Thought ya'll would like to read this. My father-in-law works for Exxon and recieved this e-mail.



WHY THE RECENT INCREASES IN U.S. GASOLINE PRICES?

Recently we've all heard or read news reports about increasing gasoline
prices, and no doubt you've noticed it when filling up your car. As we
approach the summer driving season, the following are some facts to
help you better understand what's going on with U.S. gasoline prices and to
help you explain this to your family, friends, and neighbors.

Gasoline prices are impacted by a number of factors, including changes
In the price of crude oil, supply and demand, government regulations,
taxes, and transportation costs. There are a number of these factors
currently affecting the price of gasoline in the United States:

Crude Oil Prices Have Increased
Gasoline prices are higher this year than last year primarily because
of higher crude oil prices.
Here are a few facts:
· Crude oil is the major component in gasoline.
· Crude oil typically accounts for 40-50% of the cost of gasoline. A
$1 per barrel increase in crude costs generally translates to a 2-3 cent
per gallon increase at the pump.
· World wide oil demand increased over 3% in 2004, led by growth in
Asia (China and India) and the U.S.
· The market price for crude oil is the result of thousands of buyers
going to market around the world, bidding for the available crude. The
price also includes the effects of speculators and hedge funds in the
futures markets.
· Since the U.S. relies on foreign crude oil imports, U.S. refiners
Must compete in the world market to purchase their share of that crude and
increasingly, must also compete with other buyers for refined products,
such as gasoline.
· Geopolitical uncertainties in major oil-producing countries can
also cause market prices to rise due to actual disruptions of crude oil
Supplies and / or speculation about future supply availability.

Market Forces of Supply & Demand
The market forces of supply and demand affect the price of crude oil
and ultimately gasoline.
Here are a few facts:
· Uncertainties in supply over the past year – attributable to bad
weather, i.e. hurricanes and political instability in some key oil
producing regions, have impacted crude prices.
· Availability of imports from outside the U.S. can affect the
supply/demand balance, as can unforeseen operating problems within the
refining and distribution system, particularly during periods of major
refinery maintenance, seasonal specification changes (RVP), and
tightening fuel specifications (sulfur reductions).

Fuel Demand Continues to Increase
Americans drive more vehicles and more miles than ever before -- U.S.
gasoline demand was up 1.4 percent in 2004 over the previous year.
Here are a few facts:
· Worldwide demand for gasoline, diesel, aviation fuels is up due to
economic growth.
· Nearly half of the worldwide gasoline demand growth in 2004 was in
the U.S.
· The U.S. gasoline demand is more than 9 million barrels per day (MBD),
up about 6% since 2000. The U.S. must import more than 60% of its crude
oil needs and about 1 MBD of gasoline to meet demand.
· The U.S. Energy Information Administration is forecasting continued
strong gasoline demand, with annual growth of 1.8 percent.

Unique Gasoline Supply Requirements
· U.S. refiners must produce and deliver over 20 specialized or
"boutique" types of gasoline to separate markets. These "boutique" gasoline
formulas reduce refiners' and distributors' flexibility to respond to supply
disruptions since not all types may be distributed or used in all
geographic areas. Additionally, gasoline prices can change rapidly due
to crude oil supply disruptions stemming from world events or domestic
problems, such as refinery or pipeline outages.


ADDITIONAL FACTS TO CONSIDER
· Gasoline may seem expensive today, but when adjusted for inflation,
the nationwide average retail price for all grades of gasoline is still
lower than it was in 1981, when the average price was equivalent to $2.86 per
gallon in today's dollars. This is because the petroleum industry has
become more efficient over time, to the benefit of consumers.

· Compared with most other processed liquids, gasoline remains a
bargain. For example, bottled spring water sells for the equivalent of about $4 a gallon, coffee $10 a gallon.


CHAIN EMAILS
You may have seen a "chain" email urging the boycott of Exxon and Mobil
stations in an effort to either reduce gas prices or to avoid
purchasing Middle Eastern imported oil. These emails have been around for several years and fail to take into account: (1) how gasoline prices are
determined as outlined in the forgoing points, (2) the laws of supply and demand, and (3) the U.S. dependency on foreign oil. For additional details you may want read the third party response posted on the Urban Legends Website:
http://urbanlegends.about.com or the response from the Energy Information
Administration (EIA) at
http://www.eia.doe.gov/neic/brochure.../gasoline.htm.

__________________________________________________ ______

We hope this information is helpful in understanding gasoline prices in
context. For more industry information, you may want to visit the
following web sites: http://www.eia.doe.gov and http://www.api.org.
Information on maximizing the fuel efficiency of your car can be found
at the U.S. Department of Energy site: http://www.energy.gov.

For additional information see API's Factors Affecting Gasoline Prices.

Please feel free to share this information with family, friends, and
neighbors.

 

I don't like paying more for fuel anymore than anyone else does, & I get a break on it working for an oil jobber. When I'm delivering a load in a station people are always asking when it's going to go down. My response to them is get use to it. I believe we the U.S. have been riding the cheap fuel wave for sometime compared to the world market prices in other countries. Until we are able to drill the North Slope & build more refinneries the supply goes down & the demand goes up I believe we will see even higher prices in the near future.

 

As a oil field services company employee, I dont think drilling is the answer right now... Opening the North slope wont help. All of the equipment is being utilized. Most of the drillers I have talked with are pulling rigs into service that haven't drilled a hole in 25 to 30 years. This oil boom has caught alot of people off guard.
Just build more equipment? Kinda hard with steel at a upto a 26 week lead time.
To solve the gas price problem, We need to build a couple refineries (no new since the 70's). Refineries are running over 90% capacity.

 

Thank the enviromental movement for that. They have managed to make it such a tangled mess of paper work, the new refineries needed by us haven't been built. One thing that e-mail doesn't explain, and I find interesting is that a 3 percent increase in demand world wide has nearly doubled the price of the product. Not like it was 10 or 20% or something, just 3%.

 

I don't buy the arguement that we've been lucky til now. Their primary arguement for the increase always seems to be the going market price, not cost of production. Yes Europe has always paid more, but they make little if any of their own and have high import taxes on everything, not just oil. That's not our fault. OBTW, they also have higher minimum wages and higher "average" income.

 

What oil company has NOT reported highest or near record earnings in their history for the last 3 years? Who is fooling who on this. It be speculation and PR and the flakes on the stock market. It is all about ROACE and keeping pace with the competitors. Sustainable, I think not.

 

The oil industry has always been a feast or famine industry.
The bust on the 80's wiped out alot of companies. Our inside sales guy worked the field at the time, he went from driving 10,000 miles per month, working 20 hr days, sleeping in his truck to not servicing ANY rigs for weeks at a time. One guy with equipment on over 100 rigs (at $100 to $200/day plus consumables) to nothing. In the 90's we went international big time which has leveled out our manufacturing end somewhat, but even with that, two years ago, we cut our work force in half and that half spent more time washing the walls of the weld shop than burning welding wire.

As far as Europe having higher fuel prices, that is a governmental choice. They want their subjects to stay at home or use public transportation. You also have a rather large distance factor. I worked on a rig in Colorado with a guy that was British. He flew into Canada, and worked a couple wells there, then drove to Rifle, CO from Edmonton, Canada. He got a first hand appreciation of just why we use so much energy in the US. When he was talking about how long of a drive it was, he mentioned he and his wife road motorcycles from England to Gibralter (sp?) spent three days and rode back. It took them about 2 days to cross Spain and France which are two of the largest countries there.