Why are we waiting?

[Eamonn]

A couple of weeks back I was watching the NBC news on a Friday.

The report said that gas had gone up again, I think it was up to $141.00 a barrel.

By Monday the price at the pump had gone up.

So far in our area we have been very fortunate our local stations have kept the price to $3.999 a gal.

Crude oil (NYMEX) (per barrel) today was selling for $125.49 (up $1.05) from yesterday.

The price at the pump has remained unchanged.

Why the wait?

Eamonn.

[jmwalston]

I believe it has to do with profits.

[GernBlansten]

I've asked folks intimately involved in the energy biz the same question. The common response, "Its complicated."

{tinfoilhaton}

I think the retail gas price is not set based on supply/demand, but on the pain tolerance of the public. I bet big oil has employed, not economists, but psychologists to determine what level they can sell their ill begotten booty. Ever notice that prices always climb quickly to the next dollar level but then hover, never really breaking through the barrier. Once they've figured out that the public has accepted the high price and adjusted to it, they punch through and dance the price for a while until it hovers at the next dollar point. $3.99 right now. They are probing us, seeing if we can accept $4 gas. We will. Then watch it jump to $4.40 for a few weeks then hover right under $5 until we get used to the new pain.

{/tinfoilhatoff}

(This message has been edited by gernblansten)

[jmwalston]

It's really funny, most people believe we use our oil imports for gas, when in reality, oil (petroleum) is used mostly in production of plastics and polymers. Gotta love those long chain carbon molecules. It is even used in quite large quantities to run electric plants, being burned to fuel the steam turbine generators. Gas fuel supplies is not dictated by amount of oil imported but by amount of oil refined. The US has not built any new refineries in over 30 years. This is why a country like Iran can be swimming in oil and their gas prices are comparable to ours, they lack the refineries to make more available for public consumption. Oil stocks at the refiniries may be 3-6 months old, in other words, it was oil secured that far back. Like most commodities, an oil company tries to secure supplies based on price speculation. If it appears that oil prices will shoot up, they might buy 4 months worth right then, only to have the price drop 5 or more dollars before the end of the week. They still are locked in to the higher price, and they do not intend to take a loss. And the oil producer may not necessarily honor a lower price agreement if the cost suddenly rose (think of surcharges like you see with airlines, or jewelry when gold prices rise). Why can oil producers get away with it? They have something you can't live without. Why can oil refineries get away with gas prices? They have something you can't live without.

[GernBlansten]

I've heard the arguments that we don't have refining capacity keep up with demand. However, I don't see it. Demand is down, people are driving less and SUVs are rotting in the driveways of America. If we did have a refining gap, why haven't there been any applications to build new ones? Sure the evil environmentalists don't want any new ones, but I doubt they would be any foe to the well connected oil companies. They could steam roll over any resistance if there was profit to be had. And so far, I haven't seen any new applications for them, much less any being denied.

[jmwalston]

I am yet to see an SUV rotting in the driveway in my neck of the woods. Regardless, the problem isn't why we don't build refineries, but where would we build refineries. They have to have access to oil, that generally means by tanker (Oil by pipeline is very limited and logistically more expensive to move). Today's oil tankers are too big to navigate far upriver, and refineries on the coast present enviromental problems such as storm damage and ecological impact. Plus the majority of prime locations are now developed.

 

Also, you don't build these things overnight, they are MAJOR investments of capital, and who do you think will pick up that tab?(This message has been edited by jmwalston)

[GernBlansten]

How would they fund it? Like any venture. Investment bankers and government handouts.

The real reason there aren't any refineries planned is because they can't make the case that they will be profitable. When they can, they will use all the powers they have to condemn the land necessary, grease the gears to get the EPA in compliance, wine and dine the bankers and politicians and break ground.

[BrentAllen]

Union County, SD recently voted for zoning change that would allow a refinery to be built there. If you want to see all the issues they face, read the following article:

 

http://www.siouxcityjournal.com/articles/2008/06/04/news/top/4e608d46402d5adb8625745e00110beb.txt

 

Union County approves zoning ordinance for Hyperion

By Dave Dreeszen Journal business editor

 

ELK POINT, S.D. -- Flashing a smile, Joyce Bortscheller briefly hugged Hyperion Energy Center executive Preston Phillips as she greeted him in the backyard of her home here.

 

Bortscheller, president of the Elk Point City Council, had invited about 250 supporters to an outdoor barbecue Tuesday to await the returns for arguably the most important election in Union County's history. The big crowd didn't leave disappointed.

 

As midnight approached, they popped the champagne corks, celebrating a hard-fought victory that keeps alive the county's chances of landing the nation's first all-new oil refinery in 32 years.

 

By a solid 58 percent to 42 percent margin, county voters approved Hyperion's request to rezone 3,292 acres of farm land for a new classification, Energy Center Planned Development.

 

"What happened tonight, we were not supposed to be able to do," Phillips told a cheering audience. "Development projects like this are supposed to be outright rejected by residents and neighbors. But this project is a testament to our balancing the needs for growth and for protecting the environment."

 

At stake was billions of dollars in capital investment and thousands of high-paying jobs. From the beginning, Hyperion executives said they would abandon its Union County site, just north of Elk Point, if a majority of voters failed to give their blessing to the rezoning.

 

While conceding defeat, opponents vowed to keep fighting the controversial project on every imaginable front, pressing on with a lawsuit it filed against the county over the zoning procedures and opposing Hyperion as it applies for a bevy of state and federal permits.

 

"We have strategies in place to slow or delay all the permit processes," Ed Cable, chairman of the anti-Hyperion group Save Union County, said after the vote.

 

Tuesday's historic election culminated a months-long, emotionally charged campaign that pitted neighbor against neighbor in this extreme southeast South Dakota county.

 

Supporters cited the once-in-a-lifetime economic opportunities the $10 billion project would bring.

 

An average of 4,500 construction jobs would be required over four years. With the refinery up and running, Hyperion pledges to create 1,826 full-time jobs at hourly wages of between $20 and $30.

 

"I think it would be a great opportunity for young people to stay in this area instead of leaving for other states," Kelly Hoekstra, 31, of Dakota Dunes said after casting a vote in favor of the rezoning.

 

Opponents argued the massive development would not be worth the pollution and other troubles they claimed the refinery would bring. The health risks traditionally associated with a refinery weighed heavily on the minds of some voters.

 

"I live out here. I don't need the pollution," said Jim Schroeder of McCook Lake, after voting against the rezoning.

 

The contentious issue largely broke along urban and rural lines, with residents living the closest to the Hyperion site fighting the hardest to keep the refinery out of their backyards.

 

Tuesday's record turnout largely reflected that split, with early returns from the mostly rural precincts putting the "No" votes squarely in the lead. As votes were tallied in the more populated area, particularly in the southeast tier closest to Sioux City, that lead was slowly erased.

 

The ordinance took a slim 205-vote lead after 11 of the 13 precincts reported. Hyperion supporters declared victory after the Elk Point precinct results came in, increasing the rezoning lead by 150 votes.

 

Last to report was voter-rich Dakota Dunes, where an unusually large number of absentee ballots slowed the counting. In the Dunes, the ordinance easily passed, 1,017 to 236 votes.

 

"That's huge," Phillips told the cheering crowd.

 

The final tally was 3,932 votes in favor of the ordinance and 2,832 against.

 

Hyperion touted the so-called "green" technology in its proposed energy center, which it claims would be the world's cleanest. The refinery would process 400,000 barrels of tar sands crude a day from Alberta into low-sulfur gasoline, diesel and jet fuel.

 

Supporters argued that tapping into reserves from our neighbor to the north would reduce the nation's dependence on Mideast oil and add badly needed refining capacity in the U.S., where the last all-new refinery was built in 1976.

 

Both sides flooded the county's nearly 10,000 registered voters with paid ads, direct mailers and door-to-door stops, combining to raise and spend more than $100,000.

 

A ballot question committee formed by Dallas, Texas-based Hyperion alone poured in at least $45,000.

 

"It was close, and one of the reasons why was negative campaigning worked," Phillips told supporters. "We have always taken the high road, and we will continue to take the high road."

 

Hyperion project executive J.L. "Corky" Frank, a former Marathon Oil executive, joined Phillips for Tuesday night's celebration, where supporters enjoyed music, food and drink and regularly checked their cell phones for up-to-date election numbers.

 

Addressing the audience, Phillips thanked the local supporters, including Bortscheller and her husband, Gary, for hosting the party.

 

Last summer, after Hyperion publicly announced its interest in the Union County site, Bortscheller, who is also a local economic development leader, organized a barbecue for Hyperion CEO Albert Huddleston to introduce him to local residents.

 

"From the very beginning I was on board because I felt it was the right thing for our county," Bortscheller said early in the evening.

 

Journal staff writer Michele Linck contributed to this story.

 

[CalicoPenn]

$3.999?? I'm moving - that would be heaven. We've been at $4.29 for weeks now - though yesterday we dropped to $4.09. I just got back from a trip to the Pacific Northwest. California prices were in the $4.50 range. Coming back from a day trip to Mt. Ranier (from Portland, Oregon), I found a small town gas station in Washington where the price for regular was $4.92/gallon. The premium blends were both over $5.00 per gallon.

 

CalicoPenn

[scottteng]

Gassed up the car today at $3.85 per gallon the gas one is buying today is oil that has been purchased at a price per barrel as crude some time ago then refined and shipped to the market there is some lag time. The crude oil price quoted is light sweet crude for delivery on x date in the future. Most US produced crude is not of the light sweet variety especially Alaskan thus is a little cheaper. Also requires a little more refining. Don't forget who owns those "evil" oil companies millions of Americans , their 401k plans, and mutual funds they had better turn a decent profit or you won't be retiring with any dignity at all. Look at profit margins by industry and they really do not vary much. Obscene profits don't last long there is always a competitor out there willing to settle for a reasonable profit margin. If you think their profits are to high set up in competition with them and take some of it don't use armed force to extract it in taxes.

[ghermanno]

Speaking of "Armed Forces", the price the Soldier/Airman/Marine/Sailor is paying for a gallon of gas, on base here at Osan AFB, South Korea is $4.21. Just think what the price would be if they had to pay taxes on the gas....

[Pack212Scouter]

It amaizes me how little many people seem to understand about "oil company profits." True, they are making record profits, but that is because of the high price of crude oil and the sheer size of the busines. Exxon for example made a record profit of $40.6 Billion dollars...OMG right? Wrong. To make that record profit, Exxon had to spend $404.5 Billion! That's right. They had a profit margit of 10%, which is right on the average US manufacturing profit of 9.2% (without auto companies included). Let's break this down a bit more. The REAL profits were $70.4 billion, but Exxon paid $29.8 billion in income taxes. That is a tax rate of 42.3% without any windfal tax! But wait....Exxon actually paid $105.6 billion in taxes all together... 26.1% of GROSS revenue. So one corporation, Exxon, paid as much in taxes as the entire lower 50% of Americans (65,000,000 of them!). Hmmm, I just thought of this. Since corporate expenses are passed onto the consumer, that means that in addition to the .32 to .75 cent per gallon tax we pay, we also got taxed and additional $812 for each person. Oh...and let's not forget. Out of that $40.6 billion, they paid out $7.6 billion in dividends.

 

What is the price of a $4.00 gallon of gas made up of?

 

Crude oil cost - $1.48

Gas Taxes - $0.50 (range is $0.324 to $0.749)

Refining costs - $0.75

Disribution & marketing - $0.35

Credit Card fees - $0.12

Gas Station overhead - $0.10

Gas Station payroll - $0.10

Gas station profit - $0.10

Tax on Oil company profit - $0.22

Exploration, capital improvements, etc, by oil co. - $0.10

Left over for oil company? - $0.18(This message has been edited by pack212scouter)

[GernBlansten]

Yeah, hard to not make record profits when you have very few companies controlling a resource that most people can't live without.

Ever wonder that these record profits also started when big oil started merging? Competition is good and generally will keep prices reasonable. But instead of 15 oil companies, we now have 6. Exxon/Mobil, Conoco/Phillips, Chevron/Texaco, Shell, BP and Total SA.

I ain't saying there's price collusion, but it certainly is easier when you have fewer companies to compete against.

[Pack212Scouter]

(This message has been edited by pack212scouter)

[evmori]

Supply & demand have little to do with the current price of gas. NYMEX sets the wholesale price based on what ever they want to base it on. Some oil sheik could be going through a divorce so the price goes up. Their is a storm in China so the price goes up!

 

The reason we don't see the effect of a lower wholesale price is because most stations don't buy gas at the cash price. They buy on contract prices a couple months out. And each state has a different tax & delivery rates which explains why prices vary from state to state. The current wholesale price for regular unleaded is $3.02

 

Ed Mori

1 Peter 4:10