From: Employee at MILVEHCO (milveh@dslextreme.com)
Date: Wed Aug 24 2005 - 21:28:15 PDT
No, ...it's exactly right. You must of missed the news a month ago about
the meeting of refinery and distributors association had in Calif. and the
president thought he was off mike and said words to the effect,
"Production is about right, profits are good, so increasing production
will be like cutting our own throats." Several media people picked up on
that comment and it was a brief scandal. 2 Senators from CA launched a
little investigation, but it got nowhere as the story died.
If a refinery can operate at 75% and make X billion a month, why up
production when increased production means more overhead, lower prices and
in the end you still only make X billion? Better to go at 75%, keep the
supply demand ratio at max and take advantage of the artificial high
price.
It's also true we haven't built any new refinery's in 30 years and it's
very easy to manipulate the market with so few refiners.
Joe Garrett
> The only problem with this analysis is that higher prices drive MORE
> production. If I can get $3 a gallon for gasoline, I am going to produce
> as
> much as I possibly can, because the more I sell, the more money I make.
>
> The incentive to reduce production is LOW prices. If I can't make any
> money
> selling gas at $1.50 a gallon, why bother to build more refineries?
>
> With many oil refiners (oligopoly), it is impossible for one refiner to
> drive prices up by withholding production. As soon as one company stops
> producing gasoline, another one will rush in to capture the market share
> and
> the associated profits.
>
> The problem we are experiencing is a combination of market forces and
> politics. It is clear to me that OPEC is up to it's old tricks. We are
> caught between Saudi Arabia, Iran, and Venezuela. What isn't clear is why
> this hasn't caused more of a backlash among consumers.
>
> Joe Garrett
>
>
> -----Original Message-----
> From: Military Vehicles Mailing List [mailto:mil-veh@mil-veh.org] On
> Behalf
> Of MV
> Sent: Wednesday, August 24, 2005 4:24 PM
> To: Military Vehicles Mailing List
> Subject: Re: [MV] (OT?) UK - US tax
>
>
> Good point Randy.
>
> I'd like to also point out that the actual cost to remove oil from the
> ground has actually gone down over the years. The cost to transport the
> oil from the Middle east to the USA is actually pretty minor. Single
> digit cents per gallon.
>
> The price of fuel has more than doubled in the last few years, and with
> the production costs staying pretty much the same, this means that some
> groups have more than doubled their profits on the same exact product.
> Actually it is probably more like tripled their profit margins.
>
> If the rules of supply and demand are actually involved here (I question
> that) then why should the oil companies try and produce more oil and
> build refineries. It seems to me that their best course of action would
> be to cut back on production and let the price of oil rise even further.
> If the people of the USA don't get upset with $3.00/gallon and more
> on the west coast, then obviously we haven't hit the critical pain point
> yet. Perhaps it is around $4.50/gallon?? Maybe $5.50??
>
> The big oil companies are making record profits. That is, that they are
> making record profits after doing everything they can to hide their
> record profits. There is a lot that can be done to hide profits by
> investing in other companies and acquiring assets.
>
> When BP moved in to the US about 15 years ago, the first thing they did
> was to shut down refineries. There is a huge refinery in Lima, OH that
> was mothballed. I have never heard of them taking any interest in
> reopening it. If they did I think they would create a surplus in the
> market that would tend to drive the price down. For them it is better
> to leave it shutdown and let the prices rise. Their is extra refinery
> capacity in this country, they just don't want to utilize it.
>
> BTW, Milk at Sam's club was $2.28/gallon the other day. That milk was
> sucked out of a cow 3-4 gallons per cow, refrigerated, transported,
> separated in sterile conditions, homogenized, pasteurized, bottled,
> transported in refrigerated trucks, delivered to the store with an
> expiration date, and sold to me in a quantity of 2 gallons for $2.28 per
> gallon.
>
> None of these price levels make any sense at all.
>
> These fuel prices are total BS. And if the citizens of the US don't get
> upset about the prices, then they only deserve to pay more.
>
> And why any country would apply a 100%+ tax to motor fuel is beyond me.
> The only reason I can think of to apply taxes like that is social
> engineering. They simply want to minimize the use of cars and trucks
> for some bigger purpose. Nothing else makes much sense.
>
> Dave
>
>
>
>
>
>
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