2007-2008 Crude Oil Cost

[VicMan]

Really? I like walking because it gives me exercise and it allows my family to save money that would be normally earmarked for gasoline (and hence, I become wealthier ).

I noticed, when I visited Japan, that very few Japanese (at least in Tokyo, Yokohama, and Kyoto) had potbellies because public transportation and walking factor into the daily lives of the Japanese.

If Americans took more public transportation and walked more often, less obesity would plague the US. Unfortunately, TheNiche is correct that a lot of people are unwilling to inconvenience themselves by using less quick modes of transportation.

No, that's not the moral of the story. If I can find a way to become wealthier, I'll probably increase my use of gasoline (and other goods and services that use oil-based products). And I'll be happier for it, because...

...I have no symbolic goals based in principle...

...and while is is possible to reduce consumption, I'd just rather go to the effort to earn money so that I can afford to spend it being comfortable and lazy. Laziness is the greatest motivator! Strange but true.

[TheNiche]

Vic, we're just going to have to agree to disagree on this one and chalk it up to individual differences, which is A-OK with me.

[musicman]

I noticed, when I visited Japan, that very few Japanese (at least in Tokyo, Yokohama, and Kyoto) had potbellies because public transportation and walking factor into the daily lives of the Japanese.

If Americans took more public transportation and walked more often, less obesity would plague the US. Unfortunately, TheNiche is correct that a lot of people are unwilling to inconvenience themselves by using less quick modes of transportation.

in Japan, private transportation is more expensive than it is here which results in more people using public transportation. with the density there, the public transportation is more efficient which is another factor.

[VicMan]

in Japan, private transportation is more expensive than it is here which results in more people using public transportation. with the density there, the public transportation is more efficient which is another factor.

Exactly - It's just like New York City.

As a consequence of being a society with public transportation as king, the Japanese people tend to have slimmer physiques.

[musicman]

Exactly - It's just like New York City.

As a consequence of being a society with public transportation as king, the Japanese people tend to have slimmer physiques.

but it's not like they have as easy a choice as we do, more there can't afford them. so there's no option. i know that they are eating "american" food now to be like us and well they are having their share of problems.

[Pumapayam]

Do you have any non-circumstantial evidence to this effect?

Nope, I am more of a conspiracy theorist I guess. If I had some evidence, other people would too, and all this nonsense would resolve itself.

[RedScare]

The "conspiracy", if there was one, is in energy policy set by the White House, coupled with some mistakes made by that same White House in antagonizing oil producing countries. The White House, with agreement from the oil industry, has set a consumption based energy policy. They have attempted to make it easier to drill for oil, refine it, sell it and use it. This policy, in and of itself, does not cause the price of gasoline to rise...it would merely allow higher profits due to more gasoline being consumed.

The problems arose when the White House miscalculated the effect of certain foreign policy decisions. The belief that Iraq would fall quickly, and then stabilize, giving greater access to their oil, did not come true. Oil production is now LOWER than before the invasion. The unprovoked attack on Iraq helped fuel suspicions in other countries, such as Iran, Venezuela, and Russia, that US aggression would affect them. Russia and Venezuela are nationalizing their oil industry as protection against what they consider an over-aggressive US government. These moves make oil supply interruptions more likely, as does political unrest in other oil producing countries. Add in the fact that oil consumption is nearly equal to oil production, and any interruption will cause oil buyers (the market) to panic, driving up the price.

It is important to remember that the trading market is merely a collection of people buying oil to run their businesses. If they cannot buy oil, their business stops. If hurricanes, wars and sabotage threaten the supply, even a little, they will pay more to guarantee their business has oil. The conspiracy in the trading markets is human nature. It cannot be changed. It is like ranting that the sun rises in the east.

If you would like to rant that White House actions and policies backfired, causing oil prices to rise, that is one thing (note, some people would argue that this is not the case). But, to rant against human nature is pointless. Even ranting against American wastefullness is pointless, as each individual will decide when, how and to what degree to curtail oil consumption. I've cut my gasoline consumption by 2/3, by moving close to work, and taking public transit more often (not so much because I could not afford it, but because I did not want to pay it). Others merely complain of the price. When it hurts, they will decide what to do about it.

[mrfootball]

The Commodity Futures Modernization Act of 2000 which created numerous loopholes that have enabled traders to hide their positions, create artificial volatility and essentially inflate the price of energy in a relatively unregulated environment. That and several other key pieces of legislation that were successfully passed into law by the energy lobby. Enron is nearly forgotten, but their legislation persists.

Also, there has been a great deal of consolidation in downstream refining operations that have left us with a few players who've got a great deal of market power and no real incentive to invest in new refineries. >> link to internal memos showing effort to reduce refining capacity

Most people assume we have a free market system, however the current system is certainly not functioning in equilibrium and is subject to a great deal of manipulation. Add to that we've got an administration that favors a hands off approach with regards to regulation of the Energy sector, which sounds good to those who don't like government interference...but this laissez fair approach probably has more to do with special interests than any kind of libertarian free-market principles as evidenced by the fact that we're still granting oil companies billions in gov't subsidies. No question, they've got a system that works for them.

You'd think the Democrats would want to do something about it? It doesn't appear they do. They'll recite the "Peak Oil" argument that has been so successfully leveraged (despite rising inventories) to explain to the masses why they're paying thousands more a year for gasoline. Many Democrats feel that higher energy prices will lead to alternative energy solutions - therefore the "pain at the pump" is a 'good' thing that will force us to consume less.

Ultimately this affects those who can least afford it the most. The average American consumer has seen his/her wages remain flat while prices have increased across the board. Discretionary spending (ie. college savings, vacations, etc) is being redirected to put more money into the pockets of the Energy sector.

[Pumapayam]

If you would like to rant that White House actions and policies backfired, causing oil prices to rise, that is one thing (note, some people would argue that this is not the case).

More so Bush's policies, but yes, it was the worst thing we could have done since Vietnam..

Are we just trying to use up everyone else's oil before we use ours, or did we already run out oil on our own land. I am hearing conflicting stories with that, but I assume the former.

[TJones]

Really? I like walking because it gives me exercise and it allows my family to save money that would be normally earmarked for gasoline (and hence, I become wealthier ).

I noticed, when I visited Japan, that very few Japanese (at least in Tokyo, Yokohama, and Kyoto) had potbellies because public transportation and walking factor into the daily lives of the Japanese.

If Americans took more public transportation and walked more often, less obesity would plague the US. Unfortunately, TheNiche is correct that a lot of people are unwilling to inconvenience themselves by using less quick modes of transportation.

Did you also notice that the majority of them are about 5'8" ? Also, that alot of Japanese live in apartments about as big as my livingroom ? They HAVE to be small or become VERY uncomfortable, could you imagine being 6'4", 300lbs. and staying in THIS ?

btw Puma, we only import 60% of our oil, where's the other 40% coming from ?

Niche, I understand that Citgo would easily find another Company to buy their gas and distribute it, but it would be at a drastically reduced price to them, because Citgo would have far less choices of who their consumer is now.

[VicMan]

TJones, those aren't apartments. They are capsule hotels. Yes, capsule hotels exist, but not all people stay in capsule hotels. I stayed at three hotels (two of them were aimed at Japanese people), and none were capsule hotels.

It is true that Japanese dwellings tend to be smaller than American dwellings.

Did you also notice that the majority of them are about 5'8" ? Also, that alot of Japanese live in apartments about as big as my livingroom ? They HAVE to be small or become VERY uncomfortable, could you imagine being 6'4", 300lbs. and staying in THIS ?

btw Puma, we only import 60% of our oil, where's the other 40% coming from ?

Niche, I understand that Citgo would easily find another Company to buy their gas and distribute it, but it would be at a drastically reduced price to them, because Citgo would have far less choices of who their consumer is now.

[TJones]

I didn't say they were apartments. I guess you could interpret it that way though, sorry to confuse. I had already made a reference to how big apartments were. I have a pretty large living room, you could almost fit all those capsules in it.

Let's see you try to get THIS guy in one of those capsules.

[TheNiche]

Niche, I understand that Citgo would easily find another Company to buy their gas and distribute it, but it would be at a drastically reduced price to them, because Citgo would have far less choices of who their consumer is now.

Citgo's gasoline is the exact same as anybody else's gasoline. Nobody cares who produces it because any attempt to boycott Citgo by one investor would only lead to arbitrage by many others in competition with one another that do not care about the source and is motivated by the money (i.e. people like me). Because the do-gooders know that I'll just come around and buy it if they won't, there is no motivation to boycott.

[TheNiche]

The Commodity Futures Modernization Act of 2000 which created numerous loopholes that have enabled traders to hide their positions, create artificial volatility and essentially inflate the price of energy in a relatively unregulated environment. That and several other key pieces of legislation that were successfully passed into law by the energy lobby. Enron is nearly forgotten, but their legislation persists.

Actually, there have been numerous peices of legislation that were signed into law after the Enron collapse. Energy traders in the post-Enron era have been prosecuted for walking into work and proclaiming with joking optimism that, "I'm going to move the market today!" Many loopholes and risk factors have been closed, perhaps even overzealously.

Also, there has been a great deal of consolidation in downstream refining operations that have left us with a few players who've got a great deal of market power and no real incentive to invest in new refineries. >> link to internal memos showing effort to reduce refining capacity

Most people assume we have a free market system, however the current system is certainly not functioning in equilibrium and is subject to a great deal of manipulation. Add to that we've got an administration that favors a hands off approach with regards to regulation of the Energy sector, which sounds good to those who don't like government interference...but this laissez fair approach probably has more to do with special interests than any kind of libertarian free-market principles as evidenced by the fact that we're still granting oil companies billions in gov't subsidies. No question, they've got a system that works for them.

According to the Energy Information Administration, there are 92 different domestic refining companies. Not competitive enough for you? ...never mind those based overseas. Mexico's chemical manufacturing sector is doing very well because we allow ours to languish under the burden of red tape. In fact, wheras the U.S. used to be a net exporter of enormous amounts of refined products, our regulatory climate has promoted the construction of new refineries overseas to serve our consumers. Because it is not all that different to ship refined products to our shores than it is to ship crude oil, and because the global market is so throughly and efficiently connected when it comes to trading bulk liquids, the level of domestic competition is practically irrelevant; it just isn't a domestic market. No such thing. It is a global market.

[TJones]

We'll agree to disagree then. This is a scenario where you have to start somewhere and wear a company down in order to force them to lower THEIR price , and by doing so making the competition across the street lower THEIR price and have a domino effect, you can't just wait around or have everyone just NOT buy at the same time. You simply have everyone NOT buy from a particular franchise, and the rest will fall into place. The problem is the demand for the commodity is sooooooo great, it is virtually impossible to accomplish the task, but the goal IS achievable, if everyone can adhere to the cause.

Citgo, doesn't want to sell their gas product to OTHER rivals, they want to sell it directly to YOU the consumer for the most profit. If YOU the consumer stop purchasing from their location exclusively, then their location dries up, and they close shop, then have to sell to their rival. You will see motivation from their part in order to NOT sell to a rival and keep your business exclusively.

I know I am wishful thinking, but everyone has to have a dream.

[RedScare]

Actually, there have been numerous peices of legislation that were signed into law after the Enron collapse. Energy traders in the post-Enron era have been prosecuted for walking into work and proclaiming with joking optimism that, "I'm going to move the market today!" Many loopholes and risk factors have been closed, perhaps even overzealously.

I love the smell of urban legend in the morning!

[TheNiche]

Citgo, doesn't want to sell their gas product to OTHER rivals, they want to sell it directly to YOU the consumer for the most profit. If YOU the consumer stop purchasing from their location exclusively, then their location dries up, and they close shop, then have to sell to their rival. You will see motivation from their part in order to NOT sell to a rival and keep your business exclusively.

You don't get it. Citgo sells a commodity from its refineries that gets transported to big storage facilities around the country, mixed with everyone else's gasoline that is distributed to independently-owned gas retailers. It does NOT make money by selling gasoline to gas retailers. Even if you were an energy trader, YOU could not wear them down because there are more than one of ME, and I will compete with other people like me for the arbitrage opportunity until there is no more arbitrage opportunity. That's how competitive markets work.

I love the smell of urban legend in the morning!

Please substantiate your claim.

Mine was told to me by a lawyer that does consulting on such matters and was the professor of a class I took at UH. A year or so later, a friend of mine interviewed at one time for a position with an energy trading firm and described exactly the same kinds of changes that they'd talked about having made as had been communicated to me in the class.

[RedScare]

Please substantiate your claim.

Mine was told to me by a lawyer that does consulting on such matters and was the professor of a class I took at UH. A year or so later, a friend of mine interviewed at one time for a position with an energy trading firm and described exactly the same kinds of changes that they'd talked about having made as had been communicated to me in the class.

No need to. You just proved that your statement is hearsay...in fact, it is hearsay within hearsay....hence, urban legend. Or, perhaps just outright fabrication.

[mrfootball]

I was first made aware of the so-called "Enron Loophole" in the Levin-Coleman Senate Report from June 2006.

Here are some more articles on the subject:

The Enron Loophole Helps OPEC Serve Up a Hefty Helping of Oil-Price Baloney

Media Ignore Enron Connection to Higher Oil and Gas Prices

[houstonmacbro]

Who all else is sick and tired of oil jumping up and down each day based off of supposedly "critical" information. I have never seen anything so unstable.

1. Even though nothing happened between Iran and the US during the British Navy being kidnapped, supposed fears of war made the cost per barrel go up.
   
2. If we have lots of reserves, but the demand is the same, the cost goes down.
   
3. It there is a riot in Nigeria, the price goes up
   
4. If things are going well in the middle east the cost goes down.
   
5. If a hurricane is in the Gulf of Mexico, the cost goes up; that same hurricane misses the rig, the costs goes down, yet no damage happened to begin with.
   

The list goes on.

I can accept increased cost due to demand, line breakage, refineries offline, and ACTUAL storm damage, but all the other stuff in between, is just wack.

I think I would feel better about gasoline prices if it were directly related to something. It just seems like sometimes it's up and sometimes it's down. No rhyme or reason.

[VicMan]

As Snopes points out, prices are partly influenced by overall consumption. Also, prices are influenced by threats to oil supply (threats of damage to oil facilities, political threats).

There is a method that us mortals can use to influence prices to go down: Consume less gasoline. Unfortunately, many people are not willing to inconvenience themselves.

I think I would feel better about gasoline prices if it were directly related to something. It just seems like sometimes it's up and sometimes it's down. No rhyme or reason.

[houstonmacbro]

There is a method that us mortals can use to influence prices to go down: Consume less gasoline. Unfortunately, many people are not willing to inconvenience themselves.

You are absolutely right. And especially here in Texas where it is ludicrous to have Suburbans flying down I45 at 75 mph carrying one person.

When will we learn.

[TheNiche]

No need to. You just proved that your statement is hearsay...in fact, it is hearsay within hearsay....hence, urban legend. Or, perhaps just outright fabrication.

I will concede some degree of uncertainty, but that is true of anything that I could say about anything at any time during my natural existence. Having said that, hearsay technically occurs when someone claims that something must be true because they heard it from someone else. Perhaps I was not initially clear, but the message that should have been communicated was that the message is very likely true because I heard it from a reputable source that was independently confirmed later on. ...that you would come back at me with a vague denial along these lines is the only reason that I even bothered elaborating on the independent confirmation.

...and yes, it could be an outright fabrication, but then you could just as easily be trying to mislead people by arguing against me. Neither of us have any apparent motive to mislead people, and I'm just not all that clear that such suggestion on either of our parts would be in any way shape or form constructive.

Tisk, tisk. Bad lawyer!

[TheNiche]

I think I would feel better about gasoline prices if it were directly related to something. It just seems like sometimes it's up and sometimes it's down. No rhyme or reason.

Even when political events aren't manipulating the grand scheme and longer-term outlooks which get built into traders' forward price curves each morning, day-to-day prices vary widely on account of the weather. In a cold snap, heating oil gets outrageous; in a heat wave, electricity use gets outrageous. Prices fluctuate to reflect such volatile demand as it affects the nation and sometimes beyond.

Also bear in mind that the world is a big place and many oil-producing regions just aren't very sexy...Nigeria for example. Odds are that you won't hear about political disturbances, terrorist attacks, and other matters about countries that most Americans aren't familiar with because media outlets are in the business of entertainment rather than information, and nobody is entertained by dead and dying peoples that we aren't presently at war with. Traders, on the other hand, do care. They are attuned to foreign and specialized print media, which is far more internationally focused.

[houstonmacbro]

I'll agree with most of what you said ... so here is a new question for this topic...

Based on everything you know, do you think the current price of gasoline (or barrels of oil) are priced just right? Too high? Too low?

[TJones]

You don't get it. Citgo sells a commodity from its refineries that gets transported to big storage facilities around the country, mixed with everyone else's gasoline that is distributed to independently-owned gas retailers. It does NOT make money by selling gasoline to gas retailers. Even if you were an energy trader, YOU could not wear them down because there are more than one of ME, and I will compete with other people like me for the arbitrage opportunity until there is no more arbitrage opportunity. That's how competitive markets work.

Citgo doesn't mix their gas once the additives are in it, they may sell raw material, not crude, but refined overages to other companies like Exxon and Shell, if Exxon and Shell's demand is greater than they can refine for themselves. Again, that is the last thing Citgo wants to resort to though, they lose probably about a 20% profit margin by having to resort to selling ALL of their refined product to rival companies. It will hit the pocket book, and in turn lower their price at the pump, creating the domino effect. It would take a huge concentrated effort on OUR part (America) to put this into motion. Like you said though, just too many people, like yourself, that just don't give a damn.

Law of Supply and Demand is how competitive markets work Niche. You make Citgo's supply a non-factor, to us, the consumer, and their price becomes more competitive(goes down). I just want to stop Venezuela money though, not ALL the oil companies, I am still looking into Valero's ties also.

[RedScare]

I will concede some degree of uncertainty, but that is true of anything that I could say about anything at any time during my natural existence. Having said that, hearsay technically occurs when someone claims that something must be true because they heard it from someone else. Perhaps I was not initially clear, but the message that should have been communicated was that the message is very likely true because I heard it from a reputable source that was independently confirmed later on. ...that you would come back at me with a vague denial along these lines is the only reason that I even bothered elaborating on the independent confirmation.

...and yes, it could be an outright fabrication, but then you could just as easily be trying to mislead people by arguing against me. Neither of us have any apparent motive to mislead people, and I'm just not all that clear that such suggestion on either of our parts would be in any way shape or form constructive.

Tisk, tisk. Bad lawyer!

The law makes no distinction as to the reputation of the source (in fact, reputation evidence itself is often inadmissible, due to ITS highly dubious nature!), therefore, neither do I. All you have done is repeat unsubstantiated hearsay as fact because you heard it twice. Dick Cheney has claimed a link between 9/11 and Saddam Hussein dozens of time, but the number of times he repeats it does not make it more truthful.

I am not misleading anyone. I am merely stating that your purported truth is in fact hearsay, and your attempt to buttress it with your opinion of the reputation of the person who said it makes it no more believable. If others choose to believe it in spite of that, they are free to do so. I do not believe it, mostly because it cannot be a crime if it was a joke. There is no intent.

[TJones]

.......but you can be prosecuted for telling the lady at the Airline checkin counter that you didn't see the person that put the bomb in your bag. Correct ?

[RedScare]

Law of Supply and Demand is how competitive markets work Niche. You make Citgo's supply a non-factor, to us, the consumer, and their price becomes more competitive(goes down). I just want to stop Venezuela money though, not ALL the oil companies, I am still looking into Valero's ties also.

Actually, you just described how the price would go UP. Assume CITGO has 1 million gallons of gas. Everyone else has 9 million. If everyone refused to buy CITGO, there would only be 9 million gallons available for purchase. The demand of 10 million gallons remains the same. Since supply is short of demand, the price goes up.

In reality, the others will buy CITGO's 1 million gallons to make up for it, though. The only way to make the price go down is to increase supply or to decrease demand.

[TJones]

Actually, you just described how the price would go UP. Assume CITGO has 1 million gallons of gas. Everyone else has 9 million. If everyone refused to buy CITGO, there would only be 9 million gallons available for purchase. The demand of 10 million gallons remains the same. Since supply is short of demand, the price goes up.

In reality, the others will buy CITGO's 1 million gallons to make up for it, though. The only way to make the price go down is to increase supply or to decrease demand.

No, because according to Niche, the same 10 million is still available, Citgo's 1 million just isn't getting bought, and for fear that the same fate may fall upon them, the others would have to deter such a fate as to not be greedy bastards, and lower the price.