Oil thread 9-7-06:Former BP head of Pipeline invokes 5th

[3chordcharlie]

Originally posted by: Cruise51
Ask yourself this question... Gas prices have pretty much doubled in the past five years. Have supplies been cut in half in the past five years? Did half the worlds oil somehow vanish? Do we have half the refining capacity? One word tells why prices have doubled - Profit.

Not even close.

Profit is the result of price changes, but the price changes are the result of:

1. inelastic deman (little change in quantity demanded when price changes)
2. high marginal cost of 'marginal' oil reserves (small production increases cost a lot per barrel, all oil sells at the same price, all must sell for at least the cost of the most expensive oil extracted)

The result is that some oil deposits, which were already 'worth extracting' at $15, are now massively profitable, but the last deposits to come online (things like the oil sands iin Alberta) are only 'profitable enough' to justify extraction, and are needed at current demand levels.

There's nothing irrational about the actual price - only the speculative demand that is driving it.

OPEC doesn't even figure into the equation, as they aren't really restricting output at the moment.

 

[Vic]

$70 here we come.

IME, the easiest way to distinguished the financial ignorant is that they always think market prices have momentum. They don't. "Past performance is not a valid indicator of future results." A market is never "going up," it has gone up. VERY big difference.

 

[dmcowen674]

Originally posted by: Vic

$70 here we come.

IME, the easiest way to distinguished the financial ignorant is that they always think market prices have momentum. They don't. "Past performance is not a valid indicator of future results." A market is never "going up," it has gone up. VERY big difference.

It's got momentum alright, I feel it in my pants.

The magical dissapearing $20 bills.

Oh look at that, empty wallet, must be Republican magic tricks again, yippie.

$37.35 to fill my tank today.

Last week it went up to $140 a week in gas costs from $120, now it's $160.

 

[Cruise51]

Prices are increasing far more than demand is increasing and far more than supply is decreasing. Maybe I missed something but the numbers don't add up... Someone is making a crap load of money.

 

[3chordcharlie]

Originally posted by: Cruise51
Prices are increasing far more than demand is increasing and far more than supply is decreasing. Maybe I missed something but the numbers don't add up... Someone is making a crap load of money.

Yup, the people who own the rights to the easy-to-extract oil deposits are making buckets of money.

Price balances supply and demand, but there's no set change in price that will accomplish this.

For oil, especially in the short term, you need huge price changes to significantly affect consumption choices, and increasing production is also very expensive. So you get small supply increases, small demand decreases, and large price increases.

 

[Cruise51]

Originally posted by: 3chordcharlie

Originally posted by: Cruise51
Prices are increasing far more than demand is increasing and far more than supply is decreasing. Maybe I missed something but the numbers don't add up... Someone is making a crap load of money.

Yup, the people who own the rights to the easy-to-extract oil deposits are making buckets of money.

Price balances supply and demand, but there's no set change in price that will accomplish this.

For oil, especially in the short term, you need huge price changes to significantly affect consumption choices, and increasing production is also very expensive. So you get small supply increases, small demand decreases, and large price increases.

Guess I need to take a class in oil industry economics.

 

[Vic]

Originally posted by: dmcowen674

Originally posted by: Vic

$70 here we come.

IME, the easiest way to distinguished the financial ignorant is that they always think market prices have momentum. They don't. "Past performance is not a valid indicator of future results." A market is never "going up," it has gone up. VERY big difference.

It's got momentum alright, I feel it in my pants.

The magical dissapearing $20 bills.

Oh look at that, empty wallet, must be Republican magic tricks again, yippie.

$37.35 to fill my tank today.

Last week it went up to $140 a week in gas costs from $120, now it's $160.

Sucks to be you. My gas bill has gone from $80 per month to $120 per month. Oh noesss!!

 

[3chordcharlie]

Originally posted by: Cruise51

Originally posted by: 3chordcharlie

Originally posted by: Cruise51
Prices are increasing far more than demand is increasing and far more than supply is decreasing. Maybe I missed something but the numbers don't add up... Someone is making a crap load of money.

Yup, the people who own the rights to the easy-to-extract oil deposits are making buckets of money.

Price balances supply and demand, but there's no set change in price that will accomplish this.

For oil, especially in the short term, you need huge price changes to significantly affect consumption choices, and increasing production is also very expensive. So you get small supply increases, small demand decreases, and large price increases.

Guess I need to take a class in oil industry economics.

Now that OPEC is essentially irrelevent, it's much easier than it used to be

 

[Engineer]

Originally posted by: Vic

Originally posted by: dmcowen674

Originally posted by: Vic

$70 here we come.

IME, the easiest way to distinguished the financial ignorant is that they always think market prices have momentum. They don't. "Past performance is not a valid indicator of future results." A market is never "going up," it has gone up. VERY big difference.

It's got momentum alright, I feel it in my pants.

The magical dissapearing $20 bills.

Oh look at that, empty wallet, must be Republican magic tricks again, yippie.

$37.35 to fill my tank today.

Last week it went up to $140 a week in gas costs from $120, now it's $160.

Sucks to be you. My gas bill has gone from $80 per month to $120 per month. Oh noesss!!

Sorta distasteful Vic, since, to some people struggling from paycheck to paycheck (legitimate, not the credit card junkies, etc), $40 per month can make a big difference in eating right or paying utility bills. Not saying that it can be avoided, but your ability to throw and extra $40 per month and then blow it off with an off the wall comment may not be so easy for everyone in the world (or US).

Throw in the fact that a hundred million people now giving an extra $40 to big oil instead of the general economy, and you removed $4 billion per month from the general economy. Hardly a drop in the bucket I would say.

 

[catnap1972]

Originally posted by: Engineer

Originally posted by: Vic

Originally posted by: dmcowen674

Originally posted by: Vic

$70 here we come.

IME, the easiest way to distinguished the financial ignorant is that they always think market prices have momentum. They don't. "Past performance is not a valid indicator of future results." A market is never "going up," it has gone up. VERY big difference.

It's got momentum alright, I feel it in my pants.

The magical dissapearing $20 bills.

Oh look at that, empty wallet, must be Republican magic tricks again, yippie.

$37.35 to fill my tank today.

Last week it went up to $140 a week in gas costs from $120, now it's $160.

Sucks to be you. My gas bill has gone from $80 per month to $120 per month. Oh noesss!!

Sorta distasteful Vic, since, to some people struggling from paycheck to paycheck (legitimate, not the credit card junkies, etc), $40 per month can make a big difference in eating right or paying utility bills. Not saying that it can be avoided, but your ability to throw and extra $40 per month and then blow it off with an off the wall comment may not be so easy for everyone in the world (or US).

"Bleh--so what...let those damn poor people eat cake...I GOTS MINE"

Just wait until the triple whammy hits this winter (high gas + high heating fuel + high everything else prices)...we'll see who's laughing (aisde from Bushco Oil)

 

[Fingolfin269]

Originally posted by: dmcowen674

Originally posted by: Vic

$70 here we come.

IME, the easiest way to distinguished the financial ignorant is that they always think market prices have momentum. They don't. "Past performance is not a valid indicator of future results." A market is never "going up," it has gone up. VERY big difference.

It's got momentum alright, I feel it in my pants.

The magical dissapearing $20 bills.

Oh look at that, empty wallet, must be Republican magic tricks again, yippie.

$37.35 to fill my tank today.

Last week it went up to $140 a week in gas costs from $120, now it's $160.

Good lord. You spend $160 on gas PER WEEK? I can see how high gas prices might bother you. I spend at most $25-$30 per week but then again I get 30-35mpg...

 

[Pabster]

$160 a week on gas?

Time to get rid of that guzzler and get something a bit more conservative.

I also get 30ish mpg (nearly 40 on some highway trips) ...

 

[Engineer]

Dave's van is rated for 26 mpg on the highway. He just drives lots of miles.

 

[GoPackGo]

Originally posted by: Engineer
Dave's van is rated for 26 mpg on the highway. He just drives lots of miles.

They make scooters that get 100mpg.

 

[dullard]

Originally posted by: conjur
You neglected to take into account the other factors I mentioned.

That is since the other factors are unimportant. Inflation over 4 years is nothing, a few pennies on $1.50. Boutique blends were around in 2001 and thus were already incorporated in the $1.50 average price you listed. The blend ads up to ~10 cents, so lets just subtract 10 cents from your $4+ number. Summer blends were included in all other years and thus the comparison is fine.

So $4+ - a few pennies - 10 cents = $4

Conclusion: you still claim that trippling oil prices would nearly tripple the gas price. That is just plain false.

 

[dullard]

Originally posted by: Engineer
$70 per barrel with 42 gallons per barrel = $1.67 per gallon of crude. Out of the crude, you get basically 1/2gallon of gas and other products such as diesel, kerosine, sludge (road paving material), etc., so the cost of the half gallon of gas would be $0.84 with the remaining costs going into the diesel, kerosine, etc.. Add refining, taxes and delivery, you get 1 gallon at 2 x .84 = 1.68 + taxes and delivery. That sounds about right in the $2.50 range to me, unless I fvcked up and I do often!

It would seem that several here are assuming 100% cost of crude = 100% cost of gas when other products are derived from the gallon of crude that are sellable (diesel, etc).

Thanks, Engineer. Where do people come up with this crap that oil=gas only? Refineries get high $$$ jet fuel and other valuable stuff (fertilizers, makeup, etc) out of that other half of oil.

 

[Darkhawk28]

Originally posted by: dullard

Originally posted by: Engineer
$70 per barrel with 42 gallons per barrel = $1.67 per gallon of crude. Out of the crude, you get basically 1/2gallon of gas and other products such as diesel, kerosine, sludge (road paving material), etc., so the cost of the half gallon of gas would be $0.84 with the remaining costs going into the diesel, kerosine, etc.. Add refining, taxes and delivery, you get 1 gallon at 2 x .84 = 1.68 + taxes and delivery. That sounds about right in the $2.50 range to me, unless I fvcked up and I do often!

It would seem that several here are assuming 100% cost of crude = 100% cost of gas when other products are derived from the gallon of crude that are sellable (diesel, etc).

Thanks, Engineer. Where do people come up with this crap that oil=gas only? Refineries get high $$$ jet fuel and other valuable stuff (fertilizers, makeup, etc) out of that other half of oil.

The Federal Tax on a gallon of gas is/was 18.4 cents (as of 2002).

Here in my town in Missouri, gas is $2.299 per gallon.

$2.299 - $0.184 (federal tax) - $0.17 (total Missouri state taxes) = $1.945 pre-tax/pre-profit cost of a gallon of gas.

Right now we're at about $67.00 per barrel... so

$67 / 42 gallons = $1.595 per gallon pre refining, profit and transportation cost.

So that leaves about $0.35 per gallon for refining, transportation and marketing.

Sound about right?

 

[dmcowen674]

Originally posted by: GoPackGo

Originally posted by: Engineer
Dave's van is rated for 26 mpg on the highway. He just drives lots of miles.

They make scooters that get 100mpg.

Scooters are not allowed on the The Causeway - World's Longest Bridge which I commute across some days 4 times back and forth.

A lot of days even Motorcycles are not allowed.

 

[Vic]

Originally posted by: Engineer
Sorta distasteful Vic, since, to some people struggling from paycheck to paycheck (legitimate, not the credit card junkies, etc), $40 per month can make a big difference in eating right or paying utility bills. Not saying that it can be avoided, but your ability to throw and extra $40 per month and then blow it off with an off the wall comment may not be so easy for everyone in the world (or US).

Throw in the fact that a hundred million people now giving an extra $40 to big oil instead of the general economy, and you removed $4 billion per month from the general economy. Hardly a drop in the bucket I would say.

Point taken. My comment was more in regards to Dave spending $160 per week on gas. That's an awfully high consumption level. If it's work-related, and he is having difficulty affording it, he really ought to consider the personal profitibility level of his current job.

But what's next for the liberals? A right to cheap gasoline? No thank you. The day that cheap gasoline is made a "right," only rich liberal government elites will be able to acquire any and the rest of us will be on the bus.

 

[Darkhawk28]

Originally posted by: Vic

Originally posted by: Engineer
Sorta distasteful Vic, since, to some people struggling from paycheck to paycheck (legitimate, not the credit card junkies, etc), $40 per month can make a big difference in eating right or paying utility bills. Not saying that it can be avoided, but your ability to throw and extra $40 per month and then blow it off with an off the wall comment may not be so easy for everyone in the world (or US).

Throw in the fact that a hundred million people now giving an extra $40 to big oil instead of the general economy, and you removed $4 billion per month from the general economy. Hardly a drop in the bucket I would say.

Point taken. My comment was more in regards to Dave spending $160 per week on gas. That's an awfully high consumption level. If it's work-related, and he is having difficulty affording it, he really ought to consider the personal profitibility level of his current job.

But what's next for the liberals? A right to cheap gasoline? No thank you. The day that cheap gasoline is made a "right," only rich liberal government elites will be able to acquire any and the rest of us will be on the bus.

In the spirit of that post... what's next for neocons? $12.00/gallon gasoline so that only the rich can afford it?

 

[catnap1972]

Originally posted by: Darkhawk28

Originally posted by: Vic

Originally posted by: Engineer
Sorta distasteful Vic, since, to some people struggling from paycheck to paycheck (legitimate, not the credit card junkies, etc), $40 per month can make a big difference in eating right or paying utility bills. Not saying that it can be avoided, but your ability to throw and extra $40 per month and then blow it off with an off the wall comment may not be so easy for everyone in the world (or US).

Throw in the fact that a hundred million people now giving an extra $40 to big oil instead of the general economy, and you removed $4 billion per month from the general economy. Hardly a drop in the bucket I would say.

Point taken. My comment was more in regards to Dave spending $160 per week on gas. That's an awfully high consumption level. If it's work-related, and he is having difficulty affording it, he really ought to consider the personal profitibility level of his current job.

But what's next for the liberals? A right to cheap gasoline? No thank you. The day that cheap gasoline is made a "right," only rich liberal government elites will be able to acquire any and the rest of us will be on the bus.

In the spirit of that post... what's next for neocons? $12.00/gallon gasoline so that only the rich can afford it?

Merc futures (gasoline/September) are within a penny of 2 bucks, so that's coming closer to reality.

 

[Vic]

Originally posted by: Darkhawk28
In the spirit of that post... what's next for neocons? $12.00/gallon gasoline so that only the rich can afford it?

I'm not a neocon. Go eat sh!t and die in a fire.

Originally posted by: catnap1972
Merc futures (gasoline/September) are within a penny of 2 bucks, so that's coming closer to reality.

Originally posted by: Vic
IME, the easiest way to distinguish the financial ignorant is that they always think market prices have momentum. They don't. "Past performance is not a valid indicator of future results." A market is never "going up," it has gone up. VERY big difference.

 

[dullard]

Originally posted by: Darkhawk28
Right now we're at about $67.00 per barrel... so

$67 / 42 gallons = $1.595 per gallon pre refining, profit and transportation cost.

Sound about right?

Nope, on the part I quoted above. Your final number is close, but the way you got it is wrong.

A barrel contains 42 gallons of oil. A barrel does NOT contain 42 gallons of gas. It contains 42 gallons of (tar + diesel + gas + kerosene + jet fuel + ...) Depending on refinery settings and the type of oil, you get roughly 20 gallons of gas per barrel and 22 gallons of that other stuff. I do not know what the exact amount is, but lets say that other stuff sells for $33 today. Thus you get ~$34 of oil making ~20 gallons of gas, or ~$1.70 per gallon. Refineries are selling gas at a record high of $2 a gallon now.

Note: the refinery profit per gallon of gas ranged between 19 cents and 55 cents per gallon in 2004. My numbers above gave 30 cents per gallon - operating costs. So maybe the other stuff sells for a bit more than $33.

 

[Darkhawk28]

Originally posted by: Vic

Originally posted by: Darkhawk28
In the spirit of that post... what's next for neocons? $12.00/gallon gasoline so that only the rich can afford it?

I'm not a neocon. Go eat sh!t and die in a fire.

Very classy, but did I ever say you WERE a neocon?

You started with a very respectable post and then went cheap with a liberal bash, so I took the opposite end and presented it.

Too bad you couldn't take it.

Oh wait, what's that in your sig....

"Emotion is the antithesis of logic."

Take your own advice, son.

 

[Darkhawk28]

Originally posted by: dullard

Originally posted by: Darkhawk28
Right now we're at about $67.00 per barrel... so

$67 / 42 gallons = $1.595 per gallon pre refining, profit and transportation cost.

Sound about right?

Nope, on the part I quoted above. Your final number is close, but the way you got it is wrong.

A barrel contains 42 gallons of oil. A barrel does NOT contain 42 gallons of gas. It contains 42 gallons of (tar + diesel + gas + kerosene + jet fuel + ...) Depending on refinery settings and the type of oil, you get roughly 20 gallons of gas per barrel and 22 gallons of that other stuff. I do not know what the exact amount is, but lets say that other stuff sells for $33 today. Thus you get ~$34 of oil making ~20 gallons of gas, or ~$1.70 per gallon. Refineries are selling gas at a record high of $2 a gallon now.

Note: the refinery profit per gallon of gas ranged between 19 cents and 55 cents per gallon in 2004. My numbers above gave 30 cents per gallon - operating costs. So maybe the other stuff sells for a bit more than $33.

Oh yes, I forgot to take the $67 / 42 / 2!

Ok, let's review what we know so far...

A barrel of crude oil costs about $67 right now.

A barrel contains 42 gallons of crude oil.

About 50% of that crude oil is used for gasoline, so about ~20-21 gallons of gasoline is produced. (used a simple ratio of 67/42 = X/20 to figure the total cost of those 20 gallons, then divided it by 20).

The federal tax on gas is 18.4 cents per gallon.

You estimate about 30 cents per gallon for refining profit.

-----------------------------------------------------------------------------------------
So, the 20 gallons of crude oil that is used for gasoline refining costs $1.595 per gallon.

Adding $0.30 for refining costs brings the total to $1.895 per gallon.

In Missouri, total state taxes are $0.17 per gallon to bring the total to $2.065 per gallon.

Add $0.184 for federal taxes, brings the total to $2.249.

Add a nickel per gallon (which I've heard is about right) for the retailer profit = $2.299.

Gas in my town sells for $2.299.