices in the commodities markets can prove me wrong.
With diesel at $4.30, maybe you need to get some BioWillie out there..
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