obama wants to eliminate tax breaks for oil companies

JerryBobCoJerryBobCo Senior MemberPosts: 6,560 Senior Member
In a speech given by obama this morning, he announced that he wanted to eliminate all tax breaks currently given to oil companies, and asked that congress act on this.

I'm sure that everyone here has an opinion on this. Here's mine.

First, he's in trouble with his bid for re-election because of high gas prices, so he has to do something. You can argue whether or not he's responsible for high prices, but he's the man at the top and he's the one who will take the heat. So, he at least is giving the impression of doing something, and trying to put the blame on big oil.

Second, he knows that eliminating tax breaks on these large corporations will have little or no effect on gas prices. But, it gives him an out. It also puts the onus on congress, particularly the house republicans, to do something. If they refuse to act, he and the rest of the democrats can blame those mean old republicans for failing to act in the best interest of the American people. I'd even go so far as to say that he doesn't want congress to act. If they did, and passed a law taking away the tax breaks, then what? If gas prices don't drop, will he maintain that it takes time for this to become effective, or that the law is not really what he wanted, or make some other excuse? For political and re-election issues, he's better off if congress does not act.

In other words, it's strictly a political ploy meant to steer the blame away from him, and get him out of the crosshairs.

I'd like to see the house do just what obama wants, with the following stipulations.

- all money saved by the tax breaks would go into the fund used to repair existing roads and bridges or build new roads and bridges.
- determine the amount per gallon of gas that this would amount to, and reduce the federal excise tax on gasoline/diesel by that amount.

This would result in an immediate drop in price, although it would be small, as the current federal tax is only $.18/gallon. It would also force the democrats' hands to either swallow it or come up with a reason why it's not acceptable. I expect that they would do the latter, and want the savings to go toward the development of green energy.

What do you think?
Jerry

Gun control laws make about as much sense as taking ex-lax to cure a cough.
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Replies

  • snake284snake284 Senior Member Posts: 21,855 Senior Member
    JerryBobCo wrote: »
    In a speech given by obama this morning, he announced that he wanted to eliminate all tax breaks currently given to oil companies, and asked that congress act on this.

    I'm sure that everyone here has an opinion on this. Here's mine.

    First, he's in trouble with his bid for re-election because of high gas prices, so he has to do something. You can argue whether or not he's responsible for high prices, but he's the man at the top and he's the one who will take the heat. So, he at least is giving the impression of doing something, and trying to put the blame on big oil.

    Second, he knows that eliminating tax breaks on these large corporations will have little or no effect on gas prices. But, it gives him an out. It also puts the onus on congress, particularly the house republicans, to do something. If they refuse to act, he and the rest of the democrats can blame those mean old republicans for failing to act in the best interest of the American people. I'd even go so far as to say that he doesn't want congress to act. If they did, and passed a law taking away the tax breaks, then what? If gas prices don't drop, will he maintain that it takes time for this to become effective, or that the law is not really what he wanted, or make some other excuse? For political and re-election issues, he's better off if congress does not act.

    In other words, it's strictly a political ploy meant to steer the blame away from him, and get him out of the crosshairs.

    I'd like to see the house do just what obama wants, with the following stipulations.

    - all money saved by the tax breaks would go into the fund used to repair existing roads and bridges or build new roads and bridges.
    - determine the amount per gallon of gas that this would amount to, and reduce the federal excise tax on gasoline/diesel by that amount.

    This would result in an immediate drop in price, although it would be small, as the current federal tax is only $.18/gallon. It would also force the democrats' hands to either swallow it or come up with a reason why it's not acceptable. I expect that they would do the latter, and want the savings to go toward the development of green energy.

    What do you think?

    For one thing, these liberals like him, seem to forget that Corporations like these are not one person. They are made up of ordinary citizens that own stock. You don't have to be rich to own stock and in fact most stock holders aren't rich. They're common tax payers. Also, all corporations will do if taxed more is increase prices. And who does that hurt? The public that buys the product. He's not trying to help the working man. He's just funding his social programs by not pissing off the masses. He really could give less a hoot about us. He only wants to have his cake and eat it too, that is money for social programs (Which gets votes) and not make the main body of the electorate mad (better chance of getting re-elected).
    Daddy, what's an enabler?
    Son that's somebody with nothing to do with his time but keep me in trouble with mom.
  • alphasigmookiealphasigmookie Senior Member Posts: 8,744 Senior Member
    Like most things in an election year this is a sideshow. The tax breaks are relatively small and will have a small impact on the deficit (Estimated ~$4 Billion/yr) and absolutely zero impact on gas prices either positive or negative. I generally agree that oil companies are doing fine and don't really need tax incentives to convince them to drill when oil is $110/bbl, but taking them away won't do much either. It's all just a ploy to make Republicans have to stand up and openly defend tax breaks for massively profitable and almost universally despised oil companies.
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • Make_My_DayMake_My_Day Senior Member Posts: 7,148 Senior Member
    JerryBobCo wrote: »
    .......In other words, it's strictly a political ploy meant to steer the blame away from him, and get him out of the crosshairs...........
    I have no idea whether eliminating oil subsidies will affect anything, but I am convinced of one thing: everything he does is a political ploy with this counterfeit president.
    JOE MCCARTHY WAS RIGHT:
    THE DEMOCRATS ARE THE NEW COMMUNISTS!
  • bullsi1911bullsi1911 Moderator Posts: 9,730 Senior Member
    So, he is wanting to increase the overhead costs of the oil companies, right?

    We do all realize that a fundamental rule is that all costs are passed down to the end user, right?

    In actuality, our President just stood up in front of the country and said that he wants to increase the per gallon cost at the pump for every American. Sheer genius.
    To make something simple is a thousand times more difficult than to make something complex.
    -Mikhail Kalashnikov
  • JerryBobCoJerryBobCo Senior Member Posts: 6,560 Senior Member
    It's all just a ploy to make Republicans have to stand up and openly defend tax breaks for massively profitable and almost universally despised oil companies.

    Answer this question, Alpha.

    What do you think would happen if the house passed a bill like I stated in my initial post, and sent it to the senate? Would the lord high priest of democrat senators, aka Harry Ried, let it come to the floor for debate? Or would he stop it dead in its tracks like he has so many other bills and figure out a way to blame the republicans for not bringing him a proper bill?

    I also wonder how many democrat congress persons take healthy campaign contributions from big oil, and really don't want to have to vote on something like this? Believe it or not, there are some of those folks from oil producing states, and they get their campaign funds from someone.
    Jerry

    Gun control laws make about as much sense as taking ex-lax to cure a cough.
  • conchokidconchokid Administrator Posts: 508 Senior Member
    Anything and everything this president does is for his reelection. In fact, I think you can say that about most of what he has done or tried to do since he was elected. And either he is grossly uninformed about the oil business or he is a liar.
    When "big oil" makes a profit, it's a good thing for all of us, but only if the government allows more drilling and refineries. If forget how long it has been since a new oil refinery was built in the USA but it has been many years.
    And I am convinced that if he is successful in getting rid of oil company subsidies, it definitely will cause an even more rapid increase in the cost of gasoline than is already happening. So-called oil speculators (anyone who is a stockholder in any company is a "speculator" and anyone who has a 401K or IRA very likely owns stock in a company associated with the oil business) will look ahead and "speculate" on future prices of oil and that will push up the price of oil and anything made from it.
  • JerryBobCoJerryBobCo Senior Member Posts: 6,560 Senior Member
    There was one more point I wanted to make regarding this.

    I've heard a lot of figures thrown around about how big oil company profits are. What I haven't seen or heard, though, is what their profit margin is. If they make $2 billion in profits, but have to spend $1.95 billion to make it, they're not exactly making a killing.

    Does anyone have this information?

    Also, according to obama in his speech this morning, he stated that the US consumes 20% of the world's oil supply, but only produces 2%. That's his numbers. This means that US based oil companies do not control the cost of the raw material that they use to make the final product. If they have to pay more for crude, they have to charge more for refined gas, oil and diesel.
    Jerry

    Gun control laws make about as much sense as taking ex-lax to cure a cough.
  • bullsi1911bullsi1911 Moderator Posts: 9,730 Senior Member
    The profit margins run around 6.2%. That is pretty low, and near the bottom of the scale for different industries (Publishing/ Periodicals make around 51%, Gourmet foods companies make 50%, Personal computers- like Apple- make 13-14%). I know I would have been fired in several jobs if my margins dropped below 10%.

    And I totally disagree that Oil Companies are 'universally despised'- everyone benefits from the oil companies. Their millions of employees and billions of customers should all be glad they exist, and are taking such LOW profit margins from their products.

    If Obama succeeds is raising their costs, it will cause EVERY good and service to increase in price. Food, electricity, transportation, etc... will all go up. Good job Mr. President
    132597704176-Clap.gif
    To make something simple is a thousand times more difficult than to make something complex.
    -Mikhail Kalashnikov
  • alphasigmookiealphasigmookie Senior Member Posts: 8,744 Senior Member
    JerryBobCo wrote: »
    Answer this question, Alpha.

    What do you think would happen if the house passed a bill like I stated in my initial post, and sent it to the senate? Would the lord high priest of democrat senators, aka Harry Ried, let it come to the floor for debate? Or would he stop it dead in its tracks like he has so many other bills and figure out a way to blame the republicans for not bringing him a proper bill?

    I also wonder how many democrat congress persons take healthy campaign contributions from big oil, and really don't want to have to vote on something like this? Believe it or not, there are some of those folks from oil producing states, and they get their campaign funds from someone.

    The senate just voted on a similar bill in the past few days. lost like 47-51 or something like that with 4-5 democrats defecting and 1-2 republicans voting for it. BTW Reid has very little power in the Senate due to the default filibuster. Even if he wants to got something to the floor he needs 60 votes to start debate (with the exception of a few types of things that can't be filibustered). Republicans agreed to let this one through mainly because they knew the house would never agree even if Democrats passed it.
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • blueslide88blueslide88 Member Posts: 273 Member
    Like most things in an election year this is a sideshow. The tax breaks are relatively small and will have a small impact on the deficit (Estimated ~$4 Billion/yr) and absolutely zero impact on gas prices either positive or negative. I generally agree that oil companies are doing fine and don't really need tax incentives to convince them to drill when oil is $110/bbl, but taking them away won't do much either. It's all just a ploy to make Republicans have to stand up and openly defend tax breaks for massively profitable and almost universally despised oil companies.

    Basic economics would tell any rational person that reducing the profits of any business/industry would put an UPWARD pressure on the price of the end product. Alpha, you make my head spin. INCREASING taxes on the oil companies could only INCREASE the upward price pressures, in addition to the rising cost of crude oil. The tax breaks involved here mostly have to with intangible drilling costs, those involving the development of new domestic oil sources (wells). In other words, to increase these costs by eliminating tax breaks woud also discourage the development of new domestic oil sources. It's insane.
    Let's not forget that such tax increases would also affect stock prices and dividends, likely lowering both, and punishing stock holders.
    Obama is pulling another fast one trying to bait the Republicans, true enough, while at the same time punishing the oil industry and the economy, raising taxes, raising gasoline prices, discouraging domestic oil independence, and duping the public for political gain.
    Obama needs a OWS sign and should join those lunies at their wacked out protests.
    Let's see, anti-capitalism, anti-oil industry, less oil independence, punish stock holders, more upward pressure on gasoline prices blamed on the evil oil companies and the Republicans, all rolled into one. A total sham. Vote this guy out!

    http://www.redstate.com/erick/2011/04/27/barack-obama-comes-out-for-even-higher-gas-prices/
  • alphasigmookiealphasigmookie Senior Member Posts: 8,744 Senior Member
    bullsi1911 wrote: »
    We do all realize that a fundamental rule is that all costs are passed down to the end user, right?

    That rule only works for companies that have pricing power and even then they have to consider what consumers are willing to pay. Oil companies have no say in how much they can sell their oil for. They have to accept whatever the global price is if they want to sell their oil. If the global price is $110/bbl that's what they get. If the price is $20/bbl that's what they get. Their only option is to chose to not sell their oil in which case they have to pay to store it and accept the reduction their revenues. Finished gasoline is similar except the price is set in regional markets rather than global ones and most of the price is directly tied to the cost of the oil that went into making the gasoline. Retail gasoline is the only place where there is any pricing power and that's still driven by competition. Gas station A could charge $4.50/gallon, but if gas station B down the street is charging $4.10, station A is not going to sell much gas.
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • alphasigmookiealphasigmookie Senior Member Posts: 8,744 Senior Member
    bullsi1911 wrote: »
    The profit margins run around 6.2%. That is pretty low, and near the bottom of the scale for different industries (Publishing/ Periodicals make around 51%, Gourmet foods companies make 50%, Personal computers- like Apple- make 13-14%). I know I would have been fired in several jobs if my margins dropped below 10%.

    Lets tackle that myth:

    Gross profits at Exxon last year were $180 billion vs. $433 Billion in revenues. That's a gross profit of 41%. Gross profits reflect the revenue generated vs. the cost of goods sold. Everything else is overhead. Sure a lot of that is necessary, like research, administration, and taxes, but a lot goes to things like lobbying and lining the pockets of executives. Their "net income" is only $41B after all the overhead or just under 10%.

    http://finance.yahoo.com/q/is?s=xom

    Since you brought up apple we can compare. They made $44 B gross profit vs. $108 B in revenues. That also leads to a 41% gross profit. The big difference is that Exxon spends 10X as much on overhead. Apple spent $10B and Exxon spent $105B. Because of their lower overhead Apples profit margin applicable to stockholders is 26%

    http://finance.yahoo.com/q/is?s=AAPL+Income+Statement&annual

    If you look at a smaller operator like Devon Energy that doesn't spend so much on overhead you'll see just how profitable oil companies can be. They made a gross profit of $7.9B on 11.5B in revenue or 69% gross margin. Even after all their overhead ($3.2B) they had a profit margin of 41%.

    http://finance.yahoo.com/q/is?s=DVN+Income+Statement&annual
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • AiredaleAiredale Banned Posts: 624 Senior Member
    Jerry,
    Our domestic oil companies have posted record profits for I don't know how many quarters.
    Define "profit", it's the earnings above and beyond operating expenses. So, these companies claim to have spent millions (billions) prospecting and drilling for energy sources, but they still report profits for each quarter of the year in the billions.
    I don't care what side of the aisle you're on.
    It's not Obama and it's not the other side.
    We have to curtail the influence of big business in our political proccess.
  • JerryBobCoJerryBobCo Senior Member Posts: 6,560 Senior Member
    Airedale wrote: »
    Jerry,
    Our domestic oil companies have posted record profits for I don't know how many quarters.
    Define "profit", it's the earnings above and beyond operating expenses.

    If you define profit as a percentage of your total expenditures, it's not so much. In terms of raw dollars, it's a record high. In terms of percentage of total expenditures, not so much.
    Jerry

    Gun control laws make about as much sense as taking ex-lax to cure a cough.
  • JerryBobCoJerryBobCo Senior Member Posts: 6,560 Senior Member
    BTW Reid has very little power in the Senate due to the default filibuster. Even if he wants to got something to the floor he needs 60 votes to start debate (with the exception of a few types of things that can't be filibustered).

    Then explain to me how Harry can stand before God and the rest of the world and tell us that he won't let something come to the floor for debate. There's no mention of filibuster or cloture.

    I've heard him say that on more than one occassion.
    Jerry

    Gun control laws make about as much sense as taking ex-lax to cure a cough.
  • alphasigmookiealphasigmookie Senior Member Posts: 8,744 Senior Member
    JerryBobCo wrote: »
    Then explain to me how Harry can stand before God and the rest of the world and tell us that he won't let something come to the floor for debate. There's no mention of filibuster or cloture.

    I've heard him say that on more than one occassion.

    He can block things but he can't push through a vote on something he (or Obama) actually want. Basically both sides have to agree for something to make it to the floor for a vote. Either side can effectively block anything they don't like right now in the Senate and it looks like it's going to stay that way for a long time no matter what happens in November.
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • blueslide88blueslide88 Member Posts: 273 Member
    Lets tackle that myth:

    Gross profits at Exxon last year were $180 billion vs. $433 Billion in revenues. That's a gross profit of 41%. Gross profits reflect the revenue generated vs. the cost of goods sold. Everything else is overhead. Sure a lot of that is necessary, like research, administration, and taxes, but a lot goes to things like lobbying and lining the pockets of executives. Their "net income" is only $41B after all the overhead or just under 10%.

    http://finance.yahoo.com/q/is?s=xom

    Since you brought up apple we can compare. They made $44 B gross profit vs. $108 B in revenues. That also leads to a 41% gross profit. The big difference is that Exxon spends 10X as much on overhead. Apple spent $10B and Exxon spent $105B. Because of their lower overhead Apples profit margin applicable to stockholders is 26%

    http://finance.yahoo.com/q/is?s=AAPL+Income+Statement&annual

    If you look at a smaller operator like Devon Energy that doesn't spend so much on overhead you'll see just how profitable oil companies can be. They made a gross profit of $7.9B on 11.5B in revenue or 69% gross margin. Even after all their overhead ($3.2B) they had a profit margin of 41%.

    http://finance.yahoo.com/q/is?s=DVN+Income+Statement&annual

    Exxon's "net income", which you rounded off at "just under 10%", calculates to 7.7%. Devon Energy posted a sizable loss two years prior. So what is your point? We can play gross profits and net profits and overhead all day long. Notice that the net income is money "applicable to common shares", or the stockholders, all of them. How many people does it employ, how much money does it turn over to the general marketplace in order to function? All of its purchases, such as trucks, paper, furniture, electric, phone, pencils, pens, computer networks, automobiles, the list is endless. It is a POSITIVE force.
    Apple makes lots of money, and that's GOOD. They pay taxes, local, state and federal. It is capitalism that drives our economy, from EXXON right down to the local bakery.
    Many oil tax breaks are designed to encourage oil exploration, and they work. Take them away, and exploration and development suffers.
    There is no right or wrong here. The creation of wealth in a society is a positive force.
  • blueslide88blueslide88 Member Posts: 273 Member
    That rule only works for companies that have pricing power and even then they have to consider what consumers are willing to pay. Oil companies have no say in how much they can sell their oil for. They have to accept whatever the global price is if they want to sell their oil. If the global price is $110/bbl that's what they get. If the price is $20/bbl that's what they get. Their only option is to chose to not sell their oil in which case they have to pay to store it and accept the reduction their revenues. Finished gasoline is similar except the price is set in regional markets rather than global ones and most of the price is directly tied to the cost of the oil that went into making the gasoline. Retail gasoline is the only place where there is any pricing power and that's still driven by competition. Gas station A could charge $4.50/gallon, but if gas station B down the street is charging $4.10, station A is not going to sell much gas.

    We all know the gas station A and B example. That's not the issue here. As bullsi1911 says, the oil industry IS passing on its higher cost of oil to the consumer. That's what everyone is complaining about!
    Obama's plan would increase the cost of doing business even further, and the oil companies WILL pass it to the consumer. DUH!
  • blueslide88blueslide88 Member Posts: 273 Member
    Capitalism represents freedom. It cannot survive without it. They go hand and hand. That is exactly what the liberal progressives don't want. They want CONTROL of every aspect of society, from health care to corporate profits, to the redistribution of wealth by force (taxes), to what fuel is acceptable, what kind of car we'll drive (like a Volt), creating cronyism with business (government investments in private industry, using tax dollars), bailing out entire industries and taking partial control, at least, federal control of firearms in violation of the Second Amendment,
    There's no end to it. That's why Obama and his Democratic cronies must go. They'll destroy this country with unmanageable debt and a huge federal government bureaucracy enforcing all the rules. That type of system will crash, of that I have no doubt.
  • alphasigmookiealphasigmookie Senior Member Posts: 8,744 Senior Member
    Capitalism represents freedom.

    While we're talking about capitalism, subsidies...ALL subsidies are a distortion of the "free" market. If you were truly a free market capitalist you should be against subsidies, even for industries and companies that you like.
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • alphasigmookiealphasigmookie Senior Member Posts: 8,744 Senior Member
    We all know the gas station A and B example. That's not the issue here. As bullsi1911 says, the oil industry IS passing on its higher cost of oil to the consumer. That's what everyone is complaining about!
    Obama's plan would increase the cost of doing business even further, and the oil companies WILL pass it to the consumer. DUH!

    That's where you're wrong and your lack of understanding of oil markets shows. Oil companies have one and only one way to influence prices and that's to sell the oil that they produce or shut in production. That is all. Everything else is set by global markets in which every barrel of oil available is sold essentially at auction, going to the highest bidder. If you want oil prices to drop the best way to do so is to stop buying gas (lower demand).
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • blueslide88blueslide88 Member Posts: 273 Member
    While we're talking about capitalism, subsidies...ALL subsidies are a distortion of the "free" market. If you were truly a free market capitalist you should be against subsidies, even for industries and companies that you like.

    Then there's the real world. It wouldn't bother me in the least if the government eliminated ALL subsidies, either by direct investment (GM and Solyndra (spelling?) or by tax law. So, if ALL subsidies are eliminated, then the oil industry tax credits go also. OK by me. Let's roll the freedom dice and work for that goal, which, incidentally is not a new idea.

    Here's an article by Rep. Mide Pompeo, KS, who's all for the idea.

    http://www.redstate.com/bobweeks/2012/03/06/mike-pompeo-we-need-capitalism-not-cronyism/
  • blueslide88blueslide88 Member Posts: 273 Member
    That's where you're wrong and your lack of understanding of oil markets shows. Oil companies have one and only one way to influence prices and that's to sell the oil that they produce or shut in production. That is all. Everything else is set by global markets in which every barrel of oil available is sold essentially at auction, going to the highest bidder. If you want oil prices to drop the best way to do so is to stop buying gas (lower demand).

    My understanding of oil markets is just fine. It's your comprehension skills that seem in doubt. As the global market price for oil has risen, the domestic oil companies have raised the prices at the pump at their option, obviously. The oil industry will pass on the cost of higher taxes the same as it has passed on the higher cost for crude. Simple.
  • alphasigmookiealphasigmookie Senior Member Posts: 8,744 Senior Member
    OilSupply.jpg

    http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=5&pid=53&aid=1

    Here's some hard data on the oil supply and demand picture over the past 3 decades. I generated the graph directly from the data in the link from EIA. Anyone interested in the issue can play with the data on their own which I highly recommend.

    A few things to point out. The obvious story is the nearly 3x increase in demand from Asia and the middle east. We all know the story with China and India, but it's important to note that the middle east is staring to use more of their own oil which means there's less of it that they're willing to sell to the rest of us. While US and European demand is down slightly since the rescission our decrease in demand has been more than compensated for by increased demand globally.

    The less obvious story is the growing gap between crude oil supply (the good stuff) and demand. The gap is made up by "other liquids". These other liquids consist of bio-fuels and natural gas liquids. These are imperfect substitutes for crude oil. Those who know anything about biofuels know that a lot of oil goes into producing them in the first place, so there's a double counting factor in these stats. They also have a lower energy content so a barrel of ethanol is worth more like 2/3 of a barrel of oil (not factored into the statistics). Natural gas plant liquids consist low molecular weight hydrocarbons that come out of the well as a vapor but can be condensed out under pressure. These include things like ethane, propane, butane, and some pentane and higher molecular weight hydrocarbons. Some of these are suitable for blending with gasoline in a refinery, but not all of them, so they're not really a direct substitute for crude oil. With 6+ years with virtually no increase in global crude oil supplies it's pretty obvious why prices have increased significantly over that period.
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • kansashunterkansashunter Senior Member Posts: 1,444 Senior Member
    I will admit I don't know a lot about all oil companies but here are some things to consider. Oil companies make money in different ways, some only produce oil and their income can vary a great deal, how many wells are they drilling, how many are wells that have been producing for years ect. ect. Other companies produce no oil but simply refine it. Others do both. When comparing to companies make sure you are comparing apples to apples. There is a drilling rig on my place right now, I see that as a good thing.
  • bullsi1911bullsi1911 Moderator Posts: 9,730 Senior Member
    Your just looking at cost -vs- price, and not figuring in salaries, research costs, and general overhead and coming up with 41% profit is like looking at Symantec and saying they have 100% profit because the software is delivered electronically and not in physical form. FYI.

    So, the "Universally despised" oil companies have no control over their prices, but, they are somehow to blame for having record high profit.

    They can't control the price of the product (you say), but you somehow see fit to slam them for trying to lower their overhead costs by paying for lobbyists to make sure the govt does not lower the already thin profit margin by screwing them with higher taxes.

    We need to get another thing clear in this argument this whole "corporate welfare", "ending subsidies", and "giving fat cats money" is a bogus, slanted argument. What they are fighting for is LOWER TAXES (the same thing we all want). Wealth does not come from the Government. All the companies want is to be exempted from onerous taxes- the same way that people here donate to goodwill at the end of the year to get a break on the personal income tax. The Money is in the corp. account, and the Govt comes and takes it away- but if the company finds some way to keep a little bit of that money, somehow it's "welfare", and "Giving" them money- Horsesqueeze. That is them fighting to keep hard earned capital for the company, shareholders, and employees.

    Next time someone says "welfare" for lowering taxes, they are deliberately misleading you.
    To make something simple is a thousand times more difficult than to make something complex.
    -Mikhail Kalashnikov
  • Make_My_DayMake_My_Day Senior Member Posts: 7,148 Senior Member
    .........With 6+ years with virtually no increase in global crude oil supplies it's pretty obvious why prices have increased significantly over that period.
    What about inflation caused by flooding the economy with dollars generated by the FED? The (dollar) price of Gold has more than doubled in that period, so don't you think that has a lot to do with it?
    JOE MCCARTHY WAS RIGHT:
    THE DEMOCRATS ARE THE NEW COMMUNISTS!
  • alphasigmookiealphasigmookie Senior Member Posts: 8,744 Senior Member
    What about inflation caused by flooding the economy with dollars generated by the FED? The (dollar) price of Gold has more than doubled in that period, so don't you think that has a lot to do with it?

    It does have an effect (pulling a number out of my rear I'd guess maybe 10-20% max), but I think it's a bit overblown as a main driver. We could stop printing money, balance our budget and raise interest rates and I think oil would still be at least $80-90/bbl. What matters is the relative value of currencies and the dollar has held up pretty well against most major currencies over the same period. Actual inflation in dollar terms has been relatively mild over the same period. While the official inflation statistics are obviously flawed, overall inflation has still not been extraordinarily high.

    The bigger short term effect is the risk of war with Iran. That's clearly adding another $10-20/bbl into the price right now. You live in Florida so you know exactly how things get before hurricane is about to hit. That's what's happening in the oil markets. They know that a significant amount of oil may not be available tomorrow so the price today is going up. Same thing applies to the Obama panic we experienced in ammo and reloading supplies. Uncertainty about the future always leads to higher prices today. Some people will scream at speculators and claim price gauging, but frankly this is exactly how a free market is supposed to work. When it anticipates a problem it sends price signals to try and alleviate the problem.
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • Make_My_DayMake_My_Day Senior Member Posts: 7,148 Senior Member
    ........The bigger short term effect is the risk of war with Iran. That's clearly adding another $10-20/bbl into the price right now. You live in Florida so you know exactly how things get before hurricane is about to hit. That's what's happening in the oil markets. They know that a significant amount of oil may not be available tomorrow so the price today is going up.
    Very good point, but at 80-90 dollars per barrel (for less inflation), we would probably be paying about $3.30 a gallon as opposed to $387.9 it was here yesterday.
    JOE MCCARTHY WAS RIGHT:
    THE DEMOCRATS ARE THE NEW COMMUNISTS!
  • alphasigmookiealphasigmookie Senior Member Posts: 8,744 Senior Member
    Very good point, but at 80-90 dollars per barrel (for less inflation), we would probably be paying about $3.30 a gallon as opposed to $387.9 it was here yesterday.

    Yeah probably close to it. However to further complicate things refinery margins have been increasing over the past few weeks. For most of last year refiners were basically losing money refining oil. Because of this a number of them shut down but now the ones still operating are making a profit again.
    High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [email protected] to buy additional rights. http://www.ft.com/cms/s/0/e4ce9bfa-4cb3-11e1-8741-00144feabdc0.html#ixzz1qccZKqvK

    As refining capacity disappeared, the traditional simple measure of margins, known as the 3:2:1 crack spread, surged sharply in every region: it is back to nearly $11 a barrel in Europe, above the five-year average. In the US, it is at $26 a barrel, compared with a low point of $11 a barrel in early January and a five-year average of $14.7 a barrel. And in Asia, crack spreads have surged to $19 a barrel, more than double the $7.5 a barrel in early January.

    The recovery has come at a heavy price for the sector as it is the result of closures that have tightened refined oil products supply in Europe and the US and, hence, crack spreads. Over the past four weeks, more than 1m barrels a day of refining capacity has shut down in the Atlantic basin, including the Hovensa plant, and the refineries run by Petroplus. Besides, in late 2011, several European refiners run by LyondellBasell and plants owned by ConocoPhillips and Sunoco in the US state of Pennsylvania also closed.

    Here's some data from CA shows the breakdown of the cost of a gallon of Gas. While nearly $3 is oil, it clearly shows an increase of ~$.30/gallon in costs/profits for refining over the past few weeks. That's probably on the high end of reasonable so there's maybe $.10-0.20 a gallon wiggle room to the down side in gasoline prices based on where those margins go longer term.

    http://energyalmanac.ca.gov/gasoline/margins/index.php
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
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