Finally, we find out WHY oil is so expensive..
Thread Starter
Registered User
Joined: Apr 2003
Posts: 6,564
Likes: 6
From: Cummins Technical Center, IN
Finally, we find out WHY oil is so expensive..
From one of my favorite news sources...
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Congress held testimony on the high prices of crude oil, calling before the Judiciary Committee some heavy hitters in the energy industry. These men represented "big oil" which is supposedly gouging us all.
The industry lineup was formidable: Robert Malone, Chairman and President of BP America, Inc.; John Hofmeister, President, Shell Oil Company; Peter Robertson, Vice Chairman of the Board, Chevron Corporation; John Lowe, Executive Vice President, Conoco Philips Company; and Stephen Simon, Senior Vice President, Exxon Mobil Corporation. Not surprisingly, the petroleum executives stole the show, as they were far smarter, infinitely better informed, and much more public-spirited than the Senate Democrats.
One theme that emerged from the hearing was the surprisingly small role played by American oil companies in the global petroleum market.
John Lowe pointed out:
Stephen Simon amplified:
Another theme of the day's testimony was that, if anyone is "gouging" consumers through the high price of gasoline, it is federal and state governments, not American oil companies. On the average, 15% percent of the cost of gasoline at the pump goes for taxes, while only 4% represents oil company profits. These figures were repeated several times, but, strangely, not a single Democratic Senator proposed relieving consumers' anxieties about gas prices by reducing taxes.
The last theme that was sounded repeatedly was Congress's responsibility for the fact that American companies have access to so little petroleum.
Shell's John Hofmeister explained:
Later in the hearing, Senator Orrin Hatch walked Hofmeister through the Congress' latest efforts to block energy independence:
HATCH: I want to get into that. In other words, we're talking about Utah, Colorado and Wyoming. It's fair to say that they're not considered part of America's $22 billion of proven reserves.
HOFMEISTER: Not at all.
HATCH: No, but experts agree that there's between 800 billion to almost 2 trillion barrels of oil that could be recoverable there, and that's good oil, isn't it?
HOFMEISTER: That's correct.
HATCH: It could be recovered at somewhere between $30 and $40 a barrel?
HOFMEISTER: I think those costs are probably a bit dated now, based upon what we've seen in the inflation...
HATCH: Well, somewhere in that area.
HOFMEISTER: I don't know what the exact cost would be, but, you know, if there is more supply, I think inflation in the oil industry would be cracked. And we are facing severe inflation because of the limited amount of supply against the demand.
HATCH: I guess what I'm saying, though, is that if we started to develop the oil shale in those three states we could do it within this framework of over $100 a barrel and make a profit.
HOFMEISTER: I believe we could.
HATCH: And we could help our country alleviate its oil pressures.
HOFMEISTER: Yes.
HATCH: But they're stopping us from doing that right here, as we sit here. We just had a hearing last week where Democrats had stopped the ability to do that, in at least Colorado.
HOFMEISTER: Well, as I said in my opening statement, I think the public policy constraints on the supply side in this country are a disservice to the American consumer.
Every once in a while, Congressional hearings turn out to be informative.
--from www.powerlineblog.com
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Congress held testimony on the high prices of crude oil, calling before the Judiciary Committee some heavy hitters in the energy industry. These men represented "big oil" which is supposedly gouging us all.
The industry lineup was formidable: Robert Malone, Chairman and President of BP America, Inc.; John Hofmeister, President, Shell Oil Company; Peter Robertson, Vice Chairman of the Board, Chevron Corporation; John Lowe, Executive Vice President, Conoco Philips Company; and Stephen Simon, Senior Vice President, Exxon Mobil Corporation. Not surprisingly, the petroleum executives stole the show, as they were far smarter, infinitely better informed, and much more public-spirited than the Senate Democrats.
One theme that emerged from the hearing was the surprisingly small role played by American oil companies in the global petroleum market.
John Lowe pointed out:
I cannot overemphasize the access issue. Access to resources is severely restricted in the United States and abroad, and the American oil industry must compete with national oil companies who are often much larger and have the support of their governments.
We can only compete directly for 7 percent of the world's available reserves while about 75 percent is completely controlled by national oil companies and is not accessible.
We can only compete directly for 7 percent of the world's available reserves while about 75 percent is completely controlled by national oil companies and is not accessible.
Exxon Mobil is the largest U.S. oil and gas company, but we account for only 2 percent of global energy production, only 3 percent of global oil production, only 6 percent of global refining capacity, and only 1 percent of global petroleum reserves. With respect to petroleum reserves, we rank 14th. Government-owned national oil companies dominate the top spots. For an American company to succeed in this competitive landscape and go head to head with huge government-backed national oil companies, it needs financial strength and scale to execute massive complex energy projects requiring enormous long-term investments.
To simply maintain our current operations and make needed capital investments, Exxon Mobil spends nearly $1 billion each day.
Because foreign companies and governments control the overwhelming majority of the world's oil, most of the price you pay at the pump is the cost paid by the American oil company to acquire crude oil from someone else:
Last year, the average price in the United States of a gallon of regular unleaded gasoline was around $2.80. On average in 2007, approximately 58 percent of the price reflected the amount paid for crude oil. Consumers pay for that crude oil, and so do we.
Of the 2 million barrels per day Exxon Mobil refined in 2007 here in the United States, 90 percent were purchased from others.
To simply maintain our current operations and make needed capital investments, Exxon Mobil spends nearly $1 billion each day.
Because foreign companies and governments control the overwhelming majority of the world's oil, most of the price you pay at the pump is the cost paid by the American oil company to acquire crude oil from someone else:
Last year, the average price in the United States of a gallon of regular unleaded gasoline was around $2.80. On average in 2007, approximately 58 percent of the price reflected the amount paid for crude oil. Consumers pay for that crude oil, and so do we.
Of the 2 million barrels per day Exxon Mobil refined in 2007 here in the United States, 90 percent were purchased from others.
The last theme that was sounded repeatedly was Congress's responsibility for the fact that American companies have access to so little petroleum.
Shell's John Hofmeister explained:
While all oil-importing nations buy oil at global prices, some, notably India and China, subsidize the cost of oil products to their nation's consumers, feeding the demand for more oil despite record prices. They do this to speed economic growth and to ensure a competitive advantage relative to other nations.
Meanwhile, in the United States, access to our own oil and gas resources has been limited for the last 30 years, prohibiting companies such as Shell from exploring and developing resources for the benefit of the American people.
Senator Sessions, I agree, it is not a free market.
According to the Department of the Interior, 62 percent of all on-shore federal lands are off limits to oil and gas developments, with restrictions applying to 92 percent of all federal lands. We have an outer continental shelf moratorium on the Atlantic Ocean, an outer continental shelf moratorium on the Pacific Ocean, an outer continental shelf moratorium on the eastern Gulf of Mexico, congressional bans on on-shore oil and gas activities in specific areas of the Rockies and Alaska, and even a congressional ban on doing an analysis of the resource potential for oil and gas in the Atlantic, Pacific and eastern Gulf of Mexico.
The Argonne National Laboratory did a report in 2004 that identified 40 specific federal policy areas that halt, limit, delay or restrict natural gas projects. I urge you to review it. It is a long list. If I may, I offer it today if you would like to include it in the record.
When many of these policies were implemented, oil was selling in the single digits, not the triple digits we see now. The cumulative effect of these policies has been to discourage U.S. investment and send U.S. companies outside the United States to produce new supplies.
As a result, U.S. production has declined so much that nearly 60 percent of daily consumption comes from foreign sources.
The problem of access can be solved in this country by the same government that has prohibited it. Congress could have chosen to lift some or all of the current restrictions on exportation and production of oil and gas. Congress could provide national policy to reverse the persistent decline of domestically secure natural resource development.
Meanwhile, in the United States, access to our own oil and gas resources has been limited for the last 30 years, prohibiting companies such as Shell from exploring and developing resources for the benefit of the American people.
Senator Sessions, I agree, it is not a free market.
According to the Department of the Interior, 62 percent of all on-shore federal lands are off limits to oil and gas developments, with restrictions applying to 92 percent of all federal lands. We have an outer continental shelf moratorium on the Atlantic Ocean, an outer continental shelf moratorium on the Pacific Ocean, an outer continental shelf moratorium on the eastern Gulf of Mexico, congressional bans on on-shore oil and gas activities in specific areas of the Rockies and Alaska, and even a congressional ban on doing an analysis of the resource potential for oil and gas in the Atlantic, Pacific and eastern Gulf of Mexico.
The Argonne National Laboratory did a report in 2004 that identified 40 specific federal policy areas that halt, limit, delay or restrict natural gas projects. I urge you to review it. It is a long list. If I may, I offer it today if you would like to include it in the record.
When many of these policies were implemented, oil was selling in the single digits, not the triple digits we see now. The cumulative effect of these policies has been to discourage U.S. investment and send U.S. companies outside the United States to produce new supplies.
As a result, U.S. production has declined so much that nearly 60 percent of daily consumption comes from foreign sources.
The problem of access can be solved in this country by the same government that has prohibited it. Congress could have chosen to lift some or all of the current restrictions on exportation and production of oil and gas. Congress could provide national policy to reverse the persistent decline of domestically secure natural resource development.
HATCH: I want to get into that. In other words, we're talking about Utah, Colorado and Wyoming. It's fair to say that they're not considered part of America's $22 billion of proven reserves.
HOFMEISTER: Not at all.
HATCH: No, but experts agree that there's between 800 billion to almost 2 trillion barrels of oil that could be recoverable there, and that's good oil, isn't it?
HOFMEISTER: That's correct.
HATCH: It could be recovered at somewhere between $30 and $40 a barrel?
HOFMEISTER: I think those costs are probably a bit dated now, based upon what we've seen in the inflation...
HATCH: Well, somewhere in that area.
HOFMEISTER: I don't know what the exact cost would be, but, you know, if there is more supply, I think inflation in the oil industry would be cracked. And we are facing severe inflation because of the limited amount of supply against the demand.
HATCH: I guess what I'm saying, though, is that if we started to develop the oil shale in those three states we could do it within this framework of over $100 a barrel and make a profit.
HOFMEISTER: I believe we could.
HATCH: And we could help our country alleviate its oil pressures.
HOFMEISTER: Yes.
HATCH: But they're stopping us from doing that right here, as we sit here. We just had a hearing last week where Democrats had stopped the ability to do that, in at least Colorado.
HOFMEISTER: Well, as I said in my opening statement, I think the public policy constraints on the supply side in this country are a disservice to the American consumer.
Every once in a while, Congressional hearings turn out to be informative.
--from www.powerlineblog.com
Registered User
Joined: Oct 2002
Posts: 7,543
Likes: 4
From: Tomball, Texas
Excellent.
But we all know the politicians won't do anything to tick off the Sierra Club, Greenpeace, Friends of Earth, or any other idiot groups that won't let the US be energy independent.
MikeyB
But we all know the politicians won't do anything to tick off the Sierra Club, Greenpeace, Friends of Earth, or any other idiot groups that won't let the US be energy independent.
MikeyB
Registered User
Joined: Sep 2006
Posts: 911
Likes: 0
From: Oklahoma
what a bunch of BS!
From one of my favorite news sources...
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Congress held testimony on the high prices of crude oil, calling before the Judiciary Committee some heavy hitters in the energy industry. These men represented "big oil" which is supposedly gouging us all.
The industry lineup was formidable: Robert Malone, Chairman and President of BP America, Inc.; John Hofmeister, President, Shell Oil Company; Peter Robertson, Vice Chairman of the Board, Chevron Corporation; John Lowe, Executive Vice President, Conoco Philips Company; and Stephen Simon, Senior Vice President, Exxon Mobil Corporation. Not surprisingly, the petroleum executives stole the show, as they were far smarter, infinitely better informed, and much more public-spirited than the Senate Democrats.
One theme that emerged from the hearing was the surprisingly small role played by American oil companies in the global petroleum market.
John Lowe pointed out:
Stephen Simon amplified:
Another theme of the day's testimony was that, if anyone is "gouging" consumers through the high price of gasoline, it is federal and state governments, not American oil companies. On the average, 15% percent of the cost of gasoline at the pump goes for taxes, while only 4% represents oil company profits. These figures were repeated several times, but, strangely, not a single Democratic Senator proposed relieving consumers' anxieties about gas prices by reducing taxes.
The last theme that was sounded repeatedly was Congress's responsibility for the fact that American companies have access to so little petroleum.
Shell's John Hofmeister explained:
Later in the hearing, Senator Orrin Hatch walked Hofmeister through the Congress' latest efforts to block energy independence:
HATCH: I want to get into that. In other words, we're talking about Utah, Colorado and Wyoming. It's fair to say that they're not considered part of America's $22 billion of proven reserves.
HOFMEISTER: Not at all.
HATCH: No, but experts agree that there's between 800 billion to almost 2 trillion barrels of oil that could be recoverable there, and that's good oil, isn't it?
HOFMEISTER: That's correct.
HATCH: It could be recovered at somewhere between $30 and $40 a barrel?
HOFMEISTER: I think those costs are probably a bit dated now, based upon what we've seen in the inflation...
HATCH: Well, somewhere in that area.
HOFMEISTER: I don't know what the exact cost would be, but, you know, if there is more supply, I think inflation in the oil industry would be cracked. And we are facing severe inflation because of the limited amount of supply against the demand.
HATCH: I guess what I'm saying, though, is that if we started to develop the oil shale in those three states we could do it within this framework of over $100 a barrel and make a profit.
HOFMEISTER: I believe we could.
HATCH: And we could help our country alleviate its oil pressures.
HOFMEISTER: Yes.
HATCH: But they're stopping us from doing that right here, as we sit here. We just had a hearing last week where Democrats had stopped the ability to do that, in at least Colorado.
HOFMEISTER: Well, as I said in my opening statement, I think the public policy constraints on the supply side in this country are a disservice to the American consumer.
Every once in a while, Congressional hearings turn out to be informative.
--from www.powerlineblog.com
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Congress held testimony on the high prices of crude oil, calling before the Judiciary Committee some heavy hitters in the energy industry. These men represented "big oil" which is supposedly gouging us all.
The industry lineup was formidable: Robert Malone, Chairman and President of BP America, Inc.; John Hofmeister, President, Shell Oil Company; Peter Robertson, Vice Chairman of the Board, Chevron Corporation; John Lowe, Executive Vice President, Conoco Philips Company; and Stephen Simon, Senior Vice President, Exxon Mobil Corporation. Not surprisingly, the petroleum executives stole the show, as they were far smarter, infinitely better informed, and much more public-spirited than the Senate Democrats.
One theme that emerged from the hearing was the surprisingly small role played by American oil companies in the global petroleum market.
John Lowe pointed out:
Stephen Simon amplified:
Another theme of the day's testimony was that, if anyone is "gouging" consumers through the high price of gasoline, it is federal and state governments, not American oil companies. On the average, 15% percent of the cost of gasoline at the pump goes for taxes, while only 4% represents oil company profits. These figures were repeated several times, but, strangely, not a single Democratic Senator proposed relieving consumers' anxieties about gas prices by reducing taxes.
The last theme that was sounded repeatedly was Congress's responsibility for the fact that American companies have access to so little petroleum.
Shell's John Hofmeister explained:
Later in the hearing, Senator Orrin Hatch walked Hofmeister through the Congress' latest efforts to block energy independence:
HATCH: I want to get into that. In other words, we're talking about Utah, Colorado and Wyoming. It's fair to say that they're not considered part of America's $22 billion of proven reserves.
HOFMEISTER: Not at all.
HATCH: No, but experts agree that there's between 800 billion to almost 2 trillion barrels of oil that could be recoverable there, and that's good oil, isn't it?
HOFMEISTER: That's correct.
HATCH: It could be recovered at somewhere between $30 and $40 a barrel?
HOFMEISTER: I think those costs are probably a bit dated now, based upon what we've seen in the inflation...
HATCH: Well, somewhere in that area.
HOFMEISTER: I don't know what the exact cost would be, but, you know, if there is more supply, I think inflation in the oil industry would be cracked. And we are facing severe inflation because of the limited amount of supply against the demand.
HATCH: I guess what I'm saying, though, is that if we started to develop the oil shale in those three states we could do it within this framework of over $100 a barrel and make a profit.
HOFMEISTER: I believe we could.
HATCH: And we could help our country alleviate its oil pressures.
HOFMEISTER: Yes.
HATCH: But they're stopping us from doing that right here, as we sit here. We just had a hearing last week where Democrats had stopped the ability to do that, in at least Colorado.
HOFMEISTER: Well, as I said in my opening statement, I think the public policy constraints on the supply side in this country are a disservice to the American consumer.
Every once in a while, Congressional hearings turn out to be informative.
--from www.powerlineblog.com
Registered User
Joined: Mar 2004
Posts: 3,988
Likes: 7
From: Nebraska
As long as Americans keep voting the morons that are in office now back to Washington we will continue to get the same results. To expect a different result without making a change is the definition of insanity.
The most recent example of "Government Gone Wild" is trying to add the polar bear to the protected species list. In 1980 there were 5,000 polar bears.Today, there are 25,000. Seems to me they like global warming.
If they were added to the list it would stop any further drilling of oil in Alaska. 
We have met the enemy, and they are us.
The most recent example of "Government Gone Wild" is trying to add the polar bear to the protected species list. In 1980 there were 5,000 polar bears.Today, there are 25,000. Seems to me they like global warming.
If they were added to the list it would stop any further drilling of oil in Alaska. We have met the enemy, and they are us.
Trending Topics
Registered User
Joined: Jan 2007
Posts: 196
Likes: 0
From: Texas
Seriously though, I don't care whether you consider yourself a liberal, or conservative, and if you consider yourself a Republican or a Democrat. The fact is, that Democrats not only want to keep taxes high, they want to raise them. Listen to just our two democrat nominees right now. Go back and listen to all those democrats who are now in congress, and then look at their track record.
Now, having said that, Republicans are any better. They sit back and allow it to happen, or just go along with it.
What we have here, is a failure to communicate, a failure to understand, and a failure to properly lead a country in the correct direction.
I have a feeling though, this thread is about to be closed because its going to get (or I just made it...eek!) to political.
Registered User
Joined: Dec 2003
Posts: 14,672
Likes: 9
From: Montana
More domestic drilling won't solve the problem, any oil will be sold at the same price it's going for on the world market.
What makes anyone feel like the US oil companies will give us a break?
High oil prices are mainly the result high world demand and the huge devaluation of the US dollar caused by the current administration's spend and borrow rather than raise taxes tactic.
What makes anyone feel like the US oil companies will give us a break?
High oil prices are mainly the result high world demand and the huge devaluation of the US dollar caused by the current administration's spend and borrow rather than raise taxes tactic.
Registered User
Joined: Sep 2007
Posts: 2,372
Likes: 1
right now, domestically produced oil is basically being sold back to us for a HUGE profit, by the speculators. as long as the oil companies control every phase of production and sales, and the speculators have free reign to bid the price up (regardless of rising supplies, and decreasing demand), there is no guarantee that oil produced fron new drilling will drop prices at the pump. saudi arabia increased production by 300,000 barrels/day and the price went up! they also said that they will be able to up production by 12.5 million barrels/day by 2009, and the speculators kept bidding the futures price up! world production by opec and non-opec countries has recently increased by over 1 million barrels/day, and the price of a barrel continues to skyrocket. saying that simply drilling for more oil is the solution, is like saying "i'm losing fuel because of a hole in my fuel tank, so i need to fill up more frequently, instead of fixing the hole in the tank".
Thread Starter
Registered User
Joined: Apr 2003
Posts: 6,564
Likes: 6
From: Cummins Technical Center, IN
More domestic drilling won't solve the problem, any oil will be sold at the same price it's going for on the world market.
What makes anyone feel like the US oil companies will give us a break?
High oil prices are mainly the result high world demand and the huge devaluation of the US dollar caused by the current administration's spend and borrow rather than raise taxes tactic.
What makes anyone feel like the US oil companies will give us a break?
High oil prices are mainly the result high world demand and the huge devaluation of the US dollar caused by the current administration's spend and borrow rather than raise taxes tactic.
Yes, the inflation is one element-- but let's set that aside temporarily.
It's simply wrong to say that "domestic drilling won't solve the problem because it will be sold on the world market."
The problem is that the world market is controlled by huge oil companies owned completely by foreign governments. It's not BP or Chevron pulling the oil out of the ground in Saudi Arabia, nor are they the ones getting rich off Saudi oil-- it's the SAUDIS.
The American-based oil companies mentioned in this piece are powerless to lower prices because they can't produce their own crude. They have to BUY it on the world market from the huge oil companies owned by foreign governments.
In effect, the high pump prices are largely going to enrich the Saudis, Huga Chavez, Russia, Mexico, etc-- all of whom have massive oil operations that dwarf BP/Amoco, Chevron/Texaco, etc.
If nothing else, the most relevant fact in this piece is that "BIG OIL" ISN'T BIG. Not when compared to the other oil producers against whom they must compete.
In the US, we have the gov't working against oil companies essentially leaving them little to no place to go to produce their own oil at low cost. They are forced to go offshore and extract the expensive oil, while leaving the cheaper oil in place to ensure a woolly mammoth gravesite isn't desecrated
Instead, they have to BUY the crude oil from a market dominated by mostly corrupt state-run oil companies.
**
Let's draw a little analogy. Let's say you are a small corn farmer. You live a couple miles from a massive ADM owned corporate farm that produces 20 bushels for every bushel you produce. You can't buy more land near you because you border federal lands, but the ADM farm doesn't have this limitation.
Congress passes legislation mandating ethanol in fuels, so the demand for corn goes up. But you are already producing as much corn as you can at a reasonable cost. You can spend more money on herbicides, fertilizers, spend more money for the latest Pioneer hybrid seed or whatever-- but you can only slightly increase your corn production because you can't buy more land adjoining you. So, through innovation you've managed to increase yield probably 10%. Unfortunately, your costs also went up, so you've offset a good portion of the improved yield.
The ADM farm laughs all the way to the bank.
You are making "record profits" off your corn crop, but what can you do with that money? You're already using your existing land as efficiently as you can in an effort to maximize yield. The only way to expand your operation is to buy more land a few counties over.
But you can't use that separated land very effectively, as you'll have to transport your machinery a long way to go and manage it, and you have to haul your chemicals and seeds that much farther. Never mind trying to build an irrigation system from scratch.
Still, it's your only option if you want to compete at all with the big ADM farm. So you buy new tractors and equipment, run irrigation pipe, build some access roads, and do what it takes to put this land in production.
Your son comes home from school one day and tells you that he's being teased. Other kids are saying that he's a spoiled brat because his daddy is a corn farmer making "record profits". They point to all the new tractors, barns, silos, and outbuildings as proof of your windfall corn farmer profits and that your son is spoiled.
Now *you* know that your overall profit margin has remained the same, but because you have a bigger operation now, there's more income--but also more overhead.
******
Unlike corn, oil has no real substitute. If high corn prices make corn syrup prices too high, I can use can sugar or beet sugar instead. I can use wheat instead of corn meal. Etc, etc.
We can't blame "big oil" for high prices, because they simply play TOO SMALL a role to be able to influence the price. Just as our poor small-time corn farmer couldn't produce enough corn to singlehandedly lower the price for corn, neither can American oil companies produce enough crude to lower the price. They have been pushed out of the crude market. Because they can't produce their own at a reasonable cost, they have to buy it on the world market at unreasonable prices--- then pass that on to the consumer.
CRUDE IS KING. All the problem of high *pump* prices are because of high CRUDE prices.
Blaming the "big 3" oil companies for high pump prices is like blaming a trucking company for high transport costs or blaming an airline for higher ticket prices. All of these companies are seeing record costs themselves, and they are just trying to stay in business.
The problem isn't that Big oil is too big, it's that Big Oil isn't big enough!
JH
Registered User
Joined: Sep 2007
Posts: 2,372
Likes: 1
so what you're saying hohn, is that if roughly 35% of the oil we use, was pulled from U.S. soil, the oil companies would be more in control of the price, and therefore we wouldn't have to pay these extreme 'market' prices for imported oil, right? but roughly 35% of the oil we currently use IS pulled from U.S. soil, and is NOT priced any differently than the oil that we import from any opec or non-opec country!