All Hank, all the time.

[taxwonk]

Originally posted by ltl/fb
Retail meaning, the guy at the gas station sells the fully refined product at $.02/gallon more than he pays for it?

I am more interested in the interim markups. I mean, a lot of shit seems to go on from the point the gunk that comes out of the ground and the point it's pumped into your car. It's not like the retailers are buying crude.

ETA here's the first paragraph of the chairman's statement on estimated 1st Q earnings from ExxonMobile:

ExxonMobil's Chairman Rex W. Tillerson Commented:

ExxonMobil's first quarter earnings excluding special items, were $8,400 million, up 14% from first quarter 2005. Higher crude oil and natural gas realizations and improved marketing margins were partly offset by lower chemical margins. Net income for the first quarter was up 7% from 2005.


Off their website.

What's an improved marketing margin?

EATA and I need to find out what "upstream" means, and "downstream":

"Upstream earnings were $6,383 million, up $1,329 million from the first quarter of 2005. Earnings from U.S. Upstream operations were $1,280 million, $73 million lower than the first quarter of 2005. The combination of a litigation item and higher tax expenses reduced results by over 4 cents per share. Non-U.S. Upstream earnings were $5,103 million, up $1,402 million from 2005. Higher realizations were partly offset by negative foreign exchange impacts."

"Downstream earnings excluding special items, were $1,271 million, up $128 million from the first quarter 2005, primarily due to higher marketing margins, improved refining operations and positive foreign exchange effects. Petroleum product sales were 7,865 kbd, 364 kbd lower than last year's first quarter, primarily due to lower refining throughput and divestments.

"U.S. Downstream earnings were $679 million, up $34 million. Non-U.S. Downstream earnings of $592 million were $94 million higher than the first quarter of 2005. "

Upstream refers to the product before it enters the refinery process. Sales of crude oil, unrefined natural gas, profits from sales of product to joint venture partners, etc. Downstream is the stuff that comes out of the refinery. The downstream product chain starts with bunker fuel, the least refined product, on down to diesel, kerosene, gasoline, naptha, etc. Things like olefins, polymers, elastomers, and other base chemical products can be accounted for in either the Chemicalor the downstream segments, depending on the particular company.

[taxwonk]

Originally posted by Mmmm, Burger (C.J.)
they won't tell you. the way you could figure it is to see who has the most profits, and whether they're integrated cos. (i.e., have crude oil) or don't. ExxonMobil has the most crude of any company, so they're the most profitable.

yes, 2c at the pump. then there's the terminals guy, who earns a bit, and the pipeline earns a bit, and the refiner earns a bit. Only about 30% of the price of gas is determined by refiner and retailing costs and profits, the rest is taxes and crude oil. it's a very competitive industry. the reason prices are where they are relates to the high price of crude and the fact that demand for gasoline is highly inelastic, not because of a lack of competition.

That's only partly true, because of the large number of integrated companies. ExxonMobil, Shell, BP, etc. earn money on both the upstream and the downstream, so they're largely indifferent to where the profit comes from. Independent refiners, jobbers, and wholesalers are such a small part of the market that oligopoly is a major source of market inefficiency.

[taxwonk]

Originally posted by ltl/fb
I suppose I need to review why ExxonMobil can't undersell OPEC on crude.

That's simple. The cost to lift a barrel of oil in Saudi is about $3.50/bbl. Lifring costs on deepwater Gulf crude are about $25-40/bbl, depending on the type of platform, how deep they have to drill, contractor costs and similar factors.

[ltl/fb]

Originally posted by taxwonk
That's only partly true, because of the large number of integrated companies. ExxonMobil, Shell, BP, etc. earn money on both the upstream and the downstream, so they're largely indifferent to where the profit comes from. Independent refiners, jobbers, and wholesalers are such a small part of the market that oligopoly is a major source of market inefficiency.

Could you go into more detail about where oligopoly exists (upstream, downstream, blah blah blah)? Thanks.

ETA I have to say, in eastern Oklahoma, where there are apparently many more independent refineries and wells and whatnot than there are in other areas of the country, gas prices (at the pump) seem to be noticeably lower.

[taxwonk]

Originally posted by ltl/fb
Could you go into more detail about where oligopoly exists (upstream, downstream, blah blah blah)? Thanks.

ETA I have to say, in eastern Oklahoma, where there are apparently many more independent refineries and wells and whatnot than there are in other areas of the country, gas prices (at the pump) seem to be noticeably lower.

The oligopoly exists more on the upstream side. The majors produce and purchase far more crude than the relatively smaller companies, like Ashland and Citgo that are only refiners and marketers or Marathon, which is pretty much just a marketer these days.

And you're right. In places like Oklahoma and Texas, where there are smaller producers and refiners, there is more price competition.

[Hank Chinaski]

Originally posted by Shape Shifter



Boy, Clinton really fucked things up, didn't he?

you mean 9/11? yeah, that will be his legacy. but higher gas prices are cool. it'll force alternative energy cars, and we'll be beyond all this by the time your grandkids are taking driving lessons.

[bilmore]

Originally posted by Sidd Finch
I have no great concern about oil industry profits, or about gas prices.

Best indicator - they're public companies, by and large, I hold some, and I see no great or huge proft from doing so. Oil companies are consistently boring, stodgy, 5%-9% performers in a world full of 15%-25% possibilities. You don't buy oil stocks because of gain - you buy them for stability.

As for the tax breaks - it's the "we need to preserve domestic production" argument. It costs a ton to pull up oil here compared to the ME, but the last thing we need is for production here to shut down. There are strategic costs to that that we're better off avoiding.

[Mmmm, Burger (C.J.)]

Originally posted by bilmore

As for the tax breaks - it's the "we need to preserve domestic production" argument. It costs a ton to pull up oil here compared to the ME, but the last thing we need is for production here to shut down. There are strategic costs to that that we're better off avoiding.

The tax breaks seem particularly odd in a time of high oil prices, however. I'm not sure of the exact contours, but it seems that you would want to design a system that provided a subsidy to domestic production (in the form of tax breaks) only when the price of oil is relatively low.

[bilmore]

Originally posted by Mmmm, Burger (C.J.)
The tax breaks seem particularly odd in a time of high oil prices, however. I'm not sure of the exact contours, but it seems that you would want to design a system that provided a subsidy to domestic production (in the form of tax breaks) only when the price of oil is relatively low.

Subsidy?

(Sorry. It's my "when you forget to steal something from me, you haven't given me a gift" bent shining through.)

I think this is merely a continuum argument. If you design a capping tax break, maybe you actually discourage facilities production that becomes profitable at the higher prices? Again, it's not merely the economic argument about the effect of pricing and profit on widget production - there are strategic reasons why we want domestic oil production even though it's not a purely rational-economic decision.

[Mmmm, Burger (C.J.)]

Originally posted by bilmore
Subsidy?

(Sorry. It's my "when you forget to steal something from me, you haven't given me a gift" bent shining through.)

Yes, we can get into a length debate about whether tax breaks are the equivalent of subsidies, etc.

Any narrow exception to the tax laws strikes me as a subsidy. If it's a broad exception, then it's just not a tax. But, whatever, call it a tax break instead and my point is no different. As to how to develop such a program, I'm not sure. One way might be to exempt royalty payments on the first five dollars of each barrel extracted, with royalty payments increased over a barrel price range exceeding $25 (or something). Yes, no matter what break points you put in, you could create problems. But, hey, the problems are supposedly less than not having them at all.

[ltl/fb]

Originally posted by Mmmm, Burger (C.J.)
Yes, we can get into a length debate about whether tax breaks are the equivalent of subsidies, etc.

Any narrow exception to the tax laws strikes me as a subsidy. If it's a broad exception, then it's just not a tax. But, whatever, call it a tax break instead and my point is no different. As to how to develop such a program, I'm not sure. One way might be to exempt royalty payments on the first five dollars of each barrel extracted, with royalty payments increased over a barrel price range exceeding $25 (or something). Yes, no matter what break points you put in, you could create problems. But, hey, the problems are supposedly less than not having them at all.

Index it. The things that seem to cause the most problems (AMT is a prime example) aren't indexed and so after several years, it gets ridiculous.

[Cletus Miller]

Originally posted by taxwonk
like Ashland and Citgo that are only refiners and marketers or Marathon, which is pretty much just a marketer these days.

Isn't Citgo owned by the Venezuelan national petro company? Making it effectively an integrated operation.

Isn't Marathon owned by Ashland Oil? Or vice versa?

Too lazy to google.

[bilmore]

Originally posted by Mmmm, Burger (C.J.)
Yes, we can get into a length debate about whether tax breaks are the equivalent of subsidies, etc.

Any narrow exception to the tax laws strikes me as a subsidy. If it's a broad exception, then it's just not a tax. But, whatever, call it a tax break instead and my point is no different. As to how to develop such a program, I'm not sure. One way might be to exempt royalty payments on the first five dollars of each barrel extracted, with royalty payments increased over a barrel price range exceeding $25 (or something). Yes, no matter what break points you put in, you could create problems. But, hey, the problems are supposedly less than not having them at all.

I think we mess with this natural feedback loop at our own peril.

Right now, if you listen to the global warming crew, we're using too much fossil fuel. We spew too many combustion byproducts into the air.

But, when fuel oil and natural gas start to hit the equivalent of $8/gallon, and we see what it takes to heat our homes and factories, global warming is going to start looking good.

But the price will keep usage down, thus impeding the beneficial effects of the global warming.

So, economists are going to have to figure out the optimum price for fossil fuels - the price at which we will be able to afford fuel, and will be able to generate sufficient global warming such that overall downward fuel consumption results from the decreased heating needs, but that takes into account the increased fuel needs for increased water transportation along the coasts (Manhattan water taxis?), but that won't allow the cycle to swing too far to the warming side such that the increased AC needs in the south wipe out the heat savings. It's a vicious cycle that I think is too complex to trust to politicians.

[sgtclub]

Originally posted by bilmore
I think we mess with this natural feedback loop at our own peril.

Right now, if you listen to the global warming crew, we're using too much fossil fuel. We spew too many combustion byproducts into the air.

But, when fuel oil and natural gas start to hit the equivalent of $8/gallon, and we see what it takes to heat our homes and factories, global warming is going to start looking good.

But the price will keep usage down, thus impeding the beneficial effects of the global warming.

So, economists are going to have to figure out the optimum price for fossil fuels - the price at which we will be able to afford fuel, and will be able to generate sufficient global warming such that overall downward fuel consumption results from the decreased heating needs, but that takes into account the increased fuel needs for increased water transportation along the coasts (Manhattan water taxis?), but that won't allow the cycle to swing too far to the warming side such that the increased AC needs in the south wipe out the heat savings. It's a vicious cycle that I think is too complex to trust to politicians.

I've been thinking about this a lot lately. Let's say we move away from fossil fuels and towards the hybrid or electric model. Isn't that going to put a tremendous demand on non-fossil fuel electricity? It wasn't that long ago in CA that we were experiencing rolling electricity blackouts, and I have to believe that would only be exasperated.

So we shouldn't use fossil fuels and we shouldn't build new nuclear plants. How exactly are we going to meet our electricity needs?

[Mmmm, Burger (C.J.)]

Originally posted by sgtclub


So we shouldn't use fossil fuels and we shouldn't build new nuclear plants. How exactly are we going to meet our electricity needs?

solar, wind, and hydro.