Oil, and the distortion of competitive process

[island911]

from a hyjacked thread . ..

Originally posted by Nine9six
When crude goes up $1.00 a barrel, it is seen IMMEDIATELY at the gas pump, even though that crude will not see the gas station for another month or more. When it goes down, it may take as much as a month before the reduction is seen.

How is it even blatant ripoffs are so hard for some to see?

Originally posted by newbe911
Regrading "Big Oill" riping off us customers:
The oil companies make about .10/gal. profit and we pay .40+/gal. taxes.
Much of the runup of prices this past year has been by the "future traders" in the stock market. The change in prices immidately @ the pump is the retailer trying to get enough money to purchase his next load of fuel which would be more expensive than his last.
Some of the reason for variation of price in different areas is due to the wholesaler. I have personally seen .10-.15/gal. differense in areas 50 mi. apart because one wholesaler controlled the area.

[island911]

Originally posted by sammyg2
Warning, serious topic hyjack in progress:
newbe911 nailed it.
The quick rise and slow fall in prices at the pump are not controlled by the oil companies.
Speculators, wholesale distributors, and station owner/operators affect or set the retail price.
They see a large wholesale price spike coming (which is usually caused by and exaggerated by investment speculator's over-reaction to a temporary reduction in supply) and immediately crank the prices up a bunch. They are obviously reluctant to lower these prices because that would reduce their profits. They lower the prices only as much and as fast as they have to in order to be competitive enough to sell the gasoline. The longer the station owners keep the prices high the more money they make. Most stations are privately owned and operated franchises.

This subject is not something that you can deduce an accurate understanding of out of thin air, even though most of the uninformed public believes they can. We see people every day who rival Mel Gibson in conspiracy theory, but who have not bothered to spend 5 minutes researching the subject.
The details and information necessary to form an educated and accurate opinion are publicly available but only a small fraction of the self-proclaimed experts in this world actually do the homework necessary to fully understand the system prior to spouting an opinion.

How would this board react if I came here and started posting facts about the proper way to rebuild or hot-rod a 911 engine if I had never actually done it and had never done single bit of research to back up theories I pulled out of my butt? I would be roasted and flamed to no end. I don't see how that is any different than making unfounded and erronious accusations about the oil industry.

DISCLAIMER:
i am not currently employed by or have ties to the oil industry except that I spent 23 years working in the refining business and I am also heavily invested in that industry. I have spent most of those years studying the inner workings of the oil businesses which is partly why I am confident and sucessful in my investments and have been for decades. I may not a complete expert in the field but I am much better informed that most.

[island911]

Originally posted by randywebb
Frontline had a recent investigative report on the oil co. ripoffs schemes -- they are closing refineries and exporting oil from the US to So. Amer. countries during times of shortage here...

Originally posted by Wil Ferch
Ahhh.. not so quick Newbe and Sammy....

Exxon/Mobil just posted 3rd quarter earnings.... 10 billion dollars ( that's right....NINE zero's)..... for a QUARTER !, not the whole year....

Quick ! ...name another industry that can boast such profits....

And yes...price increases are felt IMMEDIATELY at the pumps....reductions take 30-60 days.....

- Wil

Originally posted by sammyg2
I refer to my prevous post. Do the research and homework prior to presenting an argument please.

Exxonmobil had total gross revenue (sales) of $324.5 billion during that period you referred to when they ended up with a $10 billion profit. Acording to me calcumalator that translates into just over a 3% net profit magin. THOSE CROOKS!
Pelican would not survive very long at profit margins that low and neither would most companies. A good rule of thumb is that 10% profit is required for he average company to be considered viable, the bigger a company is the lower the profit margin can be for the company to still be considered profitable. XOM is huge so a 3% profit margin is considered to be very good indeed, but I can't reasonably accept the argument that 3% is gouging.

The media loves to play this sensationalistic game, saying that "XOM profits are up 200%" or "XOM posts record profits".
Most of the gullible public eats it up and regurgitates this drivel without thought.
What the news media doesn't tell you and what most people don't understand is that the 200% increase in profit means they went from 2% the previous cycle to 4% profit this cycle. Sometimes they are comparing this quarter to the previous, sometimes this quarter to the same quarter last year. They also don't say that the $10 billion profit is equivalent to just over 3% net profit.
The news media doesn't want you to know what is real, that would detract from the knee-jerk reaction they are attempting to create.

Either you fell for their manipulation of the truth or you understand their biased, sensational, and irresponsible raping of the truth and have chosen to play the same game. If we didn't realize they were intentionally trying to create a distorted perception in order to get an emotional reaction and increase their circulation or ratings, we are not alone. If we realized it and tried to do the same thing, shame on us.

Either way, the whole truth is out there is someone wants to look past the BS and find it.

[island911]

Originally posted by island911
Sammy -- As much as I have respect for your input on this and so many other topics, I have a hard time believing that you have "the truth" cornered here.

You are using numbers supplied by "big Oil" . . .

The big question is, what is the extent of market manipulation by 'big Oil."

To tell us that "big oil' does nothing to manipulate markets (manipulation is from media only) is insulting.

Originally posted by sammyg2
In not is it my intention to insult anyone. If that is how my post was percieved I appologize for not wording it better.
I am just trying to put a stop the bleeding caused by misinformation and repeated false claims by people who have little real knowledge of the subject and base their statements on nothing more than a hunch.

the numbers I quoted were directly from the quarterly reports provided by XOM to the US government (DOE and the IRS). They are also automatically audited by accounting firms as a matter of standard practice. There is no US industry that is consistantly more scrutinized as far as accounting and business practices that the oil industry. I doubt any other large industry could stand up to the same scrutiny and come out as clean. Not perfect, but cleaner than the rest and incredibly cleaner than the general public would expect. If anyone can prove that the oil companies are lying in their quarterly financial reports, step forward and you will get a big fat reward, probably in the $millions. No takers? I didn't think so. If it was really happening it wouldn't take long for it to be front page news. it isn't, so the media resorts to distorting the facts to try and make them look bad.
Some politicians base their entire platform on the promise that they will go after big oil. They try but find nothing. Every time the price of fuel goes up, some ignorant politician starts a congressional investigation. Every time they find nothing except an education on how things really work. Barbara Boxster is a perfect example of a politician who either doesn't get it or just plays stupid for personal gain, she has gone after oil a few times with wild claims of inpropriety but always comes away emptyhanded and looking foolish. Every time a refinery in the US cuts production they have to immediately notify the state and federal governments and offer an explanation. That notification usually results in a visit from the government officials to check it out. I have sat in a whole bunch of those meetings. In every one of them I was involved in, the officials agreed that we were without blame and the situation that caused the rate reduction was unavoidable.

I know of one time in the past 20 years where a large oil company intentionally cut production to change the market. that was by Bill Greehey (former CEO of valero). He cut production the valero refineries by 25% in the gulf coast region in order to increase the price. The reason? At the time (around 1999) the cost to refine and distribute gasoline in that region exceeded the wholesale price. they were loosing a penny or two on every gallon produced. He also anounced to the world that he was cutting production and explained why. He told the everyone that Valero would not make gasoline at a loss and as soon as it became profitable they would resume productiion. No backroom deals or funny hand shakes.
That is the only time I know of where an oil company intentionally cut production to affect the supply. I know from 23 years of experience that if a refinery manager cuts production he gets in trouble. If it happens more than a few times because of mechanical breakdowns, he looses his job. I know that if an operator causes a loss of production he gets in serious trouble, if he doesn't loose his job.
i know from many years of personal experience that if the head of the rotating equipment department has a piece of critical rquipment fail and irt reduces production, he gets called on the carpet over it. BTDT too many times. I even got in trouble one time for not anticipating a lightening storm that knocked a unit offline. ( we never get lightening storms in southern California).
I know for a fact that there is nothing more sacred that maximizing production in an oil refinery. My shop rebuilds large pumps and some of my customers are the local refineries. When production is threatened, money is no object as long as I get it done quickly for them. The only thing they care about is not loosing any production. That is a way of life in the refining business and has been as long as I can remember.

I also know of times when an oil company sold it's product in a different region (in one case there was a big scandal because they sold it to the midwest instead of the west coast). The reason it was worth more in the midwest. They made more money selling it there. Shame on them for doing the same thing we do on e-bay. sell to the highest bidder. Last I checked that wasn't illegal, not even immoral. Comanies are supposed to make money. That is what the shareholders demand.

If anyone has detailed examples of oil companies intentionally manipulating a market other than I have listed, please share. Sure someone might be able to dig up a little thing here or a scrap there, but there isn't a great big conspiracy. IMO It just doesn't happen. As much as we want to believe it, it just doesn't.

I am all ears. I believe these statements I have made to be logical, accurate, and baased on proof. If someone has real proof that i am misled I want to hear it. No quotes from fringe lunatic websites posing as consumer watchdogs, please. There are some real doozies out there.

okay, hyjack excized . .. discuss

[island911]

interesting.

I know that the liberal State of Washington (here) has the highest gas tax in the nation . . .tho' I believe it is based on voulme; not as a percentage of price. (read: less gallons = less tax)

[island911]

The Frontline(?) piece claims that some refineries are shut down (rather than sold) . . .that just a 2% reduction in supply will give the spike we saw.(3+ $/gal)

[M.D. Holloway]

its all a scam - biggest in history! Our great grand kids will wonder why we didn't see it. We all do, we just are rather helpless.

[M.D. Holloway]

Surprised at how much we actually don't import!