Oil...can't give it away!

[idrankwhat 0]

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I understand the general concept of supply and demand, but right now demand is high, so it seems unwise to produce only half of capacity. Not sure how raising output would not add to the bottom line.

People are still filling up their tanks just as often. People are getting more and more used to the idea of $3/gal gas. Oil companies and refiners are still profiting but not so extremely that there's talk about windfall profits taxes or subsidy reduction. I guess it's just a well choreographed collusion.

[kschilk 0]

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Could you give us a news source on this topic? I looked around and didn't find anything about your claims.

There was an article that centered on a local producer, in the local rumor rag. They're online at www.thederrick.com . The article ran on Monday, I think...maybe Tuesday. If I can locate one that hasn't been thrown away yet, I'll copy and post it. It's not so "factual"...just about a local guy complaining about not being able to sell his oil but it was still pretty interesting.

Most of the producers' and refinery figures came from some of my customers, who are local oil producers and can't vouch for the accuracy. It really doesn't matter.

My point (?) here is simply to vent and acknowledge the fact that there is a great deal more oil available, in current supply and untapped sources, than is made common knowledge. The well capping started about 15 years ago and nobody locally can understand the reasoning....especially, when we're told there's a shortage. Most that aren't from around here, probably are unaware of all the wells being capped. There are thousands of them here so you can be sure, there are millions more around the country.

I suppose the fact that the day the article ran, the local price of gas went from $2.90 to $3.04, mighta' just pis**d me off. Well....that and the fact that Pennzoil, Quaker State and Wolf's Head moved their refineries from here, to the Gulf....where they're now vulnerable to hurricanes. Every bit of it is just one big price-fixing scheme, in my opinion. Maybe it's time to seize and "nationalize" the oil industry, like the middle east countries did?

"T'was ever thus."

[NCclimber 0]

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I understand the general concept of supply and demand, but right now demand is high, so it seems unwise to produce only half of capacity. Not sure how raising output would not add to the bottom line.

People are still filling up their tanks just as often. People are getting more and more used to the idea of $3/gal gas. Oil companies and refiners are still profiting but not so extremely that there's talk about windfall profits taxes or subsidy reduction. I guess it's just a well choreographed collusion.

Just how many tin foil beanies do you have?

[NCclimber 0]

Thanks for your response. Interesting information about wells being capped in the Northeast. I don't know if opening all those (presumably) low producing wells would have a noticable impact on national supply. Maybe? Maybe not?

I'm guessing they capped those (presumably) low producing wells back when crude was in the low teens and they now realize the oil in them is going to keep going up in price.

As far as I know, there aren't any major refineries in New England, so these capped wells would need to be uncapped, re-fitted. Then the oil would need to be shipped out of the region for refinement. IOW the owners are going have to do a lot of work for a so so return.

Oil prices are going up because of an international shortage (and a falling dollar). We're still getting as much as we need. It just costs more. The refineries can't pump it out fast enough.

I'm guessing (and it's just a guess) these wells are still tapped because the oil companies have bigger fish to fry.

[idrankwhat 0]

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Just how many tin foil beanies do you have?

I wear mine inverted. You get better reception that way.

[idrankwhat 0]

This is a little old but I'm sure that supply manipulation in favor of profits is still a good bet.

Published on Friday, June 15, 2001 by the Associated Press
Leaked Oil Industry Memo Suggests Bid to Curb Refinery Output
by H. Josef Hebert

Even as the Bush administration cites a lack of refineries as a cause of energy shortages, oil industry documents show that five years ago companies were looking for ways to cut refinery output to raise profits.

The internal memos involving several major oil companies were released Thursday by Sen. Ron Wyden, D-Ore., whose office obtained them from a whistleblower. He said the materials did not necessarily reflect any illegal activities but said some of them "sure look very anticompetitive."

In response, Red Cavaney, the president of an industry trade group, said: "This finger pointing six years into the past serves no useful purpose."

Wyden was turning the material over to the Governmental Affairs Committee, which plans hearings on oil industry practices and energy prices.

Tight gasoline supplies have been cited repeatedly by the industry and the White House as a primary reason for soaring gasoline prices this year.

While pump prices have eased recently, the cost of gasoline jumped an average of 31 cents a gallon nationwide during the seven weeks ending in mid-May, according to government figures presented at a House hearing Thursday.

Because it takes about four years to build a large refinery, planning for a new plant would have had to begin by the mid-1990s, energy experts say. There has not been a new refinery build in the United States in 25 years; in the meantime, dozens of small ones have closed.

The documents obtained by Wyden's office suggest that in the mid-1990s oil companies had no interest in building refineries because of low profit margins. In fact, companies were discussing the need to curtail refinery output in order to make more money, the documents suggest.

"If the U.S. petroleum industry doesn't reduce its refining capacity, it will never see any substantial increase in refinery margins (profits)," said an internal Chevron document in November 1995, citing views presented by participants at an American Petroleum Institute conference.

A year later, an official at Texaco, in a memo marked "highly confidential," called concerns about too much refinery capacity "the most critical factor" facing the refinery industry. Excess capacity is producing "very poor refining financial results," the memo said.

Wyden said the documents "raise significant questions about whether America's oil companies tried to pull off a financial triple play – boosting profits by reducing refinery capacity, tagging consumers with higher pump prices and then arguing for environmental rollbacks."

The institute produced statistics showing refinery capacity has increased since 1996 as refineries became more efficient and some expanded. The figures also showed capacity increasing slower than demand.

Cavaney, the institute's president, said the industry's reluctance to invest in new refinery capacity when profit margins are low and supplies are adequate – as was the case in the mid-1990s – was "a normal response in a commodity market."

Wyden singled out a 1996 memo from Mobil Corp., which has since merged with Exxon, that suggests that Mobil was ready for a "full court press" to make sure an independent California refinery, which had closed in 1995, would not reopen.

At the time Mobil was concerned that if the refinery, owned by the Powerine Oil Co., resumed production it might force down the price of a special, cleaner burning gasoline by as much as 3 cents.

"Needless to say, we would all like to see Powerine stay down," the memo said. "Full court press is warranted in this case." The refinery remained closed.

Texaco spokeswoman Keelin Molloi said Wyden's allegations "divert attention away from legitimate policy questions" about energy needs.

As for the 1995 Texaco memo, she said: "Within any company, discussions about the margins and capacity are conducted in a normal course of business and in no way constitutes inappropriate or illegal behavior."

Chevron spokesman Fred Gorell said the company "flatly denies any improper conduct involving refinery production levels or gasoline pricing."

Attempts to reach ExxonMobil were unsuccessful.

The need for more refinery capacity has been the focus of President Bush's energy plan. Vice President Dick Cheney has blamed gasoline prices increases on tight supplies caused to a large part, he contends, by the fact that the last new U.S. refinery was built in 1976.

In fact, 24 refineries – many of them small independents – have shut down since 1995, according to the Energy Department. That has accounted for the loss of 831,000 barrels a day of refining capacity. Individual refinery expansions at the same time have added 1 to 2 percent of capacity annually.

© Copyright 2001 The Associated Press

[kschilk 0]

If we had an engine that would run on pure crude, we could pretty much eliminate the big oil companies. Of course, it would probably all cycle around and the small independents, would eventually become the "big oil companies". We'd be right back where we started, I suppose.

"T'was ever thus."

[NCclimber 0]

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This is a little old but I'm sure that supply manipulation in favor of profits is still a good bet.

Published on Friday, June 15, 2001 by the Associated Press
Leaked Oil Industry Memo Suggests Bid to Curb Refinery Output
by H. Josef Hebert

Back in the late 90s crude was at historic lows. There was a serious glut. From an economic cycle standpoint, we were at the opposite end of the spectrum.