Gas prices expected to soar past $3/gallon

[Sheriff Gonna Getcha]

Were getting accused of being an imperial power out for oil. I say let's prove them right and start stealing Iraqi oil. J/K

[That Guy]

Originally Posted by djnemo65

The argument that eco-terrorists are responsible for limitations in US oil refinement capacity is insipid. While its true that most Americans - eco-terrorists if you prefer - do not desire a refinery in their backyard (indeed, new projects have met predominantly local opposition) the Big-Five oil companies are equally reluctant to open new refineries. The reason? The status quo situation is such that, absent extant oil reserves, supply shocks artificially spike oil's market value by impeding demand. While this is bad for us, it is very, very good for the oil companies' profit lines. If you don't believe me, see a 2001 FTC report which inidicated just this: that the big five had artificially inflated prices by intentionally keeping refinement capacity low.

But more problematically, the argument for increased refining activity presumes oil supplies capable of keeping up with global demand, which they won't be able to. This is extreme myopia. Global oil consumption is predicted to jump about 40 percent over the next twenty years, at a time when Saudi Arabia will realize its peak production capacity. You should really read the stuff Houston energy investment banker Matt Simmons is writing about this right now. Pretty compelling...

thats why nuke plants would help, but the greens dont like them either... talk about a catch 22... either way, oil isn't the problem, we still got plenty of oil, its refined fuels.

The oil rigs can be back up and pumping in weeks, the refineries can't be functional in nearly the sasme timeframe. Maybe the oil companies don't like it, but i'm sure there's plenty of people (energy companies etc) with enough money that would be willing to invest in building more refinery capacity if the government cleared the red tape for them. The profit margin is pretty good...

[djnemo65]

Originally Posted by That Guy

thats why nuke plants would help, but the greens dont like them either... talk about a catch 22... either way, oil isn't the problem, we still got plenty of oil, its refined fuels.

The oil rigs can be back up and pumping in weeks, the refineries can't be functional in nearly the sasme timeframe. Maybe the oil companies don't like it, but i'm sure there's plenty of people (energy companies etc) with enough money that would be willing to invest in building more refinery capacity if the government cleared the red tape for them. The profit margin is pretty good...

See, the profit margin isn't good at all, because greater refinement capacity lowers the market price of oil. So logically companies don't want to invest millions in unpopular facilities that DEVALUE THEIR PRODUCT! Makes sense.

[skinznut]

The gas prices went from $2.62 to $3.42 in less than 3 days where I'm at. I think it's time for the bicycle.

[That Guy]

Originally Posted by djnemo65

See, the profit margin isn't good at all, because greater refinement capacity lowers the market price of oil. So logically companies don't want to invest millions in unpopular facilities that DEVALUE THEIR PRODUCT! Makes sense.

no it doesn't... first off, non oil companies can make refineries. More refineries means higher demand for crude oil, and a higher supply of processed fuels.

Since a refinery deals with processed fuels, and doesn't necessarily have anything to do with the extraction of oil (beyond buying it at market price) they wouldn't be devauling their own product anymore than any other commodity in existance (like, say corn, steel, or aspirin). As long as you can get the efficiencies to work so you make a profit after costs, there's no problem.

By your example we'd only have 2 corn farms in america so they could charge 20$ an ear, but guess what? that'd make absolutely no sense.

[djnemo65]

Originally Posted by That Guy

no it doesn't... first off, non oil companies can make refineries. More refineries means higher demand for crude oil, and a higher supply of processed fuels.

Since a refinery deals with processed fuels, and doesn't necessarily have anything to do with the extraction of oil (beyond buying it at market price) they wouldn't be devauling their own product anymore than any other commodity in existance (like, say corn, steel, or aspirin). As long as you can get the efficiencies to work so you make a profit after costs, there's no problem.

By your example we'd only have 2 corn farms in america so they could charge 20$ an ear, but guess what? that'd make absolutely no sense.

None of the big five are actively petitioning to build any new refineries. It is true that a few private companies are attempting to revitalize the refinerey industry, but most shy away from the unpredictability associated with it. Says the NY Times:
"The business of turning crude oil into gasoline, jet fuel or heating oil has rarely been a lucrative proposition. It has dismal profit margins compared with its more glamorous cousin, exploration. It is highly cyclical and fairly unpredictable, because demand for gasoline swings sharply by season. And because of low oil prices over the past decades, refiners have been forced into cutthroat competition that has driven many of the smaller refiners out of business."
I don't think you understand how limiting refinement capacity can impact price so let me explain it again. By operating at full capacity no reserve supplies are accumulated, which keeps the price high. More oil going into the marketplace would bring the price down. Add in the fact that it costs about 3 billion dollars to build a refinery, and that congresss didn't exempt refineries from MTBE liability, and you can see why its not econimical for big oil companies to build new plants.

While your corn example is obviously and intentionally ridiculous, it does somewhat parallel recent history. In the 90's congress repealed a new deal farming policy which had limited the amount of corn farmers could sell. Once this act was repealed the farmers accidentally killed their own profits by glutting the market with corn and driving the price down. I think it was called the Freedom to Farm act or something. The big oil companies, being much more oganized, did not commit a similar error. I will again refer you to the 2001 FTC report which found they colluded to artificially inflate price by intentionally limiting refinement capacity.

But I'm not gonna quibble over details anymore. The point is this: it is absurd to blame the environmental movement for limitations in US refinement capacity. To do so displays inadequate knowledge of a much more complicated situation.

[That Guy]

Originally Posted by djnemo65

I don't think you understand how limiting refinement capacity can impact price so let me explain it again. By operating at full capacity no reserve supplies are accumulated, which keeps the price high. More oil going into the marketplace would bring the price down.

once again, more oil isn't going into the marketplace, it'd be more refined fuels. Thats why oil prices haven't shot up at the pace of gas prices. If you think the envirnmentalist WANT more refineries or power plants, that's just wrong. Some groups are especially vocal about lobbying against any such legislation. To totally ignore that shows inadequate knowledge of current and ongoing political realities.

and farmers have been paid NOT to farm for decades. The demand for fuel and energy far outpaces the supply for food, and the supply is lower. I'm not sure where you got your figure of $3 billion for a refinery, but i'd sure like to see that math.