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Tilting at Windmills

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April 27, 2006
By: Kevin Drum

YOU'D THINK IT GREW ON TREES....You want to know how much money oil companies are making lately? Well, ExxonMobil just announced profits of $8 billion in one quarter and their stock dropped on the news. Wow.

Kevin Drum 12:35 PM Permalink | Trackbacks | Comments (113)

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Probably out of fear of subsequent regulation. By some subsequent administration and subsequent congress, of course.

What was the street expectation anyway? Did they hit their number or miss?

Posted by: LarryB on April 27, 2006 at 12:39 PM | PERMALINK

We better get those guys some tax cuts and business incentives!!! Call Cheney.

Funny bit on CNN the other night where they couldn't get one GOP Senator to really defend his vote on the Energy bill. Got to be some hay there for the Dems.

Posted by: Doug-E-Fresh on April 27, 2006 at 12:40 PM | PERMALINK

Did anyone see the Daily Show guest last night? Why couldn't she just admit that the oil companies could easily reduce their "take" on a gallon of gas (which has gone up proportionately with the cost of a barrel of crude)? I was really disappointed Jon Stewart didn't call her on it.

Posted by: Zac on April 27, 2006 at 12:40 PM | PERMALINK

Get out while the gettin's good. Sell high and buy low.

Posted by: tomeck on April 27, 2006 at 12:42 PM | PERMALINK

LarryB: Apparently they fell short of consensus estimates. Those must have been some serious expecations!

Posted by: Kevin Drum on April 27, 2006 at 12:44 PM | PERMALINK

But what about those full-page WaPo ads this week wailing about how hard the oil companies work for it, honey? Prolly just a coincidence.

Posted by: shortstop on April 27, 2006 at 12:47 PM | PERMALINK

If I had $8billion, I could finally get that spare room painted - and without using illegal immigrant labor, neither!

Posted by: craigie on April 27, 2006 at 12:48 PM | PERMALINK

Kevin, I realize you're just putting someone else's graphic up there, but I'm curious: Don't you think graphics like that are a little misleading? By starting at 61.5 it suggests that there's been a much sharper decline than the reality of 1.6 percent.

Posted by: MDS on April 27, 2006 at 12:48 PM | PERMALINK

http://www.instapundit.com/

8:44 am
"I think that a GOP disaster is now officially looming," said one of the slightly less obtuse elephants.

But 9/11! Terrorists! Purple fingers! Invisible Hand! Michael Moore is medically obese! Clinton!!!!!! chorused the rest of the herd.

Posted by: cowalker on April 27, 2006 at 12:49 PM | PERMALINK

But what about those full-page WaPo ads this week wailing about how hard the oil companies work for it, honey?

Yeah, it's hard work, hard work making dinosaurs and then squishing them into the ground like that.

Luckily, soon the oil will run out and then those greedy bastards will be hanging out by the freeway onramp, with signs that say "will drill for food." Won't we all laugh at them then, as we drive by in our horse-drawn carts.

Posted by: craigie on April 27, 2006 at 12:50 PM | PERMALINK

Well, look at the reaction to the retirement package given to ExxonMobil's outgoing CEO. The rumored $400 million figure has been seized upon by every Congresscritter and irate talk radio host as justification for further inquiry into the financial records and behavior of ExxonMobil, as well as the industry as a whole.

And just watch as those same Congresscritters and talk radio hosts seize upon this new figure as further justification for regulation and action. Will it be the straw that breaks the camel's back? That's what investors are betting on right now.

Posted by: the good reverend on April 27, 2006 at 12:50 PM | PERMALINK

Rasmussen:

Thirty-eight percent (38%) of American adults approve of the way George W. Bush is performing his role as President. That's the lowest level of support ever measured by Rasmussen Reports.

61% disapprove.

Dems ahead 44% - 32% on generic presidential ballot.

Terrible, terrible news for Democrats this week.

Just terrible!

Not.

Posted by: Advocate for God on April 27, 2006 at 12:50 PM | PERMALINK

It's quite amusing, really, to see the liberals contort themselves into fetal positions whenever glaring examples of the successes of free-market capitalism are presented to them.

Posted by: tbrosz on April 27, 2006 at 12:53 PM | PERMALINK

The thing that I haven't seen is what is being made or lost on the futures market. It would be interesting to see who is really driving up the cost of oil. Personally I see no real purpose for futures trading in oil other than making useless people rich.

Posted by: TruthPolitik on April 27, 2006 at 12:58 PM | PERMALINK

Exxon took in $370.7 billion in 2005. Half of that went to purchasing crude oil and other raw product. After other expenses, $36.1 billion was net income (profit). About ten percent.

Among those other expenses were excise taxes, income taxes and other taxes and duties that added up to $95.6 billion, or almost three times the amount of profit.

In this first quarter estimate, ExxonMobil earned $8.1 billion.

Taxes paid during that quarter: $25.7 billion.

Those, of course, don't include taxes paid by consumers at the pump.

Posted by: tbrosz on April 27, 2006 at 12:58 PM | PERMALINK

"I think that a GOP disaster is now officially looming," said one of the slightly less obtuse elephants.

hell, at least clinton didn't have to pay for it ... lol

http://www.tpmmuckraker.com/archives/000481.php

According to people with knowledge of the investigation, Mr. Wade told investigators that Mr. Cunningham periodically phoned him to request a prostitute, and that Mr. Wade then helped to arrange for one. A limousine driver then picked up the prostitute as well as Mr. Cunningham, and drove them to one of [two] hotel suites, originally at the Watergate Hotel, and subsequently at the Westin Grand.
. . . [I]nvestigators are focusing on whether any other members of Congress, or their staffs, may also have used the same free services, though it isn't clear whether investigators have turned up anything to implicate others.

Posted by: linda on April 27, 2006 at 12:59 PM | PERMALINK

I'm all for regulation of Big Oil, but please put $8 billion in some context. As just a number, it means next to nothing.

Posted by: brewmn on April 27, 2006 at 1:00 PM | PERMALINK

Advocate:

Democrats always do well in "generic" polls. Unfortunately, at some point the party has to field an actual Democrat, and voters flee in droves.

What did you think of the rest of the survey?

Posted by: tbrosz on April 27, 2006 at 1:04 PM | PERMALINK

Tbrosz,

That statement clearly indicates the 8 billion is net income. That's income after expenses. Pay attention, buddy.

Posted by: Scott Herbst on April 27, 2006 at 1:05 PM | PERMALINK

Maybe the stockholders are aware that the end of the road is in sight and that gas prices are truly out of big oil's control.

BTW, that site (The Oil Drum), which serves as a great community discussing oil availability issues, has just put out a consensus press release on the politics of oil, arguing that the way our leaders and media address these issues simply must change.

And a recent Boston Globe editorial put it nicely: "Political leaders should be explaining energy economics and devising policies to mandate conservation instead of searching for scapegoats."

I realize Dems are currently in the minority ,which has certain downsides, but hopefully they'll have some success and the discourse on oil politics really will change.

Posted by: Adam Piontek on April 27, 2006 at 1:06 PM | PERMALINK

and voters flee in droves.

You'd like to believe that, and yet 50% of the country doesn't flee. 60% if you live in California or New York, places where actual wealth comes from.

Posted by: craigie on April 27, 2006 at 1:08 PM | PERMALINK

Oh Clinton paid for it alright. So did the rest of US. Between 911 and monica, look at the mess we are in.

Posted by: the fake Fake Al on April 27, 2006 at 1:09 PM | PERMALINK

According to Jasimina Keleman at Market Watch:

Exxon slipped 1.2% to $62.34 after the company said first-quarter earnings came in at $8.4 billion, or $1.37 a share, up from a year-earlier profit of $7.86 billion, or $1.22 a share. Revenue climbed 8% in the first three months of 2006 to $88.98 billion from $82.05 billion in the same period a year earlier.

Analysts had expected a profit of $1.47 per share. A ten cent miss is a big miss in the oil industry. Apparently investors are concerned that the analysts missed something fundamental. How about reduced production?

Posted by: Ron Byers on April 27, 2006 at 1:09 PM | PERMALINK

Peak oil has arrived, according to the Army:

http://www.energybulletin.net/13737.html

Posted by: Matt on April 27, 2006 at 1:10 PM | PERMALINK

Well, in my garage, Darth and I--I mean, voters--flee in droves! And my garage is the boundary of my universe!

Posted by: shortstop brosz on April 27, 2006 at 1:13 PM | PERMALINK

The stock price dropped because of "profit taking" which is where investors cash out a portion of a good performing stock. Notice that the stock dropped over the course of one evening, and immediately recovered to the level previous to the announcement.

The cause of the drop is quite the opposite that you are inferring, so I wouldn't scofflaw yet.

Posted by: Jon Karak on April 27, 2006 at 1:15 PM | PERMALINK

Tbroz wins the Strawman prize for this day 4-27-06. Congrats Tbroz!!

Posted by: Booo on April 27, 2006 at 1:17 PM | PERMALINK

Funny tbrosz, I never realized massive government subsidies were a part of Adam Smith's theory.

Posted by: Doug-E-Fresh on April 27, 2006 at 1:18 PM | PERMALINK

How much do you suppose oil companies make on a gallon of gas? How much do you suppose the Federal Government makes on a gallon of gas?

About 6 cents, and about 19 cents, respectively, as I recall.

Besides, I thought you lefties were in favor of high gas prices. We have to stop driving those evil SUVs, right? Take the bus. Global warming. (or is it global cooling this month?)

Posted by: conspiracy nut on April 27, 2006 at 1:18 PM | PERMALINK

Kevin - if you'd be up at 6AM PDT and watched CNN's American Morning (OK, I was up only because of my dogs barking), Andy S. explained it all. Analysts were expecting profits in excess of $9 billion. Andy even hinted at some politically based earnings manipulation but decided not to pursue that line of thought so early in the morning.

Posted by: pgl on April 27, 2006 at 1:20 PM | PERMALINK

As a liberal, high gas prices don't bother me, except for their impact on the poor who must drive long distances for their work. But that's just one of many economic hardwhips for the poor.

I have no problem with the oil companies making a profit, if legitimate. The profits are "obscene" only because of our incredible demand for oil, and the lack of an competent long-term national energy policy, along with effective foreign policy that doesn't, oh, say, lower oil production.

Obviously, much higher sustained oil prices will be necessary before that beings to happen. I'd say $10/gallon might do it. $5/gallon won't. Noises will be made, but nothing effective will be done. There is no cry for real, effective action. The polls imply otherwise, but wait until real action (e. g., rationing, high taxes on gas and/or gas guzzlers) is proposed.

Americans like any free market system they don't have to personally participate in. And they want their cake for free.

Posted by: K on April 27, 2006 at 1:23 PM | PERMALINK

CN> Besides, I thought you lefties were in favor of high gas prices.

This lefty can't supress a grin every time I go by a gas station now. High gas prices are a net good for the world.

Despite the fact my carpooling bill went up $20 this month, I love to watch the pained looks on the faces of those wasteful, thoughtless SUV drivers as they fill up.

Posted by: Bruce the Canuck on April 27, 2006 at 1:24 PM | PERMALINK

The reason for the drop is that Wall Street's consensus earnings estimate for Q1 was $9.14 billion. So ExxonMobil's results were a bit lower than expected, but nothing significant.

Posted by: Matt D on April 27, 2006 at 1:28 PM | PERMALINK

CN> Besides, I thought you lefties were in favor of high gas prices.

I am. And it does amuse me to see people freak out becase - the horror! - filling up the tank will cost an extra $5 or something. Last night the "news" was showing us morons putting crisco into their gas tanks because it saves 8 cents.

Gas still costs less than milk, and cows are renewable. Dinosaurs are not. So in my mind, gas is still pretty damn cheap.

Posted by: craigie on April 27, 2006 at 1:30 PM | PERMALINK

Bruce
Those SUV drivers aren't thoughtless, they're using up evil gasoline at an abnormally high rate. Which drives the price up, making alternative energy more attractive.

While you're bitching and moaning about alternative energy, SUV drivers are making it a reality.

Posted by: conspiracy nut on April 27, 2006 at 1:30 PM | PERMALINK

And my garage is the boundary of my universe!

God you make me laugh sometimes!

Posted by: craigie on April 27, 2006 at 1:31 PM | PERMALINK

Democrats always do well in "generic" polls. Unfortunately, at some point the party has to field an actual Democrat, and voters flee in droves.

Man, nobody every played with you in school, did they? Well, you're certainly wreaking your revenge now. Yeah, Democrats suck!That'll show those dumb jocks, stupid cheerleaders, and popular student council kids who ignored you fifty years ago.

Just remember: every time you express your passive aggression here you're getting back at them, and somewhere their heads are exploding, I'm sure of it.

About ten percent.

Yes, only 10% net profit. Such a pittance hardly makes it possible to give away those $400 million dollar severance packages. Oh wait, it does -- because 10% of a gazillion is still a lot of money when you have half the employees of say, AT&T, but eight times the profit.

Posted by: trex on April 27, 2006 at 1:32 PM | PERMALINK

Which reminds me, I see Senator Chappaquiddick is trying stop a wind farm.

Posted by: conspiracy nut on April 27, 2006 at 1:33 PM | PERMALINK

Does ExxonMobil complain about the cost of providing healthcare for its employees? Probably. I know if I had $8billion, I'd be really annoyed that I didn't have $9billion.

Posted by: craigie as tbrosz on April 27, 2006 at 1:35 PM | PERMALINK

I thought companies were supposed to make money. (is that not the point)
Its not the Net its the profit margin.
Starbucks & Microsoft have a bigger profit margin then Exxon.

If you guys are so upset that they made a profit, why not just buy their stock?
(then you can give the profit you make dirrectly to Nacy Pelosi)

Posted by: Fitz on April 27, 2006 at 1:38 PM | PERMALINK

Question:

If one believes in the creationist drivel about an intelligently designed universe how can the use of fossil fuels be reconciled with?

Oil is not 6,000 years old.

So all who believe in what our President does (that the universe is only a few 1,000 years old), stop using oil!

Exxon's profits proves my belief that we now have a government for the rich and nothing but the rich so help us god.

Posted by: Tom Nicholson on April 27, 2006 at 1:39 PM | PERMALINK

In my garage the voters come and go
in droves they say no

to the dems that take my money away


in droves they say no
In my garage the voters come and go

Posted by: tbrosz on April 27, 2006 at 1:41 PM | PERMALINK

CN>While you're bitching and moaning about alternative energy, SUV drivers are making it a reality.

Wonderful. Actually it does worry me. We're likely to run at high speed into steep oil depletion without an alternate path ready.

It could take 10-20 years to ready for a smooth transition, and all we did to prepare was hog out our consumption level. Result? I expect panicked and poor decision making. Look at how people flip out at gas prices, like children having their candy ration cut back. You'd think it was the price of bread.

The worries of the 70's were right. The problem was, people in our societies just can't think 20-30 years in advance. Knowing that, those who saw the problem sold it as "oh my god, right now!". When we got a couple decade's respite, the mob said it had all been overblown, cornucopia was still on, and around the corner would be hydrogen! (nevermind the inefficiencies, or what energy to make it with).

Here we are. Right where hubbert & co said we'd be, possibly even right where the club of rome predicted, delayed about 5 whole years by OPEC's tightening back then. Now we either save ourselves by a huge effort to hit the high-quality, high-tech, lower material path, or we go straight to coal and tar and resource wars.

Bets as to which way? I think I'm going to have a triple-header movie night this weekend: The Road Warrior, Mad Max, and Beyond Thunderdome.

Posted by: Bruce the Canuck on April 27, 2006 at 1:46 PM | PERMALINK

Lawzy, Brosz, you say you're an engineer but I have a hard time believing you're not in marketing, such a shill you are!

tbrosz: Exxon took in $370.7 billion in 2005. Half of that went to purchasing crude oil and other raw product. After other expenses, $36.1 billion was net income (profit). About ten percent.

Among those other expenses were excise taxes, income taxes and other taxes and duties that added up to $95.6 billion, or almost three times the amount of profit.

Well, let's look at that more exactly:
Income taxes (Q1 2006) 7,059
Excise taxes (Q1 2006) 7,664
All other taxes (Q1 2006) 11,049

Woah! "All other taxes" sure does comprise a lot of that tax burden!

I went to their 2005 annual report to find out what "all other taxes" might possibly include, but it turns out Exxon doesn't want to specify. Although they do confess that what they really mean is "all other taxes and duties", i.e. paying for port facilities and environmental abatement on pipelines etc etc.

In other words, they want to claim this high tax burden but don't feel obliged to actually break down what sort of 'taxes' they are paying, because those taxes would then seem far too reasonable for the services they are associated with.

In this first quarter estimate, ExxonMobil earned $8.1 billion.

Taxes paid during that quarter: $25.7 billion.

And it would be more if not for those subsidiary companies in the Bahamas (7 companies!) and the Caymans. Lots of oil in those locations, I hear.

Those, of course, don't include taxes paid by consumers at the pump.

Yes, they do. They're called 'excise taxes'. What, you think Exxon doesn't pass those right on? Or are you referring to state sales tax?

I know you don't have any sort of business degree, but you really ought to learn to approach financial statements with at least a little skepticism. Like, say, the degree that your sort of ideologue uses when it comes to 'global warming'.

Posted by: S Ra on April 27, 2006 at 1:53 PM | PERMALINK

I love me some "end of times" rhetoric from the Lefties.

Really good crazy, that.

Posted by: Birkel on April 27, 2006 at 1:57 PM | PERMALINK

"Prufrock" references on a political blog, plus someone said "Lawzy." Have I died and gone to heaven?

Posted by: shortstop on April 27, 2006 at 1:57 PM | PERMALINK

The $8.4B number is all the more remarkable because you have to believe that they are doing everything in their power to lower their profit number (and attendant expectations) so that they can escape public scrutiny and political recrimination.

I'd expect there'd be all kinds of creative accounting to diminish profits, just like in the movie industry. God only knows how many expensive offices, and functions, and cars, and corporate jets, and unnecessarily high salaries all around at the management level are encouraged to lower those numbers.

The $8.4B is, I'm sure, just the tip of the obscenity.

Posted by: frankly0 on April 27, 2006 at 1:58 PM | PERMALINK

Lets see, the price of a barrel of oil has doubled, but the price of gas has nearly trippled.

Gee, no wonder profits are through the roof. All at the expense of working people, who can't find jobs anymore.

Posted by: Bubbles on April 27, 2006 at 2:01 PM | PERMALINK

The graphic is not misleading. If the point is that the stock experienced a large temporary fall in value, then the graphic perfectly represents that.

It is also not a fall of 1.5%. It is a fall of ((63-61.5)/63)*100 = 2.4%. A 2.4% drop in a single day is significant.

Just a heads up. Carry on.

Posted by: Saam Barrager on April 27, 2006 at 2:03 PM | PERMALINK

Shorter tbrosz: I don't like taxes.

S Ra,

tbrosz puts up a post rife with straw man arguments, misleading statistics, bogus characterizations and other intellectual dishonesty? Say it ain't so! ;)

tbrosz, any time you feel inclined to post, why don't you just type "I don't like taxes"? It's what most of your posts boil down to, and at least then you'd be making an honest statement for once.

Posted by: Gregory on April 27, 2006 at 2:06 PM | PERMALINK

I love me some good straw man arguments from Birkel.

Real good intellectual dishoensty, that.

Posted by: Gregory on April 27, 2006 at 2:07 PM | PERMALINK

To put the $8 billion profit in the quarter in perspective, just think that this is roughly the cost of government for just today.

Posted by: Yancey Ward on April 27, 2006 at 2:09 PM | PERMALINK

Bruce the Canuck at 1:46 ain't a doomsayer, Gregory? He's not preaching that the end is nigh?

Posted by: Birkel on April 27, 2006 at 2:19 PM | PERMALINK

Birkel> Bruce the Canuck at 1:46 ain't a doomsayer, Gregory? He's not preaching that the end is nigh?

No, that a turning point is nigh, a decision point. Could wind up bad, could just be rough and then better than now. Depends on if we take responsibility for it, or stick our heads in the sand, go around blaming outsiders.

Posted by: Bruce the Canuck on April 27, 2006 at 2:23 PM | PERMALINK

Inflation adjusted gas prices are near the peak:

http://inflationdata.com/Inflation/images/charts/Oil/Gasoline_inflation_chart.htm

No doubt the war on terror and peak oil have combined, or should I say, the war on oil and peak terror? Basically the real price has doubled in the last 6 years.

Should we care?. Good old Toyota will be doubling the MPG in the next couple of years.

It is the underdeveloped countries, mainly in Africa who pay the biggest price.

Posted by: Matt on April 27, 2006 at 2:24 PM | PERMALINK

S Ra:

You can dance around it all you like, but the fact is that the government is taking a much bigger chunk of Exxon's gross than Exxon is keeping, even if you exclude "other taxes." That number is just as valid as the profit numbers that the usual anti-corporate idiots (on both left and right) are waving around right now.

Oh, the screaming is going to work, all right. I give the Congress about two weeks before they do something abysmally stupid, the economic equivalent of tossing a can of gasoline on a fire. Don't know what it's going to be yet, but I've already heard a number of dumbass ideas from both Democrats and Republicans.

Best bet would be some kind of "windfall profits tax," that would not do one damn thing to bring us more oil or lower gas prices, but will make the simpleminded think that Big Oil got what was coming to it.

Here's a little beauty from California that would wring money from those evil fat cats and spend it drugs for seniors.

Posted by: tbrosz on April 27, 2006 at 2:36 PM | PERMALINK

tbrosz....is...[this is hard]...right.

The same crap is happening in Canada, all the way from far right to far left. It's like the major party's MPs all came back from their lobotomies over the weekend.

This is an issue where political hangers-on from both sides should be educating themselves, then the public, and asking to see some backbone out of their respective champions in office. For the good of us all.

Posted by: Bruce the Canuck on April 27, 2006 at 2:44 PM | PERMALINK

Another shorter tbroz: "The real problem is that Big Oil executives don't make ENOUGH money because the big bad evil government is taking so much of it!"

*Wipes tear thinking about the hard lives of millionaire fat cat oil executives*

Posted by: Comedy on April 27, 2006 at 2:51 PM | PERMALINK

The "real problem" is that people focus on the profits of the oil companies to avoid having to think about the harder issues.

Posted by: Bruce the Canuck on April 27, 2006 at 2:56 PM | PERMALINK

Apparently they fell short of consensus estimates. Those must have been some serious expecations!

That was my thought. If that's all the money that they can make with Americans guzzling fuel the same as ever and petroleum at $75 per barrel, they must be in big trouble. Plus, the government wants to take an extra share of that $8B.

that's a quick slide, but only about 2%, made up over the next few hours. Probably a large sell-off by a single (institutional?) investor.

Yesterday China signed an agreement with Nigeria, one of a large number signed over recent months between China and oil producers in Africa and elsewhere (e.g. Myanmar). With major competition from Chinese oil companies (or company) the future does not look that bright for western companies. While western companies are under "scrutiny" when they do business in most places (e.g. Sudan), the Chinese are free to bribe and coerce as they see fit.

While Americans are clamoring for more energy, the people who produce it are prevented from expanding their production facilities: can't drill on the OCS, in ANWR or the Rockies; can't build new refineries; can't buld windfarms where people can see them; can't build the agri-waste methane generators where people can see them.

I expect that if you were reviewing your portfolio, you might very well be shifting your assets from the western companies to the Chinese companies. Assuming, that is, that you are interested in a return.

Posted by: republicrat on April 27, 2006 at 3:05 PM | PERMALINK

From:
http://www.washingtonpost.com/wp-dyn/content/article/2006/04/26/AR2006042602307_pf.html

"Since George Bush and Dick Cheney took over as president and vice president, gas prices have doubled!" charged Sen. Barbara Boxer (D-Calif.), standing at an Exxon station on Capitol Hill where regular unleaded hit $3.10. "They are too cozy with the oil industry."

She then hopped in a waiting Chrysler LHS (18 mpg) -- even though her Senate office was only a block away.

Posted by: Matt on April 27, 2006 at 3:06 PM | PERMALINK

Bruce:

The same crap is happening in Canada, all the way from far right to far left. It's like the major party's MPs all came back from their lobotomies over the weekend.

To be fair, this is true of almost any real (or perceived) crisis. The need to be seen as DOING SOMETHING outweighs any real solutions that might not be as obvious.

There's nothing so bad that the government can't jump in and make it worse. Often by creating huge new bureaucracies, or appointing "czars" to deal with things.

Try and tell me that everything that was done domestically after 9/11 was brilliant.

Posted by: tbrosz on April 27, 2006 at 3:08 PM | PERMALINK

Dems ahead 44% - 32% on generic presidential ballot.

If the Dems could run "generic" Democratic candidates they could probably do pretty well. Unfortunately, they have to run "particular" Democratic candidates, and those tend not to do so well. A lot of people who like "generic" Democratic candidates voted for Bush over Kerry. I expect that Democratic candidate for Congress, and incumbent, Hollohan of W. Virginia isn't going to do so well; but the news about him hasn't spread as well as the news about Republican Cunningham has spread; Hollohan would do better if he could excape his recent "particulars" and go back to being "generic".

Posted by: republicrat on April 27, 2006 at 3:21 PM | PERMALINK

Saam Barrager: Lets see, the price of a barrel of oil has doubled, but the price of gas has nearly trippled.

Where has the price of gas tripled? Where I buy it has increased 50% as the price of oil has doubled.

Posted by: republicrat on April 27, 2006 at 3:26 PM | PERMALINK

Regarding the actions of the market - oil is a very unique product in a very unique position.

The demand is great and highly inelastic, the supply is constrained forever, and there are no easy or quick alternatives.

With no outside action the price will simply shoot through the roof and there is nothing anyone can do about it.

Imagine if the same thing was happening with, for example, air or water?

Because of the special case I think 'normal' market actions should not apply. This will cause a stroke to the libertarians but I think the government needs to put special regulations in place - for the public good.

I can imagine that in the last 30 years much of the right wing rhetoric was propoganda trying to persuade the public that skyrocketing prices and profits were an inevitable fallout from this situation.

I contend that peak oil is a special case that requires a unique government response, and should not be left to the whims of the so-called "free market."

Posted by: Tripp on April 27, 2006 at 3:27 PM | PERMALINK

While western companies are under "scrutiny" when they do business in most places (e.g. Sudan), the Chinese are free to bribe and coerce as they see fit.
Posted by: republicrat on April 27, 2006 at 3:05 PM | PERMALINK

Bombing, invading, and installing puppet dictators isn't coersion?

Posted by: Frequently Wrong on April 27, 2006 at 3:28 PM | PERMALINK

Bruce the Canuck said: "The 'real problem' is that people focus on the profits of the oil companies to avoid having to think about the harder issues."

You're absolutely right. You and tbrosz don't think about the harder issues -- you focus on the profits of the oil companies, just like the oil fat cats themselves.

Posted by: Comedy on April 27, 2006 at 3:29 PM | PERMALINK

You want some class warfare? I think every gas pump in America should have a notice of how the Exxon CEO got a $400,000,000.00 special retirement package off the increase in the price of gas.

But he earned it right?

Right now the 'invisible hand' of the market has got every American by the nads and is squeezing real hard. I love hearing apologists telling us we should be happy about this.

Posted by: Tripp on April 27, 2006 at 3:35 PM | PERMALINK

Bruce the Canuck,

The real problem is that we have built a society that is dependent on a scarce resource that is running out.

I figure the carrying capacity of the Earth will be about, oh, 3 billion on renewables.

That means 4 billion deaths. And yet trolls will bleat about how the US must continue to grow in population.

We better figure out a better way to live and stay on top because simply consuming resources faster than other countries isn't going to work much longer.

Posted by: Tripp on April 27, 2006 at 3:39 PM | PERMALINK

tbrosz puts up a post rife with straw man arguments, misleading statistics, bogus characterizations and other intellectual dishonesty? Say it ain't so! ;)

There is nothing wrong with pointing out that the government has a higher net profit than the investors. It illuminates why increasing the taxes isn't going to solve the problem of high prices. If the government used the money to pay for investments in energy supplies, then the price might come down in a few years, assuming the people gave permission to build the new production facilities (which in many places they won't, at least not in under 10 years.)

High prices have many causes, but large profits are not a major cause. the price of gasoline would be about 97% of what it is now if the producers gave up profits completely. The figures that I read were $0.1 per gallon for profit, and $0.35-$0.65 for taxes, depending on the state.

Posted by: republicrat on April 27, 2006 at 3:40 PM | PERMALINK

What makes the profits obscene is the price in blood, American and Iraqi, that is being paid for those profits. Soldiers and Iraqis are dying and being horribly maimed to secure the flow of oil while the CEO of Exxon is given a half billion payout. The oil industry profits obscenely from this sacrifice without enduring any pain or consequences itself. They are asking others to give their lives while they enjoy their luxuries and opulence.

Posted by: bblog on April 27, 2006 at 3:43 PM | PERMALINK

The need to be seen as DOING SOMETHING outweighs any real solutions that might not be as obvious.

Exactly, la invading Iraq.

Finally, a hint of honesty.

Posted by: trex on April 27, 2006 at 3:44 PM | PERMALINK

I contend that peak oil is a special case that requires a unique government response, and should not be left to the whims of the so-called "free market."

Tripp,

Not sure where you end up? Are you asking for price controls? Gas taxes? What exactly?

Posted by: Matt on April 27, 2006 at 3:45 PM | PERMALINK

Bombing, invading, and installing puppet dictators isn't coersion?

I assume you are writing of the American invasion of Iraq. Compare what the Chinese companies do in Nigeria, Sudan, Myanmar compared to what the western companies do. In response to a suit against Unocal for practices in Myanmar, Unocal is out, and the Chinese are in business in Myanmar.

The Americian invasion of Iraq has resulted in highly scrutinized elections and a newly trained judiciary, plus the removal of a gross dictatorial regime. The Chinese displacement of Unocal in Myanmar has resulted in reduced scrutiny in Myanmar -- nobody cares how many political prisoners in Myanmar work the equipment for the Chinese, and the government of Myanmar rakes in the foreign exchange.

Posted by: republicrat on April 27, 2006 at 3:46 PM | PERMALINK

um, it dropped on the open and has rebounded since. It is called selling on the news. Many traders unload positions after earning are reported.

Posted by: sedated on April 27, 2006 at 3:47 PM | PERMALINK

Try and tell me that everything that was done domestically after 9/11 was brilliant.

We'll leave the water carrying for the Bush Administration to you, tbrosz.

Posted by: Gregory on April 27, 2006 at 3:49 PM | PERMALINK

Bruce
Your doom and gloom scenario don't cut it with me, I recognize it for what it is: you're claiming the sky is falling and only you have the answer. It's a simple power grab.

There are a few hundred years of oil left at current usage levels. There is even more shale oil available if the price goes up much more. Long before we run out of oil the price will rise to where alternative energy is viable. The reason we use oil now is because it's the most economically feasible fuel. Any premature move away from oil will come at an economic cost, and those poor people the left is supposed to worry about will suffer the brunt of it. Bill Gates will still be able to afford to heat his house.

Besides, if this really concerned the left they wouldn't be blocking nuclear power. And wind farms. It's so much simpler for the left to just whine about the oil companies actually making money (gasp!) for providing something that people want to buy.

And Tripp
The overpopulation doom-mongers were proven wrong over a decade ago.

Posted by: conspiracy nut on April 27, 2006 at 3:50 PM | PERMALINK

She then hopped in a waiting Chrysler LHS (18 mpg) -- even though her Senate office was only a block away.
Posted by: Matt

oops, you forgot this one:

When GOP senators had a lunch Tuesday a couple of blocks from the Capitol, many took cars. Sen. John McCain (R-Ariz.) emerged from the lunch looking for his ride when he spied The Washington Post's Shailagh Murray. Reconsidering, he set out on foot. "I need the exercise," he reasoned.

Posted by: linda on April 27, 2006 at 4:00 PM | PERMALINK

CN>There are a few hundred years of oil left at current usage levels. There is even more shale oil available if the price goes up much more.

Pure fantasy. Even the USGS doesn't believe that.

CN>you're claiming the sky is falling and only you have the answer. It's a simple power grab.

Power grab, huh. In what way would I gain power, or any other lefty? If we switch energy & consumption paths it will become conventional wisdom quickly, and be implemented by big corporations just as before.

People such as myself, we could happily turn away from such issues and go back to rooting for space science funding, or whatever, unworried by the foolish crap that goes on now.

Ignoring CN's pop strawman...
Tripp>I figure the carrying capacity of the Earth will be about, oh, 3 billion on renewables...That means 4 billion deaths...

No, not necessarily. There is carrying capacity (income) and natural capital (assets). We can draw down natural capital for several generations before collapse, and the symptoms of that drawdown are are likely to show up slowly. Population is already trending to negative in the whole developed world, and much of the developing world. Exceptions are due to local immigration patterns.

The chances of a lethally sharp climate shift are prob "only" in the low single-digit percentages, and barring that a total economic collapse would require severe mismanagement or a global war. We're dumb at the mob level, but not quite that dumb.

An uncomfortable, lingering mess is quite likely though. As is the world being permanently a poorer and lower quality place to live in, if we draw down natural capital too far. The earlier we change, the lower the total cost, the better shape humanity is in for the next millenia or so.

Posted by: Bruce the Canuck on April 27, 2006 at 4:08 PM | PERMALINK

I heard this 'plenty of oil left' from Glen Renyolds, and now on this blog. The peak oil debate is about plain old oil, the liquid stuff.

The arguments against us running out of this for a long time, involvse technology to get that last bit of oil, go to shale, tar sands etc.

But the peak oil debate is about the regular oil from regular wells. And on that stuff, the consensus is about 20-50 years, depending on how you count, but either way, is now peak oil time.


Posted by: Matt on April 27, 2006 at 4:21 PM | PERMALINK

Americans are being asked to pay a huge price to secure the ME oil reserves. A trillion dollars for the war and who knows how many dead and maimed. That is why the profits are seen as so obscene at this time.

Posted by: bblog on April 27, 2006 at 4:30 PM | PERMALINK

Try and tell me that everything that was done domestically after 9/11 was brilliant.

I knew we could agree on something!

Posted by: craigie on April 27, 2006 at 4:41 PM | PERMALINK

At 1.1 trillion barrels of proven reserves and a run rate of 80 million barrels used at present, I get 37 years left. Now more reserves are going to be found in the next 37 years, but use is almost certain to increase as well.

Of conventional resources, I would guess that oil will be used, in ways familiar to today, for the next 30 years at least. However, one must remember that unconventional sources (tar sands and shale) are becoming economical at today's prices, and such unconventional sources are estimated to have up to 3 trillion additional barrels that are recoverable.

In short, the price of oil will continue to rise in fits and starts, but oil isn't going to run out tomorrow. However, I do think production will peak sometime in the next 40 years.

Posted by: Yancey Ward on April 27, 2006 at 4:50 PM | PERMALINK


***"Since George Bush and Dick Cheney took over as president and vice president, gas prices have doubled!" charged Sen. Barbara Boxer (D-Calif.), standing at an Exxon station on Capitol Hill where regular unleaded hit $3.10. "They are too cozy with the oil industry."***

babs...look what has happened to oil prices..

price of oil on 1/20/2001: $22.50

price of oil on 4/21/2006: $75.17

Posted by: thisspaceavailable on April 27, 2006 at 4:53 PM | PERMALINK

Thank God for exxon and the rest of big oil. i like my dividend checks, ya baby.

ha let the republican party bash big oil like the dumb asses of the democrat party and then i am not going to vote for the crack pots either.

Posted by: roger o. on April 27, 2006 at 4:57 PM | PERMALINK

Matt> The arguments against us running out of this for a long time, involvse technology to get that last bit of oil, go to shale, tar sands etc.

Exactly! We're probably going to burn all of the easily oil. The question is whether we then go on to burn the higher-carbon fuels, or shift to renewables and higher efficiency. Both paths probably have about the same cost, and we can probably only afford to huge investment once without impoverishing ourselves. Which is it?

In Canada, pathetically, the tax breaks and subsidies are going to tar sands, despite huge wind resources. The tar sands produce about 6 x 10^15 Joules/day of energy. Easily developed wind energy here could be around 50 GW = 4e15 J / day.

Roughly the same scale, and the wind energy wouldn't be using 1/5 of our natural gas to upgrade it. Plus huge gains are still possible in efficiency. Transmission losses and lightbulbs alone use something like 1/4 of our electricity.

It's all tied together. Much of the pressure to develop the tar sands comes from south of the border. And economies of scale are neccessary to make alternatives work.

There's the crap path, and the quality path. We seem to be choosing the wrong one. If we take the quality path, we'll lead the way for the developing world, and profit from exporting the expertise gained. That is, after all, what our economies are based on now. It's the smart way to go.

Posted by: Bruce the Canuck on April 27, 2006 at 5:00 PM | PERMALINK

Bruce,

I dunno. I've seen an Amish farm and it wasn't good. I'm skeptical we can grow enough food for more than 3 or 4 billion with renewables.

That is not too bad, really, if the losses occur by normal "attrition."

Yancey, the problem with looking at what is an "economical energy alternative" is that it focuses on money and ignores what the money is based on.

People say "assuming everything stayed exactly the same except the price of oil doubles, then we can make money refining tar into oil."

The problem is that if the real price of oil doubles it will be because the supply is constrained. If the supply of oil is constrained then everything else won't stay the same.

Alternatives may ease the downward slope but make no mistake we are on a downward slope. The carrying capacity of the Earth will be less than it is now.

Posted by: Tripp on April 27, 2006 at 5:10 PM | PERMALINK

How many of you carpooled to work today? How many of you rode your bicycles to work?

Anybody who answered "not me" to both of these questions has no right to whine and complain about gas prices.

I love how in America, everybody has to sacrifice except for #1.

Posted by: ernie v on April 27, 2006 at 5:12 PM | PERMALINK

republicrat: High prices have many causes, but large profits are not a major cause. the price of gasoline would be about 97% of what it is now if the producers gave up profits completely. The figures that I read were $0.1 per gallon for profit, and $0.35-$0.65 for taxes, depending on the state.

That doesn't seem to jive with ExxonMobil's numbers. Q1/04-Q1/05 oil-equivalent production increased 3.8%; sales by volume across the board are down or flat; refinery throughput is down. Net income is up. Way up; the EPS figures don't tell the whole story, as ExxonMobil spent $5B this quarter in a share buy-back and will increase that to $6B next quarter.

Accounting for share buy-back, Q1/04-Q1/05 net income has increased 70% (or over 80% if you discount special charges from Q1/04). That increase hasn't come from operations (small increase), asset sales (nil). or other special items (none). So where did it come from?

Back of the envelope calculation for ExxonMobil shows that if you take the Q1/05 numbers for sales volume of oil products and factor out net income (including share buy-back), it would reduce the price of those products by about $19.64/barrel or $0.47/gallon.

Posted by: has407 on April 27, 2006 at 5:12 PM | PERMALINK

ernie,

Will you accept a scooter? That's what I rode to work on. Zuma 50cc scooter.

What did you ride on?

Posted by: Tripp on April 27, 2006 at 5:14 PM | PERMALINK

Yancey,

However, I do think production will peak sometime in the next 40 years.

We won't know until for sure until we look back, but I think production is currently at its peak except for the contribution from Iraq.

I think everyone else is pumping flat out and we aren't finding much in the way of new fields.

Posted by: Tripp on April 27, 2006 at 5:18 PM | PERMALINK

So what is my solution?

There is no "solution," but we need to do the best we can.

Promote conservation. Make conspicuous consumption 'uncool.'

Build nuclear and wind.

Increase efficiency - car mileage, home and office insulation.

Nail windfall profits and use that money to do the above.

Note that I'm not stupid enough to think this is going to happen, or that it will allow us to continue living the way we do. Still, it is the right thing to do and if America wants to be the world leader then we need to be doing these things.

Posted by: Tripp on April 27, 2006 at 5:24 PM | PERMALINK

>I dunno. I've seen an Amish farm and it wasn't good...

We're not Amish. Tractors, water pumps, and (some) fertilizer make a difference, and any number of substitutes could power enough of them.

>That is not too bad, really, if the [population drawdown] occurs by normal "attrition."

Which is what how will happen in most places. The EU is on that path, as is China, and even the USA, minus immigration influences.

Posted by: Bruce the Canuck on April 27, 2006 at 5:29 PM | PERMALINK

Will you accept a scooter? That's what I rode to work on. Zuma 50cc scooter.

Tripp, you rock.

Posted by: shortstop on April 27, 2006 at 5:29 PM | PERMALINK

ernie: How many of you carpooled to work today? How many of you rode your bicycles to work?

Anybody who answered "not me" to both of these questions has no right to whine and complain about gas prices.

Interesting that public transportation didn't even make your list.

Posted by: shortstop on April 27, 2006 at 5:30 PM | PERMALINK

Sorry, correction to previous post... "Q1/05" should read "Q1/06" and "Q1/04" should read "Q1/05".

Also, I didn't mention that ExxonMobil also made $2B in dividend payments in Q1/06; an 18% increase over Q1/05.

If you throw that into the profit pot, prices would drop $22.46/bbl or $0.53/gallon.

Posted by: has407 on April 27, 2006 at 5:37 PM | PERMALINK

You are right Bruce, there is a bad way to do this, and a lot of factors come into play.

The Europeans are moving to biodiesel, but the Indonesian response was too erratic as they created much worse pollution preparing to farm palm oil.

Then the MTBE fiasco. The U.S. began using alcohol additives, mostly to replace MTBE and reduce emissions for which we all seemed to accept, and that ramp up worked out pretty well, except for a period of over subsidies.

Population migration to more efficient cities works out pretty well. But Africa is in the toilet, partly because they cannot afford efficient energy equipment.

China uses 1.5 barrels of oil per capita per year, Mexico uses something closer to 10, we use 30. This will change very rapidly.

China expects to ramp up per capita usage very quickly, and it is China that is buying up future oil supplies and driving the 'peak' oil effect.

At current prices, biodiesel would be competetive; if we had the infrastructure. What I see is that solar algae, if we can farm it, is probably cheaper than tar sands or oil shale, and runs just as good if not better in diesel engines.

Growing the proper algae for biodiesel depends on either a better engineered algae, or a better conversion process, but algae is 30 times more solar efficient than any form of grain alcohol.

Cars will be getting 100 MPG soon, and economies of scale are beginning to give them better life cycle costs in terms of energy.

Industrial nations have done prety well in energy efficiency, keeping the real price of energy fairly stable.

Global warming restrictions will hit soon, the problem is being generally accepted. But if you look at the U.S. use of oil over the past 100 years, we have done fairly well with global warming because we used oil to dramatically reduce our farmland converting to intensive agriculture, and our net co2 emissions do not reflect our oil use because of the farmland that has been converted back into forest.

The key, IMHO, is the speculators who lock up future supplies of crude. They give a market signal that peak oil is near and we should prepare. Greens often have government jump in too soon, and cause ripple effects that government programs cannot always figure out in advance.

Also, there is something to be said for the idea that nature did not give us enough oil to fry our brains. The oil in the crust was created afterall by the interaction of atmosphere co2 and land photosynthesis in the carboniferous age. So, there is an inherent limit to how badly we can fuck this up. That is, peak oil does seem to be occuring just when global warming is starting to ramp up.


Posted by: Matt on April 27, 2006 at 5:45 PM | PERMALINK

Bruce
Let's see what we can learn:

Some estimates, such as the USGS, predict that oil reserves will become economically unrecoverable by the 2050s. However, these numbers are open to debate as they include only reserves that are presently in development or considered economically recoverable. [source]
What else can we learn:
The USGS estimates the total reserves are about three times the known amount. [same]
And let's see if there might be more information out there:
If a technology can be developed to economically recover oil from oil shale, the potential is tantalisingly enormous. If the containing organic material could be converted to oil, the quantities would be far beyond all known conventional oil reserves. [source]
So, the USGS thinks we have about 50 years of "economically recoverable" oil. Of course, as the price rises more of it becomes "economically recoverable". They also seem to think there's 3 times that amount out there. And given rising oil prices, the oil shale starts becoming economically viable; and there's loads of that.

Here's your clue: We'll use whatever energy source is the most economical, because that is what improves people standard of living the most by allowing them the greatest purchasing power for their dollar. Right now that's oil, and at double the cost it's still oil (look what they pay in Europe). When oil starts getting scarce, the price will rise until it is no longer the most economical, then we'll use something that is. And all the bloviating from the left isn't going to change any of that.

Oh, and you want lefty politicians in power, that's the simple power grab. Apparently the left can't get in power on ideas, they need trumped up doomsday scenarios.

Posted by: conspiracy nut on April 27, 2006 at 6:22 PM | PERMALINK

has407 on April 27, 2006 at 5:12 PM

That's a good contribution. thank you.

I think there would be less annoyance at their profits if they had invested more in alternative energy generation instead of stock buy-backs. On the other hand, the stock buy-backs give a lot of capital back to investors to invest in alternative energy if they thinks it'll pay.

again, thanks.

Posted by: republicrat on April 27, 2006 at 6:50 PM | PERMALINK

>the USGS thinks we have about 50 years of "economically recoverable" oil.

This is best expressed as when the peak production is expected to be. They put it at 2025-2037, from a report I read from them, but also show a much steeper drop off on the far side of peak.

>They also seem to think there's 3 times that amount out there.

Discovery rates don't support this. Note I said "even the USGS", not "the ever-reliable and unbiased USGS". Their conclusions, especially public ones, are influenced by the geopolitical needs of the USA. For example, assuming that almost all the remaining oil won't be in the middle east undercuts OPEC's confidence.

>And given rising oil prices, the oil shale starts becoming economically viable; and there's loads of that.

Yes and if we could just do protium fusion (light hydrogen), the whole of the oceans would be our gas tank. Don't hold your breath, it's a shitty, low-quality resource. The energy return bites.

>Oh, and you want lefty politicians in power,

Of course. But I fully expect that within ten years of a direction change, winger' politicians will be onboard like it was their idea all along. There won't be a comparative advantage. Anybody could take this on. It isn't even ideologically left or right, mostly by habit.

>Here's your clue: We'll use whatever energy source is the most economical, because that is what improves people standard of living the most...

Not counting externalities, and with a high discounting rate on future quality of life.

>...at double the cost it's still oil (look what they pay in Europe...

Current policies in the EU were based on the idea of $25-$40 oil. Things are changing quickly. And the "alternative" resource with the lowest marginal cost at this point is probably conservation/efficiency, in which areas they are far, far ahead of north america. After that's hit diminishing returns, the next cheapest is probably wind energy, which is being rapidly developed, then expanded nuclear (under intense debate), and possibly anerobic coal power. Note that the ITER fusion demonstrator plant is being built in France.

>that's the simple power grab. Apparently the left can't get in power on ideas...

There are multiple reasons to reform our energy economy: geopolitics, effects on the atmosphere, depletion, local pollution. And multiple possible solutions: renewables, nuclear, conservation, efficiency, land use planning. The subject is rich with ideas.

Posted by: Bruce the Canuck on April 27, 2006 at 6:56 PM | PERMALINK

I think there would be less annoyance at their profits if they had invested more in alternative energy generation instead of stock buy-backs.

Chevron puts something like $300 million a year into alternative fuels and energy. BP has one of the most well-known alternative energy programs, with a planned investment of $1.8 billion over the next three years.

I'm not seeing a lot of this kind of thing at Exxon, unless I missed it in the documents, and if they aren't doing this, they're missing a bet. The smart oil companies will transform neatly over the next couple of decades into energy companies, and those that cling to oil with a death grip will end up losing out.

Posted by: tbrosz on April 27, 2006 at 7:43 PM | PERMALINK

tbrosz: I'm not seeing a lot of this kind of thing at Exxon, unless I missed it in the documents, and if they aren't doing this, they're missing a bet.

ExxonMobil's investment in alternatives is nil, relatively speaking. It's one of the reasons the market loves them, at least for the moment.

Posted by: has407 on April 27, 2006 at 8:14 PM | PERMALINK

Apparently the left can't get in power on ideas, they need trumped up doomsday scenarios.

"We can't wait until the smoking gun is a mushroom cloud."

If by "the left" you mean "the right" -- you're absolutely correct.

Posted by: Windhorse on April 27, 2006 at 10:41 PM | PERMALINK

Why does everyone assume that oil companies pay the SPOT OIL prices, They don't, they have long term contracts(often with their own production units). Yes, eventually they will have to renew those contracts at higher prices, BUT MEANWHILE ANY INCREASE IN PRICE TO THE CONSUMER while their costs are fixed IS PURE PROFIT. That is both "how the free market works" and "gouging" and it is why oil company profits rise in step with gas prices. Now if there was competiton--but there isn't.

Posted by: lee on April 27, 2006 at 11:45 PM | PERMALINK

"..pay the SPOT OIL prices, They don't, they have long term contracts.."

You bet, and the long term contract prices are up, way up. How does this affect current profits? Dunno.

Posted by: Matt on April 27, 2006 at 11:54 PM | PERMALINK

ExxonMobil's Q1/06 press release has the basic numbers...

Over 75% of their net income comes from upstream (crude oil and natural gas prodution); the rest from downstream, chemical and operations. I.e., they currently make most of their money producing and selling crude oil and natural gas.

Posted by: has407 on April 28, 2006 at 12:29 AM | PERMALINK

matt: "You bet, and the long term contract prices are up, way up. How does this affect current profits?"

I'm not seeing that looking at NYMEX light sweet crude. Not a market I'm familiar with. Today, there seems only some spotty large open interest further out, but:
Jun '06 closing $70.97
Dec '06 closing $74.53 12.85% over spot annual rate
Jun '07 closing $74.40 04.83%
Dec '07 closing $73.63 03.44%
Jun '08 closing $72.58 02.27%

So, although not in backwardation, out months showing cheaper than finance, by a margin.

On this there is not enough depth to make for profits long-term, but, if there are enough buyers out foreward somewhere (China?), an oil producer can lock in present day profits at this level. Always a judgement call.

And earn 3% p.a. on oil in the ground.

Posted by: notthere on April 28, 2006 at 12:47 AM | PERMALINK

republicrat, and anyone else who was looking at my posts above...

Sorry, the correct number to use is $8.4B. I was just castigated by my CFO/friend, as I was doing the calculations as if "operating income" instead of "net income". Duh.

Posted by: has407 on April 28, 2006 at 12:55 AM | PERMALINK

has407: Sorry, the correct number to use is $8.4B. I was just castigated by my CFO/friend, as I was doing the calculations as if "operating income" instead of "net income". Duh.

So $0.10 per gallon profit is about right?

rereading "has407 on April 27, 2006 at 5:12 PM", I do not see where the figure of $8.4B enters the calculation.

Thanks again.

You can get to the truth more quickly by mistakes than by confusion and indecision. The original point was that the government gets a lot compared to what the oil companies get -- the exact ratio matters, but not as much as the main point.

Posted by: republicrat on April 28, 2006 at 2:50 AM | PERMALINK

republicrat -- Based on their Q1/06 numbers: worldwide petroleum product (i.e., downstream) sales volume of 7865kbd and $8.4B net income = $11.87/bb $0.28/gal.

Posted by: has407 on April 28, 2006 at 4:22 AM | PERMALINK

has407: I admire your persistence. $0.28/gal makes the company profit per gallon less than the tax take per gallon in every or almost every state. I don't mind the tax (not exactly, anyway), but I also don't mind the profit. Where I live, gasoline prices would be about 93% of their current prices if the company eliminated all of its profits.

I would be happier, and I think Americans would at least tolerate the prices, if I were confident that the oil industry were investing more in domestic and renewable energy supplies. I am a great respecter of the free market, but the oil market isn't free -- besides that, with China growing and buying oil everywhere, I do not expect even the free market price to decline by much.

thanks again for some good posts. One has to read a lot of junk here to get some real information (sadly, I post some of the junk, as you'll know if you read the rejoinders to my comments on cell phone usage in Iraq and neighbors.)

keep up the good work.

Another note about China. china is a country of about 1.3 billion people, of whom about 300 million have wealth roughly comparable to Americans. As the country continues to grow its economy, that will soon be 400 million, then 500 million, then 600 million with wealth and productivity roughly comparable to Americans (in some kind of aggregate). China may be experiencing an investment/building bubble of sorts (sources elswhere) but even if the bubble bursts it is hard to imagine a crash landing so severe that their usage of energy won't rise.

Add to that India, somewhat behind China in totals and in averages, yet another economic behemoth. It is really difficult to come up with a realistic scenario in which fuel prices fall.

Posted by: republicrat on April 28, 2006 at 3:36 PM | PERMALINK

How dumb does Big Oil think you are?

"This business sucks. In an effort to get ahead of the curve, Big Oil has been putting out the message that oil is actually a bad business to be in. The American Petroleum Institute has been running full-page advertisements in the New York Times this week that show where a hypothetical dollar spent on gas at the pump goes: 19 cents for taxes; 26 cents for refining, distribution, and service stations; and 55 cents for the crude oil. The ads also cite a PricewaterhouseCoopers study that shows the industry in 2005 "earned 8.5 cents on every dollar of sales." These figures are intended to elicit sympathy for the poor gas companies, struggling to get by with their 8.5 percent margins. Don't fall for it. Integrated companies like ExxonMobil--which pump crude, refine it, and sell it--capture 81 cents of every dollar spent on gas. And 8.5 percent is a pretty good margin for a capital-intensive, high-volume business like oil. ExxonMobil's profits last quarter were $8.4 billion on sales of $89 billion--about 9.4 percent of sales...."

Posted by: Bruce the Canuck on April 29, 2006 at 1:00 AM | PERMALINK




 

 

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