View Full Version : useful link for the oil (gas) discussions...

05-05-2008, 11:55 PM

didn't feel like finding an appropriate thread, plus could be useful for a new one anyway. The link is to estimated gasoline price breakdown and margin details for 2007. I'm too tired to go through the various years and analyze the numbers right now, but someone else may feel like it. To change the year simply replace the "2007" with whatever year you would like in the URL... i.e. if you want to compare this data with 2006, simply replace "2007" with "2006" where the end of the link would be "..../margins/2006.html". Have fun kids!


editing to note that if you don't feel like editing the URL, there are links towards the bottom of the page to view back up to ten years

Gayle in MD
05-07-2008, 11:07 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> Special to the Star-Telegram
“They see speculation in the market, I see decline in global inventories.” “I don’t think this is a big surprise, that we’ve had a jump in price when there has been a decrease in crude inventories.” — Energy Secretary Sam Bodman, Bloomberg News, March 5, 2008
“It should be obvious to you all that the [gasoline] demand is outstripping supply, which causes prices to go up.” — President G.W. Bush, Associated Press, March 5, 2008

One wonders if verifiable facts ever get in the way of this administration’s statements on issues that are critical to the average American’s well-being. After all, last time I checked, when politicians are elected to public office, or appointed like Secretary Bodman, they must take an oath to the American people before assuming their new positions. How can they forget a sacred oath so quickly? Were they daydreaming when they took it, so it never meant anything to begin with? Maybe it’s just another promise you have to make to get into office: When you’re securely incumbent you can ignore even solemn oaths you took.

Obviously, the two quotes that led this article came from discussions concerning the current high price for oil on the futures market. Bodman appears to be protecting the speculators in oil, as opposed to looking after the interests of all Americans. President Bush, apparently, has never talked to the Energy Department’s Energy Information Agency to see whether gasoline demand is actually up. More troubling, the writer of that particular Associated Press article obviously didn’t look up the EIA’s numbers to verify the president’s assertions: They weren’t accurate.

1. There Is No Shortage!

Gasoline reserves on hand have built up to the highest levels since the early nineties, which is remarkable considering that the nation’s refineries have been cutting back on the production of gasoline because their margins on gas have declined. In fact, gasoline reserves on hand have risen for 19 straight weeks, while oil reserves in this country have gone up in eight out of the last nine weeks – and would have gone nine for nine if fog in the Houston Ship Channel two weeks ago hadn’t kept oil tankers from unloading their crude.

In the same Bloomberg article that quotes Bodman from his CNBC appearance on March 4, he also said that thanks to ethanol the gasoline problem isn’t worse. He then added that the fact that making ethanol is forcing up the prices of other farm commodities, including hog and chicken feed, is “nowhere near as important as trying to relieve pressure on [gasoline] supplies.”

Of course, there is no pressure on gasoline supplies in this country as of today, but Bodman’s statement must have made eyes roll among the executives at Pilgrim’s Pride; they announced 1,100 layoffs on March 13, closing one processing plant and six of their 13 distribution centers because their company’s price for chicken feed went up $600 million last fiscal year and was on track to increase by another $700 million this year.

Here’s the scorecard, in case you missed it. There’s no shortage of gasoline or oil in the U.S. today, and we have near-record reserves on hand. Meanwhile, the Congressional mandate for ethanol has jacked up the price of chicken feed for Pilgrim’s Pride by $1.3 billion – and that’s just one companyprocessing chicken. This is what passes for acceptable to our Energy Secretary?

2. Demand Is DOWN, Yet Prices Are UP!

Just so we can all get on the same page, here are the verifiable facts on oil supplies, production and gasoline demand.

In January of this year, the United States used 4 percent less petroleum than we did a year ago; furthermore, demand has been falling slowly since July of last year. At the same time, worldwide production of oil has risen 2.5 percent in the first quarter, while worldwide demand has grown by only 2 percent. Production is expected to increase by 3.3 percent in the second quarter and by as much as 4.1 percent by the third quarter. The net result is that just the daily buffer for oil production against demand, which was a paltry 1.5 million barrels as recently as 2005, is now up to 3 million barrels in excess capacity today.

So, what is going on here? Why would our Energy Secretary say there’s a supply and demand problem when none exists? Why would he say that speculators have little or nothing to do with the incredibly high price of oil and gasoline, when it’s clear that they do? The president gives the ever-growing demand for gasoline as the primary reason why prices are so high, yet that notion can be dispelled in one minute of research. That’s the problem with rhetoric; it rarely matches the facts.

3. Speculation is Up, and the Dollar Is Down!

On the same day the president and our Energy Secretary made those foolish comments, no less an authority than Exxon CEO Rex Tillerson was quoted by Marketwatch as saying, “The record run in oil prices is related more to speculation and a weakening dollar than supply and demand in the market.” He added, “In terms of fundamentals, fear of supply reliability is overblown.”

As for the speculators, in 2000, approximately $9 billion were invested in oil futures, while today that number has gone up to $250 billion. Now, if any publicly traded company had an additional $241 billion put into its stock in the same period, its stock would rise out of sight too – even if the company was not worth anywhere near that amount of market capitalization.

Moving on to the weak American dollar as a primary cause for skyrocketing oil prices – there is ‘some’ truth in that statement. But consider this: The dollar has depreciated 30 percent against the world’s currencies since 2002, while the price of oil has gone up 550 percent. So, is it the weak dollar that has caused a 550 percent increase in the price of oil, or is it the extra $241 billion worth of speculation? Well, mostly it’s the speculation in the market.

Possibly just to ensure that oil prices don’t respond to real-world market conditions, Goldman Sachs forecast on March 7 that turbulence in the oil market could cause oil to spike as high as $200 a barrel. This flies in the face of all known information – but then again, Goldman Sachs started the current oil speculation craze.

What Is Washington Thinking?

Rounding out the list of experts discussing our oil and gasoline situation is Bill Klesse, head of Valero Energy. He spoke in San Diego a week after those comments from Goldman Sachs, the President and Secretary Bodman. Unbelievably, Klesse said that poor margins may cause Valero to sell one-third of its refinery operations; he stated that poor margins in recent months had caused planned refinery expansions, which would have produced 500,000 more barrels per day, to be canceled. Moreover, Klesse recently released the information that gasoline production has been curtailed in response to slowing demand. (Source: Reuters Online Service, March 11, 2008)

Imagine that: Refiners cut gasoline production, yet gasoline reserves have grown to the largest since late 1992. So much for “surging demand.”

Klesse also called for the government to start imposing a tariff on imported gasoline to protect American refiners’ profits. Protectionism? As famed economist J.K. Galbraith correctly said, “In America, the only respectable form of socialism is socialism for the rich.”

Which takes us back to the original question: Why is Washington doing everything it can to convince us there is a shortage when there isn’t one? After all, the only people they’re protecting are those heavily invested in oil futures – and to the detriment of all other Americans.

We’re Paying for What?

When it became undeniable that poor decision-making by company executives had put a respected 85-year-old American institution in financial peril, why did the Federal Reserve rush in to save investment bank Bear Stearns? Sure, we need to restore confidence in our financial institutions, but why protect the personal assets of those who were responsible for the mess? Both the corporation’s officers and its board members should contribute their personal assets toward saving the bank they put in the ditch – the bank all of us are going to pay to bail out.

Instead, the administration is protecting those responsible for creating yet another speculative bubble in oil futures, and is protecting investors in the ethanol industry – much to the detriment of food-processing companies such as Pilgrim’s Pride. And the net result of all this is that the prices of crude and gasoline rise ever higher thanks to a “shortage” that does not exist, while food costs are soaring thanks to the ethanol mandate.

The Federal Reserve lowers interest rates, but the cost of mortgages goes up six weeks in a row – and last month Bank of America credit card holders started being charged more than 24 percent interest on new purchases.

This is what they call Republican Prosperity? Ronald Reagan was both right and wrong: “Government is not the solution, government is the problem.” And government is still the problem. Instead of a fair and open market they gave us a free-for-all marketplace with no regulations at all, which lately these “Bubble Boys” have sent south for all of us.

I guess Washington missed the obvious: Protect all American consumers and you’re also protecting business expansion.

© 2008 Ed Wallace

Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Society. He reviews new cars every Friday morning at 7:15 on Fox Four’s Good Day, contributes articles to BusinessWeek Online and hosts the talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF. E-mail: wheels570@sbcglobal.net

Possibly to ensure that oil prices don’t respond to real-world conditions, Goldman Sachs forecast on March 7 that turbulence in the oil market could cause oil to spike as high as $200 a barrel. This flies in the face of all known information – but then again, Goldman Sachs started the current oil speculation craze.