NationStates Jolt Archive

This is a hard, no bullshit look at where we are and the challenges we face.

Dear Bill O'Reilly: We can reduce the price of gasoline (http://www.energybulletin.net/17085.html)
by Ronald R. Cooke



We like to watch the O'Reilly Factor on FOX. It's enjoyable entertainment. The other night he expounded on the price of gasoline. He wants to boycott Exxon Mobil because he believes the company is charging too much for its gasoline. And besides, the company makes too much money.

Nonsense.

Bill. You have spun into orbit. Boycotting Exxon Mobil may make you feel good, but it will not bring down the price of gasoline. You have obviously failed to do your homework on the subject of world oil production and consumption, oil resource depletion, or how these factors impact the price of gasoline.

A Few Facts

According to the United States Department of Energy (DOE), fossil fuels – coal, oil and natural gas -- currently provide more than 85% of all the energy consumed in the United States, nearly two-thirds of our electricity, and virtually all of our transportation fuels. Moreover, despite the development of alternative energy solutions, America's reliance on fossil fuels is actually projected to increase.

Gasoline, one of the main products refined from crude oil, accounts for just about 17 percent of the energy consumed in the United States. Most of the gasoline we use is pumped through a network of pipelines from a refinery to a local distributor, who then sends it by truck to one of our nation's 168,987 gasoline stations.

The following chart shows that the average retail price for a gallon of regular gasoline in the United States increased by 19 percent in the four year period from 2000 to 2004. If, as expected, the average price reaches an annual average of $2.86 for all of 2006, it will have increased by another 55 percent in two years. The chart shows refining, distribution and marketing, taxes, and crude oil costs as a percentage of the price you pay at the pump. In 2004, 15 percent of the price you paid ($1.56 per gallon) went to refine the gasoline you use. Another 14 percent went to cover the cost of moving that gallon of gasoline to the pump. Federal and State taxes added 27 percent to the price of regular gasoline. Less than half of the money you spent (44 percent) actually went to the owners and producers of crude oil.



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A Profile of the Price You Pay for Regular Gasoline

Year Average price Refining costs Distribution and marketing costs Taxes Cost of crude oil
2000 $1.56 15% 14% 27% 44%
2004 $1.85 18% 12% 23% 47%
2006* $2.86 15% 8% 15% 62%

*Estimated.

Source Data: EIA/DOE. Percentages are based on national average costs. Because of variations in local tax codes and distribution costs, these percentages will vary by region.

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But all of these percentages change as the price of crude oil increases. The higher the cost of crude oil, the greater impact it will have on the price of gasoline. If the estimated national average price per gallon of regular gasoline reaches $2.86 in 2006, it will do so because the price temporarily exceeds $3.60 before the end of September. In California, environmental regulations could briefly drive the price of regular gasoline to more than $4.00 per gallon.

Historically, the price of gasoline has been quite volatile. That will not change. Even if we do nothing, economic and cultural forces beyond our control will continue to drives prices up and down. It would not surprise me if the average national price for a gallon of regular gasoline temporarily dropped below $2.50 per gallon. But don't be deceived by a short-term price decline. A price above $4.00 per gallon of regular gasoline is equally possible.

Supply Vs. Demand

We can mitigate the upward trend in gasoline prices, and - of course - the coincident increase in the price we pay for diesel, heating oil, and propane fuels. All of these fuels are made from oil. All we have to do is either increase the supply of oil, or decrease the demand for products we make from oil.

Increasing the supply of oil would certainly ease the upward pressure on gasoline prices. We can drill for oil off our coasts, there is more oil to be had in Alaska and the Arctic, and new discoveries promise additional oil in Africa and South America.

Unfortunately, there are two problems with the supply side:
Even assuming we know where the oil is located, it takes 5 to 7 years from the date you say "Go" to bring a new field on-line. Existing and planned drilling programs will not provide us with enough additional oil to bring down the price of gasoline in 2006.
Projected increases in the supply of conventional oil from all known drilling programs, less the rate of depletion at existing oil fields, will not exceed the projected long term growth in world-wide demand. Although in a "Best Case" scenario, production may occasionally exceed consumption over the next few years, oil shortages are inevitable. It's not a case of "if". It's only a question of "when". And that simple fact, Dear Bill, will raise hell with the price of gasoline.
Let me put it another way.
The only way to avoid future oil shortages and higher prices for gasoline, diesel, propane, and heating oil fuels is to decrease demand.
Why? Because oil is a finite resource and we humans are running out of easily accessible (low cost) conventional oil. That's what "Oil Depletion" is all about. And it is very clear to me that oil depletion has already begun to impact the price and availability of oil.

But there is some good news. If there is a sufficient decrease in demand, production will exceed consumption, and the price of oil will come down. The nations that own the world's oil reserves have a tendency to over-produce in order to protect the stream of revenue they receive from the sale of oil. Competition for the available market will thus force the price down. If the price of oil declines, the price of gasoline will decline.

So we do have a demand side solution to the high price of gasoline. Use less.

Here are two specific ways to use less gasoline.

1. Decrease personal consumption.
If we make fewer and shorter trips in our cars and trucks, we consume less gasoline. Everyone can participate. Our children can walk to soccer practice. We can car pool, ride a bicycle, use public transportation, and telecommute to work. There's an almost endless list of ways to curtail our driving. We can also junk our gasoline powered water craft, lawn mowers, airplanes, quads, dirt bikes, tools, and equipment. And finally, when we do purchase a gasoline powered vehicle or product, we can chose one with a smaller motor.

Projection. Highly likely. Consumers, already feeling wallet pain at the pump, will make minor adjustments to their life-style. The average price per gallon will come down. But not by much. Deep price cuts would require a substantial change in consumer lifestyle.

2. Have a recession.
Nothing reduces the price of oil like a really bad world-wide recession. Oil demand growth is moderated by declining employment and business activity. The longer and deeper the recession, the longer the price of gasoline will be (comparatively) inexpensive. Oil prices declined by 47 percent in 1986, bringing the price of gasoline down by $ .27.

Projection. Highly probable. Look for a recession to put downward pressure on the price of gasoline.


A Few Challenges

Lord Browne, the man who runs BP, has said that the price of oil may decline to the $40 range in the intermediate term, and perhaps lower in the longer term. There are, however, a few "challenges" to be resolved before we can expect to see consistently lower gasoline prices. These caveats all put upward pressure on the price of oil – and gasoline.

1. International contracts are worthless.

Let's say you run a really big oil company. You have negotiated a good faith contract with a foreign nation to explore, produce, refine and transport oil from that country to world markets. Your company's total investment has been several billion (that's billion – with a "$ b") dollars. Your efforts have provided the technical expertise, capital, and labor for a successful venture. Then an elected dictator assumes control of the host country government. He soon insists that a national oil company, which his political cronies manage, take a 51 percent controlling interest in your venture, raises the tax rate on the oil you produce from 34 percent to 50 percent, and hikes the royalties you must pay from 16.7 to 33 percent.

Would you think you were double-crossed?

But that is exactly what Hugo Chavez has done in Venezuela, the world's fourth largest oil exporter and a primary supplier to the United States. Hugo has raised the price of gasoline.

Projection. World oil depletion has changed the rules of international trade. Producer nations believe they have the right to tear up existing oil (and natural gas) production contracts whenever they please.

2. Futures trading distorts the intrinsic value of oil.

Futures traders set the world price of oil and gasoline. In the Futures Market, buyers trade to lock in the price they will have to pay for oil (or unleaded gasoline) at some future point in time. Sellers trade to lock in the price they will get for the oil (or unleaded gasoline) they plan to sell at some point of time in the future. Speculators buy and sell futures contracts based on their optimism (greed) that prices will go up, or on their pessimism (fear) that prices are going to fall. Competition for available supplies forces prices up. If the traders perceive a surplus is possible, prices decline. Price changes can be very volatile.

Want to blame someone for high oil prices? Censure Wall Street firms such as Goldman Sachs and Morgan Stanley, or hedge funds that invest in speculative investments for the wealthy. Oil futures trading activity at the New York Mercantile Exchange, London's ICE Futures Exchange, the Tokyo Commodity Exchange, and the Atlanta Intercontinental Exchange soared in 2005. NyMex, the largest oil trading exchange, handled over 60 million oil contract sales and 13 million gasoline contract sales in 2005. Think billions of barrels of oil and multiple billions of gallons of gasoline. All priced by contracts for the delivery of oil or gasoline at some point in the future. If you are paying $3.00 for a gallon of regular gasoline, there are those who believe that maybe $ .30 to $.45 of that price is based on speculative trading in the Futures market.

Projection: Although most of the oil we humans consume is not traded through a futures exchange, these institutions will continue to set the price for open market purchases, and hence the "peg" against which the price of other oil deals are established.

3. International market agreements would stabilize supply.

If they can be enforced. Here is the theory. Consumer nations need to work together with supplier nations on a consumption plan that fairly allocates the world's remaining oil reserves.

Projection: Will never happen. An allocation plan would require a level of international sophistication and cooperation that simply does not exist. Consumer nations have neither the will nor the leadership necessary to build a constructive coalition. Most producer nations are driven by unconstrained greed, uncompromising ideology, and a passion for political power. The trend is clear. A dwindling supply of "open market" oil ensures higher prices at the gas pump.

4. We need to stop price gouging.

As your comments demonstrate, American media is dominated by people who just don't get it. Exxon Mobil is not the world's largest oil company. In fact, independent oil companies – upon whom most English speaking and European nations depend for oil – are relatively small potatoes. Back in 1963, "Big Oil" – defined as the independent oil companies - had a large influence on the price of oil. But their influence has been declining. OPEC cartel decisions, producer nation policy, futures trading, government regulation, and distributor competition for available gasoline supplies all play a key role in determining what you pay at the pump. Although many politicians still believe it's 1963, the price of oil, and hence the price of gasoline, is largely outside the control of "Big Oil".

Bill. If you really want to stop price gouging. Go after national oil companies like Saudi Aramco, the world's largest oil company. Saudi Aramco, largely owned by the Saudi Royal family and a few close friends, is an integrated global petroleum enterprise. Saudi Aramco produces and exports more crude oil than any other company. Recent production has averaged some 8 million barrels per day. That is more than twice the output of the next highest national oil company and nearly three times greater than Exxon Mobil. If all of the oil produced by Saudi Aramco were convertible to gasoline, (it is not) it would have produced enough oil in 2005 to make (roughly) 50 billion gallons of gasoline. Saudi income soared by 49 per cent to $153 billion in 2005 and is projected to swell further to $162 billion in 2006.

Can you guess how much of this income is pure profit? The U. S. EIA's estimate of 2005 OPEC revenue is $473 billion. Was the gross profit more than $345 billion? Was that 10 times more profit than Exxon Mobil made? If so, then just who is really doing the price gouging?

Projection. The United States is unlikely to pursue a case for price gouging against any national oil company. Potential price reduction: None.

5. Our politicians need to get real.

China is driving up the price of oil. The price is going up because the world's Democracies refuse to deal with reality. Here we are, competing with China for what's left of the world's remaining cheap oil with Alice-in-Wonderland energy policies. We worry obsessively about being politically correct, whine about abusive human rights behavior, demand economic reform, and push foreign governments to espouse our political objectives.

China has no such restrictions. The Chinese just want to make deals. With whoever is in charge. They will trade for cash, military weapons, diplomatic favors, and whatever else it takes to lock down the world's remaining oil reserves. They bid up the price of oil using the cash they make from selling manufactured goods to the West.

If the future availability of a commodity is influenced by depletion and shortages, the only way for a buyer to avoid price volatility and ensure commodity availability is to negotiate long term supply contracts. If the world's democracies want to nail down better oil prices, they have compete for oil on a national basis, deal with repressive regimes, use weapon sales, bribery and intimidation as bargaining tools, ignore producer nation human rights abuses, and form coalitions with other consumer nations to stabilize the oil market.

Yes, I know. It's nasty stuff. Unpleasant. Repugnant. But if the world's democracies want to exercise some measure of control over the price they pay for oil, they have to deal with reality. Life. The real deal. Bad as it is.

Projection. Unlikely. China, Russia and Iran are in a three way chess game to control most of the world's remaining cheap oil. The Washington establishment will continue to pretend it's 1963. Consequently, America will fail to take the steps necessary to shore up it oil resource base until the only recourse is military action. American consumers will see higher prices at the gas pump.

6. America must stay in Iraq.

There are those who believe going into Iraq was dumb. Senseless killing continues. The war effort has been appallingly mismanaged. Efforts to create an Iraqi democracy have failed. Backed by the United States, the Kurds are in a four way struggle with Syria, Iran, and Turkey for control of the Kurdish ethnic areas of Iraq, Syria, Turkey, and Iran. At stake: the oil fields near Kirkuk. Shia factions and criminal gangs are in a three way conflict over who will control Southern Iraq. At stake: the oil fields near Basra. Saudi Arabia and other predominately Sunni nations are backing Al-Qaeda and the Iraqi Sunni population in Central Iraq. At stake: the Sunni's want to control all of Iraq with an iron fist theocracy.

But wait. Iraq does have the world's third largest reserves of cheap oil. If America leaves, Iraq will be taken over by people who have no love for the United States, Canada, Australia or Western Europe. There will be a very bloody civil war. If that conflict can be resolved (not a sure thing), then whatever oil production Iraq can muster will go to nations favored by the winners.

Everyone else will have to compete for what's left over. The price of oil will be astronomical.

Yes. This is all very ugly. But, Europeans can not afford to be blasé about Iraq's oil. Like the Americans, they do not have enough oil to sustain their economies. What we need, is an unprecedented level of diplomatic cooperation among all consuming nations.

Projection. Not good. Bringing peace to the Middle East would require a massive, creative, intelligent, and politically neutral cooperative effort among the world's democracies. But we currently do not have the will, vision, or leadership it would take to reach this goal.

More conflict is inevitable.

7. Consuming nations must control the outcome in Iran.

Iranian President Mahmoud Ahmadinejad is an ambitious man. He wants to lead the Islamists to greater political power. Worldwide. Ahmadinejad knows the more oil and natural gas he controls, the greater the leverage he will have over his chosen enemies. He looks west. Neighboring Iraq has plenty of oil. If he controls Iraq, then Iran would have the first or second largest reserves of low cost conventional oil and natural gas in the world. Copious wealth beacons. Money to achieve his ambitions.

So. Does he covet the oil fields of Shia dominated Southern Iraq? Can he maneuver his way into the Kurdish oil fields of Northern Iraq? Does he have the military resources? Do you think he will try?

And then there is Iran's Supreme Leader Ayatollah Ali Khamenei - the man who holds the real political power in Iran. He has made it very clear. Iran will use its military power to disrupt oil shipments from the Gulf region if the United States makes a "wrong move". Note: - he did not say "Iran". He said "Gulf". Iran has drawn up plans to sabotage oil shipments from the entire Gulf region. That's where the world gets 27 percent of its crude oil.

Does anybody think there is a problem?

Projection. Political instability always reduces oil exploration and production. In the Middle East, the trend is toward increased cultural instability. The inevitable result is more conflict. If Iran's disruption is successful, the world will be plunged into a depression.

8. America will wrestle with nationalization.

Back in 1963, Western oil companies ("Big Oil") had virtually unrestricted access to more than 80 percent of the world's known oil reserves. They could make exploration and production deals almost anywhere they wanted on this planet. No more. Big Oil now has relatively open access to less than 20 percent of the world's remaining reserves. A combination of national self interest, political conflict, and environmental restrictions have sharply decreased upstream opportunities.

But these are the very same companies that supply much of the oil consumed by the world's democracies. If these nations want to assure themselves of a reliable and stable flow of oil, they will have to establish a constructive partnership with the oil industry that puts national interests before intramural politics. Liberals have an easy solution. Nationalize the capitalistic oil companies. Replace the top two or three tiers of management with political appointees. Operate "Big Oil" as a national trust.

Projection: Maybe. I'll make a prediction. The Washington Establishment will eventually propose to nationalize America's oil industry. The legislation will be launched in an environment of extreme economic stress, debated with bitter acrimony, and accompanied by savage political infighting. Many of the proposed rules, regulations, and directives will not make any sense.

9. Reduce taxes and fees.

Exxon Mobil made a lot of money in 2005. Income from continuing operations was $36.1 billion. But that's not the whole story. Exxon Mobil paid almost three times that amount, $95.6 billion, in direct taxes, royalties, fees and duties. That's 45% more than this company paid in 2000. Trust me. You paid for these government imposed taxes, royalties and fees at the gas pump. Exxon Mobil simply passed them on to your wallet. And Exxon Mobil is not alone. High taxes, duties, fees and royalties are a key expense for any company in the oil industry. In addition, consumers also pay Federal, State and (usually) Local taxes in the United States on every gallon of gasoline they buy.

So. Do your own homework. How much are all these levies costing us per gallon of gasoline? And just who is really making the big money from the sale of oil?

Projection. There will not be any substantial reduction in government mandated costs – foreign or domestic. Washington politicians have no way to fund the lost tax revenue. Producer nation politicians clearly intend to milk consumer nations for as much $$ as they can. The long term trend for oil royalties, duties, taxes, and fees is up. Not down.

10. Don't Boycott Exxon Mobil

You assume that by boycotting Exxon Mobil, the company will be forced to reduce the price of gasoline. In a way, you are right. Exxon Mobil could reduce the price of the gasoline it sells though the company's branded gas stations. If Exxon Mobil's upstream operations reduced the price of the oil they sell to the company's downstream operations, and the refinery shaved its profits, Exxon Mobil could reduce the price of gasoline it sells to you.

But they won't. There are two key problems with this idea.

First. Let's deal with reality. Oil is a BIG business. Even with 2005 revenues of $370.68 billion, Exxon Mobil is too small to set the price of gasoline in the United States – or anywhere else. Boycotting Exxon Mobil's gasoline sales would work if there were a surplus of conventional light, sweet, crude oil, and excess gasoline refining capacity. But that's not the case. Oil supplies are tight and world refining capacity is stretched. In the event of a boycott, the company would simply sell its product to other distributors. You would buy Exxon Mobil gasoline at some other station's pump.

Second. Gasoline sales account for a fraction of Exxon Mobil's profits. Read the company's 10K filing with the Securities and Exchange Commission (SEC), and compare Exxon Mobil's total gasoline sales with world gasoline sales. Then calculate how much of this company's profits come from the sale of gasoline. (Hint: In addition to gasoline, Exxon Mobil's profits include sales of natural gas, crude oil, naphtha, aviation fuel, heating oil, diesel fuel, chemicals, and other petroleum products).

The bottom line. The market for oil and oil products is so large that boycotting Exxon Mobil, as big as it is, would not make any difference to world gasoline consumption, or the price of gasoline.

11. Face up to the reality of oil depletion.

The economic and cultural challenges of oil depletion are not going to begin sometime in the future. They have already begun. Go back through the challenges discussed in this article. If oil were plentiful, most of them would be trivialized. The challenges of Iraq and Iran, the use of oil and natural gas as a political weapon, the rising price of gasoline, the disregard for oil exploration and production contracts, the competition for oil resources, and the distrust of "Big Oil" are all symptoms of a depleting resource. We need to face the issue of depletion head-on.

Bill. You and your friends at Fox can do your viewers and listeners a great service by providing them with the truth about oil and natural gas depletion. Somehow we must encourage Congress to replace the current Energy Bill with one that will actually help America. (For more about energy legislation, see my article " The Energy Policy Act of 2005, Legislative Achievement or Management Fiasco?).

Prudent energy resource management must include conservation, ecologically responsible energy production and consumption, and the development of alternative energy resources. Oil and natural gas depletion will inevitably force extensive cultural change. Of particular interest is the development of a constructive response within our state, municipal and county infrastructure, the implementation of a pragmatic federal agenda, and the formation of productive partnerships between private and public organizations. Since no nation will be able to resolve its energy challenges without due consideration for the energy needs of other nations, we must encourage international cooperation in the development, production and consumption of our planet's energy resources.


Conclusion.

OK. By now your feeling a mixture of incredulity and anger. You don't like the challenges that lie ahead. This oil thing is nasty stuff. It sneers at your beliefs. Ignores your needs. Every possible option comes with its own economic, cultural and/or ecological baggage.

But that is precisely the point. There are NO painless ways to reduce the price of gasoline.

Bill. This is serious stuff. You have the opportunity to provide a great service to your viewers and listeners. Oil exploration, production, transportation, refining, and distribution is a complex subject. The economic and cultural impact of oil depletion is a real problem – today. You can see it in the rising price of gasoline. This is no time for pop-culture journalism. Please. undertake the responsibility to clearly understand the issues. Make an effort to explain them in a clear and concise manner to your audience. America needs a credible "No Spin" approach to the cultural and economic realities of oil depletion.

Is that too much to ask?


Ronald R. Cooke
The Cultural Economist

Additionally, if we hooked a pipe to his ass to collect the methane, and put a windmill in front of his mouth, that would go a long way to helping solve the energy problem.

It's easy: collect all the hot air coming from Bill O'Reilly, Pat Robertson and Ann Coulter, connect it to a brayton engine, and problem solved!

Ooh, i'm on fire!

It's easy: collect all the hot air coming from Bill O'Reilly, Pat Robertson and Ann Coulter, connect it to a brayton engine, and problem solved!

Ooh, i'm on fire!
You forgot Al Franken, Janeane Garafalo, and others.

And Howard Stern.

I fart as much or more than any of them. :)

Aww, Bill O'Rielly is such an idiot anyway. Why listen to him?

Aww, Bill O'Rielly is such an idiot anyway. Why listen to him?
That the letter is addressed to Bill O'Reilly is beside the point. What's in the letter is important for everyone to understand.

I have an idea: MOVE THE FUCK AWAY FROM OIL.

You have to understand Fox's agenda, if you start hinting that the reason for high oil prices is that oil is running out you'll end up with mass lemming hysteria. It's easier to scapegoat the evil oil companies.

I have an idea: MOVE THE FUCK AWAY FROM OIL.
If you take the time to read the article you'll understand the challenges in doing that.

You forgot Al Franken, Janeane Garafalo, and others.

And Howard Stern.
TRUTH

Additionally, if we hooked a pipe to his ass to collect the methane, and put a windmill in front of his mouth, that would go a long way to helping solve the energy problem.
Then how would he talk? (with the pipe and all)

Then how would he talk? (with the pipe and all)
He could still talk, it will just be muffled and incoherent which, IMHO, would be a good things.

Sure, China may have several times the number of people the US does, but how many of them are subsistance farmers who live out in the middle of fucking nowhere? Alot more than those who are using gasoline.

Sure, China may have several times the number of people the US does, but how many of them are subsistance farmers who live out in the middle of fucking nowhere? Alot more than those who are using gasoline.
True. That doesn't change anything, though. They're still running headlong into industrialization and they're going to be using coal to do it.

True. That doesn't change anything, though. They're still running headlong into industrialization and they're going to be using coal to do it.
I must've missed the part where coal = oil.

I must've missed the part where coal = oil.
The point is that we are running into oil scarcity so they will have to usse coal. They've already made the contracts with a few American companies to build coal gasification and liquification plants. They may want to use oil, but I'd like to have a dodo bird.

I must've missed the part where coal = oil.
Oil can be synthesized(sp?) using coal.

What this OP lacks to adress, though, is pollution. This isn't ONLY about energy. Much good will it do us to find more oil if the world is a desert wasteland in a century or two.

Oil can be synthesized(sp?) using coal.

What this OP lacks to adress, though, is pollution. This isn't ONLY about energy. Much good will it do us to find more oil if the world is a desert wasteland in a century or two.
You must not have read the whole article because it had a whole section on carbon sequestering. The post is about oil scarcity, though, not about global warming.

Actually the price went down today by 16 cents. It obviously made a difference. But hey, I live in a town that's over 70% conservative, and I bet alot of people watch O'Reilly here. I guess maybe you feel the same about voting.

This is my judgement on you, "Boycotting wont do anything, im only one man."

You saying this just makes me believe that you feel the same about voting.

Boycotting is one of the most effective demonstration of protest.

Actually the price went down today by 16 cents. It obviously made a difference. But hey, I live in a town that's over 70% conservative, and I bet alot of people watch O'Reilly here. I guess maybe you feel the same about voting.

This is my judgement on you, "Boycotting wont do anything, im only one man."

You saying this just makes me believe that you feel the same about voting.

Boycotting is one of the most effective demonstration of protest.
the price of gasoline went down today because the DOE's weekly inventory report showed a build in the supply of gasoline in the US and the DOE's gasoline demand report showed a roughly 3% decline in gasoline demand relative to last year at this time. It had nothing to do with Bill O'Reilly. Gasoline prices are soaring globally including in countries that Exxon Mobile, or any other western oil company, has nothing to do with. Read the article. Boycotting Exxon Mobile gas station will do absolutely nothing to bring down gas prices. Nothing. Zip. Nada. Inarguable at all.

You must not have read the whole article because it had a whole section on carbon sequestering. The post is about oil scarcity, though, not about global warming.
What? I took the time to read through all 11 sections, and didn't see anything about carbon sequestering.

And yes, I know it's about oil scarcity, but the two issues are linked. I happen to think oil scarcity is a necessary evil: if we weren't in danger of running out, nobody would give a damn about all the problems our reliance on fossil fuels may cause in the long term.

The only way to get out of this mess is clearly to use renewable, non-pollutant energy. Fortunately, we still have about... 40 year's worth of oil? That should be enough to make the transition possible if we just get off our collective lazy asses and start finding a solution now.

I like how it fails to mention that CEO Lee Raymond got a retirement package of nearly $400 million.

What? I took the time to read through all 11 sections, and didn't see anything about carbon sequestering.Actually, you're right. I confused this with another article I read today. I sit and read about energy all day so these articles soometimes bleed together.

And yes, I know it's about oil scarcity, but the two issues are linked. I happen to think oil scarcity is a necessary evil: if we weren't in danger of running out, nobody would give a damn about all the problems our reliance on fossil fuels may cause in the long term.I agree. I do see it as necessary to be real about it, though, and there will be no solution involving "clean and renewable" energy that will allow us to keep our easy motoring ways and our "3,000 mile ceaser salads." We're simply going to have to learn to live with less. We'll have to do that whether we like it or not. Might as well prepare at least mentally for it.

The only way to get out of this mess is clearly to use renewable, non-pollutant energy. Fortunately, we still have about... 40 year's worth of oil? That should be enough to make the transition possible if we just get off our collective lazy asses and start finding a solution now.
We don't have 40 years worth of oil. I believe that oil is peaking now and that we are about to enter decline. These bills we've accumulated over the past 100 years or so are going to be paid by us within the next decade.

I like how it fails to mention that CEO Lee Raymond got a retirement package of nearly $400 million.
So if we were to divide that between all Americans we could pay them each a little less than a dollar to pay back those high gasoline prices. He deserved that package. Next time you take a company and triple it's net worth in ten years I hope you get a similar package because you'll deserve it, too.

So if we were to divide that between all Americans we could pay them each a little less than a dollar to pay back those high gasoline prices. He deserved that package. Next time you take a company and triple it's net worth in ten years I hope you get a similar package because you'll deserve it, too.
It was more of a reference to how the author talked about the record breaking profits the company made compared to the fees they had to pay. There is no reason to feel sorry for this corporation.

Actually, you're right. I confused this with another article I read today. I sit and read about energy all day so these articles soometimes bleed together.

Whew. For a moment there I was thinking I was crazy or blind. Or both.


I agree. I do see it as necessary to be real about it, though, and there will be no solution involving "clean and renewable" energy that will allow us to keep our easy motoring ways and our "3,000 mile ceaser salads." We're simply going to have to learn to live with less. We'll have to do that whether we like it or not. Might as well prepare at least mentally for it.

Well, I think there'll be enough for us to go around if we're careful about it. Hydrogen could be used as a clean fuel source... but then again, we'll need electricity from wind farms/hydro dams/other sources to make it, so we might as well say bye-bye to all those shiny SUVs and get used to taking mass transit.


We don't have 40 years worth of oil. I believe that oil is peaking now and that we are about to enter decline. These bills we've accumulated over the past 100 years or so are going to be paid by us within the next decade.
I didn't say 40 years of CHEAP oil, but world reserves are estimated at 40 years, even if oil has peaked. Although it might be significantly lower, around 25 years, if demand continues to rise as fast and steadily as it has.

Although we'll have to pay higher, we still will have enough to go around until our alternative-powered power plants and cars are ready to run. That was my point. If oil ceased completely to exist tomorrow, the world might have as well stopped turning for all industrialized countries.

Because, we all know a huge gazoline engine is what really makes the world spin.

It was more of a reference to how the author talked about the record breaking profits the company made compared to the fees they had to pay. There is no reason to feel sorry for this corporation.
Not at all. I think the letter was more of an attempt to get people like Bill to deal with the energy situation we're in realistically than to cry for any corporation.

This is my judgement on you, "Boycotting wont do anything, im only one man."

You saying this just makes me believe that you feel the same about voting.

Boycotting is one of the most effective demonstration of protest.

Boycotting might be one of the most effective protests possible, but gasoline boycotts don't work. Pretty much ever.

O'Reilly's has the best chance of working, because he's not saying "Don't buy gas on X day." He's saying "Don't buy gas from Exxon." Except, that's difficult for a lot of people to do, and Americans as a whole don't do things that are difficult. Our parents did, our grandparents did, and some of Generations X and Y do, but that some is not the majority. We've lived a life of convenience; our poorest are wealthier than the average citizens of most countries. We don't really know what "hard" is. Even if Americans did boycott Exxon, it wouldn't much help.

The whole point of the article was that gas prices aren't artificially high. They are what they are because demand exceeds supply. Textbook example of a free market. If we don't curb our consumption, we'll be out of oil before we've developed practical workable alternative fuel sources. O'Reilly's Exxon boycott does nothing to address that - and that's the real issue.

Correlation does not prove causation.

Whew. For a moment there I was thinking I was crazy or blind. Or both.Yeah, sorry about that. The sequestration stuff I read today was from here: http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=11631

the price of gasoline went down today because the DOE's weekly inventory report showed a build in the supply of gasoline in the US and the DOE's gasoline demand report showed a roughly 3% decline in gasoline demand relative to last year at this time. It had nothing to do with Bill O'Reilly. Gasoline prices are soaring globally including in countries that Exxon Mobile, or any other western oil company, has nothing to do with. Read the article. Boycotting Exxon Mobile gas station will do absolutely nothing to bring down gas prices. Nothing. Zip. Nada. Inarguable at all.
They will if we boycott exxon. You don't have to get your gas from fucking exxon you know.

They will if we boycott exxon. You don't have to get your gas from fucking exxon you know.
The wholesale price of gasoline is not set by Exxon. It's set here: http://www.nymex.com by futures traders in unleaded gasoline contracts. Exxon makes almost no money on the sale of gasoline. It makes it's money on the production and refining of crude oil. If you boycott Exxon gas stations it will have no effect on the oil company it will only make small business men and women who independently own these stations very poor.

Well, I was mistaken. Boycotting Exxon won't work, but not for the reason I postulated.

The article is a must-read. O'Reilly is an ignorant blowhard (in addition to Robertson, Garafallo, Franken, et al).

I believe the the article hit the proverbial nail on the head. There are only two points that I have a mild and strong difference with, respectively.

Mild Differing Opinion: Futures Markets
While there is always volatility in commodity futures, these markets also provide invaluable service to both producers and consumers in that they take the bulk of the price risk on themselves in the pursuit of profit. These markets serve to minimize the occurance and severity of shortages and gluts in the market for the commodity of interest.

Srong Difference of Opinion: Nationalizing 'Big Oil'
This would prove disastroud in the long term, and would lead to a lack of viable aternative sources for energy for quite a long time. Nationalizing the industry would remove the incentives involved in taking risks to explore for new sources and would lead to bureaucrats making decisions that grow their budgets and influence, rather than benefiting consumers or taxpayers. Also, so long as the government is controlling the oil business, they will be disinclinded to have the private sector develop and profit from competing energy sources. Without the potential for large profit, individuals and organizations will be much less likely to take the risks involved in developing alternatives and bringing them to market.

Based on this some will surely ask "If the private sector is so good at innovation, why don't we have viable alternatives in place now?". Others will claim that the answer to that question is because of a vast conspiracy between 'Big Oil' and politicians. The real reason is that because oil has been cheap and relatively plentiful compared to new, untested technologies, alternatives have not been able to compete on price for the dollars of the average consumer - thereby negating the profit incentive. If the government just forced us to use the alternatives, we'll be left with a lot less energy for our money.

Take a look a ethanol - as it is right now this is not a long-term solution. Oil is used in the harvesting, refining, and transportation of ethanol. It currently cannot be transported through pipelines, meaning that it is transported by burning fuel through truck, train, or barge. Also, ethanol contains less energy than gasonline, therfoore more is needed to get the same amount of energy (think gas mileage). The only reason that E85 is cheaper in some regions is because there is no Federal tax on it (18.4 cents) and likely no state or local tax as well, in addition to federal subsidy. The market price of Ethanol is MORE than the price of gasoline, for LESS energy, especially if you live farther away from the corn states in the midwest.

But if someone could figure out a way to ship ethanol by pipe and mix it with gasonline at the refinery, thereby reducing the need to transport it as much, it may be a bit more viable.

The increasing cost of gasoline and the large profits being reaped by 'Big Oil' is the best thing that could happen to people who hate oil and oil companies. Others are now incented to try to come up with ways to take some of those profits from 'Big Oil' with new ideas. The difference with this method of taking profits from 'Big Oil' and a windfall profits tax, is that the former benefits the consumer and the nation economically, while the latter hurts consumers by removing incentives.

PsychoticDan - this is your thread and you usually keep me honest on these things :p ... any comments on this?

The article is a must-read. O'Reilly is an ignorant blowhard (in addition to Robertson, Garafallo, Franken, et al).

I believe the the article hit the proverbial nail on the head. There are only two points that I have a mild and strong difference with, respectively.

Mild Differing Opinion: Futures Markets
While there is always volatility in commodity futures, these markets also provide invaluable service to both producers and consumers in that they take the bulk of the price risk on themselves in the pursuit of profit. These markets serve to minimize the occurance and severity of shortages and gluts in the market for the commodity of interest.

Srong Difference of Opinion: Nationalizing 'Big Oil'
This would prove disastroud in the long term, and would lead to a lack of viable aternative sources for energy for quite a long time. Nationalizing the industry would remove the incentives involved in taking risks to explore for new sources and would lead to bureaucrats making decisions that grow their budgets and influence, rather than benefiting consumers or taxpayers. Also, so long as the government is controlling the oil business, they will be disinclinded to have the private sector develop and profit from competing energy sources. Without the potential for large profit, individuals and organizations will be much less likely to take the risks involved in developing alternatives and bringing them to market.

Based on this some will surely ask "If the private sector is so good at innovation, why don't we have viable alternatives in place now?". Others will claim that the answer to that question is because of a vast conspiracy between 'Big Oil' and politicians. The real reason is that because oil has been cheap and relatively plentiful compared to new, untested technologies, alternatives have not been able to compete on price for the dollars of the average consumer - thereby negating the profit incentive. If the government just forced us to use the alternatives, we'll be left with a lot less energy for our money.

Take a look a ethanol - as it is right now this is not a long-term solution. Oil is used in the harvesting, refining, and transportation of ethanol. It currently cannot be transported through pipelines, meaning that it is transported by burning fuel through truck, train, or barge. Also, ethanol contains less energy than gasonline, therfoore more is needed to get the same amount of energy (think gas mileage). The only reason that E85 is cheaper in some regions is because there is no Federal tax on it (18.4 cents) and likely no state or local tax as well, in addition to federal subsidy. The market price of Ethanol is MORE than the price of gasoline, for LESS energy, especially if you live farther away from the corn states in the midwest.

But if someone could figure out a way to ship ethanol by pipe and mix it with gasonline at the refinery, thereby reducing the need to transport it as much, it may be a bit more viable.

The increasing cost of gasoline and the large profits being reaped by 'Big Oil' is the best thing that could happen to people who hate oil and oil companies. Others are now incented to try to come up with ways to take some of those profits from 'Big Oil' with new ideas. The difference with this method of taking profits from 'Big Oil' and a windfall profits tax, is that the former benefits the consumer and the nation economically, while the latter hurts consumers by removing incentives.

PsychoticDan - this is your thread and you usually keep me honest on these things :p ... any comments on this?
You pretty much said everything I agree with. One difference - I don't thinnk the writer was in favor of natuinalizing oil, he was just saying that it was probably going to happen whether it's a good thing or not.

How do you feel about a taxation at the pump that goes to funding for alternative fuel sources?

How do you feel about a taxation at the pump that goes to funding for alternative fuel sources?
A taxation at the pump to build freight and mass transit rail would be much better. No alternative fuel can compete with the fact that trains can get 400 miles+ to the gallon. We get all tht cross country freight out of deisel trucks and all those people out of their cars and we get way more bang for our buck as far as energy conservation is concerned. Let private industry work on alt fuels. If they're economic then they can make money. If they can make money then they'll produce it.

Sure, China may have several times the number of people the US does, but how many of them are subsistance farmers who live out in the middle of fucking nowhere? Alot more than those who are using gasoline.

That is changing at light speed however. China is now witnessing the largest mass migration in human history as the rural pesants swarm into the cities. Over 100 million have moved in the last 15 years and another 300 million will join them in the next 20. China is fast becoming an urban industrial nation.

http://www.abc.net.au/worldtoday/content/2006/s1605771.htm

"We're talking about the largest urban migration in human history. Basically, China is moving the equivalent of the population of the United States from the countryside into cities in only 20 years.

That's like building one new Shanghai every year."

and

"On one hand it is terrifying. I mean, you know, urban residents in China use three times the resources that rural residents do.

So the burden on not only China's domestic environment, but the global environment in terms of carbon dioxide and global warming pollution is enormous."

Here are my thoughts:
1. Oil companies can afford a few years of no profits. Why don't they cut down their profits?

2. As of now, "alternative" fuels really aren't very good alternatives. Getting hydrogen from water takes alot of electricity. Solar panels and wind mill generator thingies don't produce alot of electricity. You'd have to nuke the entire US and fill the entire landscape with wind mills and solar panels just to generate enough power to produce enough hydrogen.

Electric cars take way too long to charge(8 hours I think), don't go very fast, and have incredibly short ranges(100 miles, I think). Plus, where would the power come from? Mostly coal-powered plants, taking away any environmental benefits.

I'm a bit tired right now, so I can't think of any more "alternatives".

3. I've watched almost every episode of the Factor and you've taken his words out of context. He said HE wouldn't buy gas from exxon. Not you. Him. Not much of a boycott there. Of course, there might be some agendas here. Either that or you think he's too conservative(some conservatives think he's too liberal.)

Here are my thoughts:
1. Oil companies can afford a few years of no profits. Why don't they cut down their profits?

2. As of now, "alternative" fuels really aren't very good alternatives. Getting hydrogen from water takes alot of electricity. Solar panels and wind mill generator thingies don't produce alot of electricity. You'd have to nuke the entire US and fill the entire landscape with wind mills and solar panels just to generate enough power to produce enough hydrogen.

Electric cars take way too long to charge(8 hours I think), don't go very fast, and have incredibly short ranges(100 miles, I think). Plus, where would the power come from? Mostly coal-powered plants, taking away any environmental benefits.

I'm a bit tired right now, so I can't think of any more "alternatives".

3. I've watched almost every episode of the Factor and you've taken his words out of context. He said HE wouldn't buy gas from exxon. Not you. Him. Not much of a boycott there. Of course, there might be some agendas here. Either that or you think he's too conservative(some conservatives think he's too liberal.)
I didn't write the piece, I posted it. The only agenda is that Americans and teh rest of teh world need to get real about energy and Bill isn't helping.

Here are my thoughts:
1. Oil companies can afford a few years of no profits. Why don't they cut down their profits?

*snip*



It's not that easy or simple. Most oil companies lost lots of money for a couple of years not long ago. I don't feel like pouring through numerous 10-K filings to find out, but I'd guess that, in recent years at least, they are still coming out ahead on balance of profitable years vs. loss years and the magnitudes of each.

However, this doesn't address what is done with those profits. The money goes somewhere, and chief executives take a much smaller share than you might think. The profits can be returned to investors who ponied up their money to buy the stock either through dividends or stock buy-backs. Before some start getting angry that rich fat-cats get money this way, be aware that for most large, publicly traded companies, it is pension funds, 401k's and mututal funds that generally hold the largest share of a company's stock, by investor class.

The other thing that can be done with profit is to reinvest it back into the business. This money could then be used however the company sees fit to best grow the business, by either reinvesting in new reserves, R&D, equipment, more employees, etc. If the management team is doing an excellent job which is generating these profits, you can bet that their incentives and compensation will go up too.

Also, with regard to Exxon Mobil at least, most of their sales come from contries outside of the United States and are not gasoline. Cutting their profits would not have a large direct effect on gasoline prices.