can you believe these guys !!!

[Clem Z.]

Re: can you believe these guys !!!

The cost of producing a barrel of oil has not changed in quite some time so the increase in price was due to factors in the market. These are; perceived short or long term scarcity, market manipulation, oil producers policy and speculation without oversight. These major and other minor forces drove oil from $1.20 per gallon to $4.15 per gallon for unleaded regular. This showed just how inelastic the demand for oil is and should help guide us in putting in place a viable oil policy that can start the process of decreased dependence of oil for energy.


I think it is unfair to pile on GM and Ford all the blame for their current plight. I agree their current car lineup is lacking but neither company specialized in making cars they make/made vehicles that were selling in the current marketplace and NOBODY foresaw that the oil market could be manipulated so easily. They sold a ton of trucks and SUVs and those products were very successful so the fault in part lies at the feet of an energy policy that failed to see the artificial low price of fuel was not in the best interest of the US. In their defense both companies have expended a lot of money to bring to market a redesigned truck line to include new power trains that greatly improved mileage in the diesel engines.
Note in the above I did not recommend adding additional taxes on diesel at this time. I think diesel is in a category by itself and at the present time the following forces must be addressed before any changes are made to its pricing. Oil refiners have not taken steps to increase diesel refinery capability to keep up with the demand for this product. Doing so has priced this product higher than the production costs dictate. It is cheaper to produce and you get more gallons per barrel than with gasoline so it should be cheaper than any refined gasoline. If there ever was a case for an excess profits tax on a company I think one could be made here.
Because of the premium already added to the cost of diesel any tax here would have an unwanted affect on the economy. The backbone of our economy depends on truck delivery so we do not need any added costs in this area. Another advantage to leaving diesel alone is that this plays right into the efforts of GM and Ford to bring to market state of the art power systems. In doing so we give implement a policy that complements a product ready to go in a marketplace in an area we are still the acknowledged leaders. These products must involve US based production facilities and it should be understood will remain that way. Both companies have spent a lot of money bringing these products to market and these can be the bridge that allows them to remain viable while shifting to platforms designed for the new reality.

I as a citizen understand the current crisis will take some adjustments and sacrifice on my part but I have yet to see any kind of coherent policy that I could understand and support. What you have read is something most people can understand and support.
An additional benefit would be a positive impact on the balance of payments and a signal the international community we are serious about addressing the problems our past appetite for oil has created.

Tyler Townsley

what happens when the price of gasoline get up,say past $3 a gallon due to a rise in crude oil will the tax come off ? there are a lot of people in this country that are in no financial position to buy a new fuel efficient car and these are the people who will be hurt. i see lots of people still driving LTD fords and big old impalas. if you can afford $30K/$40K for a new car the price of a gallon of gasoline is not a big concern unless you have to drive 100 miles round trip to work then maybe you could justify buying a new fuel effecent car or moving closer to work. i think gasoline should be $2.00/$2.50 a gallon allowing for inflation and the already rise in taxes.i believe the extra cost on diesel is caused by the extra federal tax that was implemented and the trucking companies went along because they were allowed to haul more weight,80,000# was standardized. #2 diesel and home heating oil are the same,just dyed a different color so there is a bigger demand in certain parts of the country during the winter month.

[Tyler T.]

Re: can you believe these guys !!!

what happens when the price of gasoline get up,say past $3 a gallon due to a rise in crude oil will the tax come off ? there are a lot of people in this country that are in no financial position to buy a new fuel efficient car and these are the people who will be hurt. i see lots of people still driving LTD fords and big old impalas. if you can afford $30K/$40K for a new car the price of a gallon of gasoline is not a big concern unless you have to drive 100 miles round trip to work then maybe you could justify buying a new fuel effecent car or moving closer to work. i think gasoline should be $2.00/$2.50 a gallon allowing for inflation and the already rise in taxes.i believe the extra cost on diesel is caused by the extra federal tax that was implemented and the trucking companies went along because they were allowed to haul more weight,80,000# was standardized. #2 diesel and home heating oil are the same,just dyed a different color so there is a bigger demand in certain parts of the country during the winter month.

Fed Tax per gal Gas .38, diesel .43. In my area diesel is .45 to .75 more than unleaded. It is not the tax thats doing it. You miss the point, gas is going to whatever we can afford adjusted by consumption. Production costs+refinment costs+profit+tax equals what is charged at the pump. Its time to move the profit part of the equation to tax. Real problem is where the bigest slice of profit goes.

Tyler

[Clem Z.]

Re: can you believe these guys !!!

Fed Tax per gal Gas .38, diesel .43. In my area diesel is .45 to .75 more than unleaded. It is not the tax thats doing it. You miss the point, gas is going to whatever we can afford adjusted by consumption. Production costs+refinment costs+profit+tax equals what is charged at the pump. Its time to move the profit part of the equation to tax. Real problem is where the bigest slice of profit goes.

Tyler

looking at the figures you have posted it looks to me like the biggest profiteers on a gallon of gasoline is already the govt both state and federal. why give them more money to waste ? if the govt gets more money it will just put more people on the payroll and everyone know a govt employee does not produce anything they just consume. now if you want to put a bigger tax on gasoline and that tax is deductible from your federal and state income taxes i might agree with you.

[Tyler T.]

Re: can you believe these guys !!!

looking at the figures you have posted it looks to me like the biggest profiteers on a gallon of gasoline is already the govt both state and federal. why give them more money to waste ? if the govt gets more money it will just put more people on the payroll and everyone know a govt employee does not produce anything they just consume. now if you want to put a bigger tax on gasoline and that tax is deductible from your federal and state income taxes i might agree with you.

You would rather see it go to Chavez or Saudia Arabia? The alternative is to let the gov LEGISLATE the changes to reduce demand and that would be the death knoll for the cars we love.

Tyler

[Larry W.]

Re: can you believe these guys !!!

Wait, wait these inquisitors are hubris +. Are the Big 3 CEOS arrogance personified - yes. But does anybody remember N. Pelosi whining her plane was too small. Give me a break! When the Sens & Reps start flying econ I'll listen but for now what a bunch of arrogant hypocrites. Note I didn't mention that all they are in charge of are among the least efficient operations in the world.
Don't make me laugh.

[Jeff B.]

Re: can you believe these guys !!!

I have been saying we need a $1.00 gas tax for for some time. It's nice to see that other have thought about this in such detail - either pro or con. I own an electrical contracting business with over 20 trucks so this would cost me alot of money. Still, I think that if the money was properly earmarked (and protected from loop holes) for public transportation and developement and construction of infrastructure for an array of alternative energy systems including nuclear, solar and wind, this would be positive step for the economy and the enviroment. If done properly it could also reduce our demand for fuel and lower greenhouse gas production. Then we could keep driving our Corvetts longer!

[Clem Z.]

Re: can you believe these guys !!!

I have been saying we need a $1.00 gas tax for for some time. It's nice to see that other have thought about this in such detail - either pro or con. I own an electrical contracting business with over 20 trucks so this would cost me alot of money. Still, I think that if the money was properly earmarked (and protected from loop holes) for public transportation and developement and construction of infrastructure for an array of alternative energy systems including nuclear, solar and wind, this would be positive step for the economy and the enviroment. If done properly it could also reduce our demand for fuel and lower greenhouse gas production. Then we could keep driving our Corvetts longer!

i would think since the gas in your trucks would be a business expense that the tax would be deductible,correct ??

[Jeff B.]

Re: can you believe these guys !!!

You are correct, I assume it would be tax deductable just as fuel expense is. That being said, the corporate tax rate is approximately 33% which means a $1.00 per gallon tax would still cost the business a net 67 cents a gallon more even with the the tax deduction fully considered. And of course, if you have a year where the business does not make any money then the tax deduction is, well, meaningless. I'm almost never in favor of giving the goverment money to accomplish anything so I get what you are saying. However, I'm concerned that the progress now being made in alternative energy and fuel will hault with the decline of fuel costs. And while I'm not an eccofreak, I think this is a very important issue for our county, planet and our children's future. But that's just my opinion and I'm always ready to be wrong. Thanks for the reply.

[Clem Z.]

Re: can you believe these guys !!!

You are correct, I assume it would be tax deductable just as fuel expense is. That being said, the corporate tax rate is approximately 33% which means a $1.00 per gallon tax would still cost the business a net 67 cents a gallon more even with the the tax deduction fully considered. And of course, if you have a year where the business does not make any money then the tax deduction is, well, meaningless. I'm almost never in favor of giving the goverment money to accomplish anything so I get what you are saying. However, I'm concerned that the progress now being made in alternative energy and fuel will hault with the decline of fuel costs. And while I'm not an eccofreak, I think this is a very important issue for our county, planet and our children's future. But that's just my opinion and I'm always ready to be wrong. Thanks for the reply.

the problem is for a retiree like me who does not have any deductions the added tax just becomes a additional expense. the part that has me upset now is the fuel surcharge that the trucking companies put on will most likely not be taken off even though the price of fuel has been cut more than in half. my theory is lets run the arabs out of oil and then drill here.

[Doug F.]

Re: can you believe these guys !!!

The cost of producing a barrel of oil has not changed in quite some time so the increase in price was due to factors in the market.

Not true. The cost of services and production increase with the price of oil. As demand for the services increases, the price of the services, equipment and labor increases. Steel prices have been increasing over 30% per year. Five years ago, we were able to get drilling rigs for $7000 per day. The same rig shot up to about $20,000 per day. With other services, a typical onshore rig was spending $30,000 to $50,000 per day while operating. The rig prices have started falling now with the collapse in oil prices. A lot of our expenses of the energy industry are directly related to the oil price. We have fuel, electrical and chemical costs associated with the finding and production of oil & gas that float with the oil & gas prices.

People will begin to holler about price fixing again, but the prices will correct themselves again. There were many companies that were heavily leveraged and counting on revenue streams of oil and gas prices based on $100/bbl oil and $10/mcf gas. In addition, the credit and investor market has dried up and it will remove many small players from the playing field. The company I work for is very conservative and well managed, but even if we live within our means, we can expect to have 50% less cash available to drill and develop new production. The driving factor wil be whether the world economy has pulled back enough to decrease world demand

Many folks do not understand that the refining and marketing divisions of the integrated oil companies are not responsible for the bulk of the profits. The reason is that the gasoline prices are dictated by how much the refinery has to pay for the crude oil. Refining operations are capital, fuel cost and transportion intensive. Oil companies make their money from their revenue interest in the oil and gas well leases not the small markup in refining. What the public does not understand about Exxon and some of the majors is the immense volumes that they handle on a daily basis. I just Googled the annual U.S. gasoline consumption. It is 390 million gallons per day. The U.S. consumes 868 million gallons of crude per day. Few commodities approach that magnitude of scale. Keep in mind that the Federal, State & local governments share in any "windfall profits" that the oil companies see due to the income, ad valorem and production severance taxes that they pay. The only one recieving a windfall is the Government.

Oil refiners have not taken steps to increase diesel refinery capability to keep up with the demand for this product. Doing so has priced this product higher than the production costs dictate. It is cheaper to produce and you get more gallons per barrel than with gasoline so it should be cheaper than any refined gasoline.

The yield of gasoline is almost twice as much as the yield of diesel from a barrel of crude. So diesel is not cheaper or more abundant than gasoline. In 2006 the Feds mandated the low sulfur diesel for highway vehicles and that was extended to off-road vehicles and trains in 2007. Much of the developing world relies more on diesel than gasoline so diesel is more competitive than gasoline. And the industry has invested over $8 billion in upgrades so that the refineries can increase the prodution of the low sulfur diesel.
That is my Soap Box Speech for tonight.
Doug

[Dale S.]

Re: can you believe these guys !!!

Doug, Thank you for a very informative post. Dale

[David H.]

Re: can you believe these guys !!!

Ditto that! Thanks Doug. You saved me from writing a similar reply - and I'm sure not as well put. The general public and most of our elected officials are woefully ignorant of the oil industry. Most are clueless beyond their locally owned corner gas station - which they are quick to boycott when they think prices have gotten too high! I hope everyone reads, digests, and re-reads your post. If it sinks in, we will surely be a bit wiser.

[Tyler T.]

Re: can you believe these guys !!!

According to this satistic a gallon of diesel requires less cost in crude than a gallon of gas which is means to me that one can get more diesel from a barrel than gas.

http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp

According to what you read above about 19 gal of gas can be made from a bbl of crude with a long list of other products including diesel. According to this:

http://cr4.globalspec.com/thread/26624/Maximum-gallons-of-diesel-from-a-barrel-of-crude-oil#comment281160

If the cracking process is stopped the 19 gal of gas would/could be diesel which would goes to what I ment about getting more of a particular consumable energy product from a bbl of crude. This means the cost to produce the gal is lower since it does not have to undergo the further cracking.

Production cost ie the cost to actually get the oil from in place facilities to a tanker vice exploration costs ie finding new oil and building additional facilities etc have stabilized. Point is the SHARP runup over the last 12 months did not originate from increased activity in trying to find and bring more oil to market rather the opposite is true the runup in price caused the inceased activity.

Tyler

[Doug F.]

Re: can you believe these guys !!!

When you do the math on the link you provided, http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp
it shows that the crude cost for both gasoline and diesel is $1.79 per gal. The percentage of the crude cost for diesel is a smaller percentage only because the diesel costs more. The refining cost for the gasoline calculates to be $0.09 per gal and $0.50 per gal for the diesel.

The other link you provided discusses catalytic cracking and hydrocracking. The link does state that catalytic cracking can yield more gasoline. But it also says that hydrocracking can be used to increase the yield of diesel. And more importantly, the hydrocracking process also removes some of the sulfur. Unless I read something wrong it states that hydrocracking is more expensive, which would seem to jive with the refining cost numbers provided in the first link. Another reason that the gasoline refining costs are lower is that a significant portion of gasoline is obtained from natural gas. The liquids are extracted from natural gas before the gas is dried and put into the natural gas lines. These liquids are of a lighter composition than crude oil and most of the times the extracted liquids are shipped to the refineries for further fractionation. Some of the gas wells yield natural drip gasoline that used to be run in automobiles.

Production cost or what we term as lift costs have not stabilized. If they have stabilized, it is only in the past couple of months. It certainly has not been stabilized during the past few years. As I mentioned previously, producing oil requires power, labor and chemicals. Power and chemical costs are directly related to the oil price.

I agree that the activity did not cause the price of crude to increase. On the contrary, the activity has contibuted to the recent decrease in prices. When demand causes prices to increase, the industry responds with an increase in activity and new investment. Projects that were uneconomical a few years ago are now economical. New technology and processes have allowed the industry to tap resources thought to be unproductive in years past.

It is not like we drill an oil well, sit back and watch the money roll in. Wells require replacement of tubing, pipelines, pumps, valves, tanks etc due to wear and corrosion. And in many cases wells require periodic interventions to restimulate the production. Even if I am not drilling for new oil, I still require the same service people and equipment that the drilling operations require. You are competing with the drilling and completion operations for the same competitive labor pool. The oil industry also competes with other industries for people and materials. We are competing with the Wal-marts and the Olive-Garden's of the world to maintain a workforce in areas where the oil boom has picked up the activity and unemployment is low. The industry competes with the much larger construction industry for steel, cement and sand. There have been numerous shortages for all of those.
Soap box speech for tonight.
Doug

[Dick W.]

Re: can you believe these guys !!!

I think that this thread has run it's course. We are getting too far off on politics. Let's keep it to Corvettes with maybe a little levity occassionally

This thread is closed