Getting Better Transparency From Oil Refineries 217
Hugh Pickens writes "Gregg Laskoski reports in U.S. News and World Report that virtually all of the retail gasoline price volatility that Americans experienced this past year was connected to significant problems at refineries. It was those refineries' vulnerability that subjected U.S. consumers to the year's highest average price ever, $3.63 per gallon. February delivered the BP refinery fire in Cherry Point, Washington that led to gasoline price spikes all along the Pacific coast, refinery problems in the Great Lakes region pushed Chicago gas prices to an all-time high of $4.56 per gallon, and over the summer, west coast refineries incurred outages, and California saw record highs in most markets, with Los Angeles gasoline's average price peaking at $4.72/gallon in October. Finally after Reuters reported that some 7,700 gallons of fuel spilled from Phillips 66's Bayway refinery in Linden, NJ, after Hurricane Sandy, New Jersey environmental protection officials said they were not made aware of a major spill at the Bayway plant, and the refinery failed to respond to inquiries from Reuters reporters. 'Too many times, history has shown us, the Phillips 66 response or lack thereof characterizes the standard practice of the oil industry. Refineries often fail or are slow to communicate problems that create significant disruptions to fuel supplies and spikes in retail gasoline prices. More often than not, scant information is provided reluctantly, if at all,' writes Laskoski. 'When such things occur is silence from refineries acceptable? Or does our government and the electorate who put them there have a right to know what's really going on?'"
Speculators (Score:5, Interesting)
Speculators demand more transparency so they can jack the price of futures every time a breaker trips at a refinery.
Speculation is already in play ... (Score:5, Interesting)
Speculators demand more transparency so they can jack the price of futures every time a breaker trips at a refinery.
One of the reasons that gas prices fluctuate overnight is due to speculation - this is just another way of attempting to democratize the "open" market.
As I understand it, the price of crude changes quicker due to speculation than to any other factors - can you think of another item where demand and/or supply will affect the prices on the same level (not due to speculation)?
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Now who is laughing all the way to the bank?
Speculation is bullshit, it is simply a form of legalized gambling.
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THe problem is the game is rigged for the players.
The only way we can fix this is through law.
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You can fix a broken game by playing the game? Nonsense. The game is broken, whether you happen to be a winner or a loser. The problem being pointed out is, currently everyone loses except those few players who happen to own a few congress critters.
Re:Speculation is already in play ... (Score:5, Interesting)
April 17, 2012
http://money.cnn.com/2012/04/17/markets/obama-oil-speculators/index.htm [cnn.com]
The new proposals require oil traders to put up more of their own money for transactions, ask for more money for market enforcement and monitoring activities, and call for higher penalties for market manipulation.
"None of these will bring gas prices down overnight," Obama said at a White House press. "But they will prevent market manipulation, and help protect consumers."
I think we should just kick speculators out completely, but then again,
I also think that fair, competitive, and transparent markets are better than "free" markets.
The numbers I've seen quoted are that the oil market is 70% speculators and 30% producers/users.
Historically, that number has been the opposite, with producers/users makeing up 70% of the market.
I'm not disputing that refinery problems are responsible for localized price spikes, but overall prices have gone up because speculators are moving the market towards higher prices.
The Book (Score:3)
Leah McGrath Goodman, a financial reporter, wrote a book about Nymex and the transition to electronic trading in the early 2000s. It's called "The Asylum" and verifies a lot of what you guys are saying.
Except that the regulators in the government are kind of... on the 'same team' . . . the head of the CFTC left and to work for the New York Mercantile Exchange. She documented the whole thing. Hell of a story.
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Actually, oil prices have gone up primarily because the US Dollar has been devalued. Compare the value of the 1970 dollar to the value of gold, oil, the yen, the yuan, or any foreign currency. Then, compare the value of the 2012 dollar to all those same items.
The dollar has been devalued, oil has increased in price very little. Several cents a barrel, in fact, not dollars.
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I'll repeat: the value of oil, based on the value of gold, has remained very stable since 1950.
http://communities.washingtontimes.com/neighborhood/energy-harnassed/2012/jul/17/does-gold-set-price-oil/ [washingtontimes.com]
http://pricedingold.com/crude-oil/ [pricedingold.com]
Talking heads, and the latest generations of "economists" would have you believe that the dollar is stable, while all other commodities fluctuate. The prices you see at the pump reflect, instead, the relative strength of the dollar.
Speculation does have a short transitory effe
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waiting for that bubble to pop...
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Speculators demand more transparency so they can jack the price of futures every time a breaker trips at a refinery.
RSS feeds like ASM's process safety incidents list [asmconsortium.net] are available and useful for keeping track of what's happening at refineries (of all types) around the world. That sort of transparency is valuable to far more people than just speculators.
Reporting to a public-facing list like this should be mandatory for all significant process industries. Transparency should be the norm, not the exception.
Yes, better transparency! (Score:1, Insightful)
Re:Yes, better transparency! (Score:4, Interesting)
Why don't fuel pumps mention the $0.18/gallon federal gasoline tax? Or the $0.38/gallon (California) state gasoline tax? Both are greater profit margin than the "greedy" store, the "greedy" refiner, or the "greedy" oil company.
The state and federal gas tax pays for things like roads. You do like to drive on roads, yes? Well, they don't just pop up and maintain themselves...
By the way, what where Exxon and BP's reported profits last year?
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The state and federal gas tax pays for things like roads. You do like to drive on roads, yes? Well, they don't just pop up and maintain themselves...
Last I checked, the price to pay for things like roads doesn't scale proportionally with the price of gas. The fact that gas went from $1.50 to $3 a gallon on some day , doesn't now mean the roads require twice as much money to pay for them.
The states get a proportional increase in tax; which is a mass 'hidden' tax increase, that they get to blame the oil
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I'm 28 and have never driven in my life, the cost doesn't appeal to me and Australia has a semi-decent public transpo
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Last I checked, the price to pay for things like roads doesn't scale proportionally with the price of gas.
The fact that gas went from $1.50 to $3 a gallon on some day , doesn't now mean the roads require twice as much money to pay for them.
The states get a proportional increase in tax; which is a mass 'hidden' tax increase, that they get to blame the oil companies on.
Why would a per gallon charge scale up when the cost of gasoline rises? 15 gallons is 15 gallons whether it costs 1 dollar or 100 to purchase.
If anything, as fuel efficiency increases the amount of money states are collecting via the fuel tax is shrinking, not rising.
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As far as I know fuel taxes are fixed and don't vary with the price of fuel. That's certainly true in my state and for federal gas taxes. Do you know of any state(s) where the fuel tax is a percentage of the price? So for your example if the per gallon tax is $0.50 that's what is collected whether you pay $1.50 or $3.00.
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You don't know enough then.
There is a fixed tax per gallon, and then the normal scaling sales tax, now at 8.75%.
So they do rake in more at the state level when prices go up.
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You pay sales tax on gasoline purchases in addition to the gas tax? I've never run into that in my travels around the western US. In Oregon where I live we don't have sales tax at all so it's not an issue.
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Head south to California, you will pay it there, unless it is for a business.
Head north, you will pay it there:
http://dor.wa.gov/Content/FindTaxesAndRates/RetailSalesTax/Exemptions.aspx#producer [wa.gov]
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There are typically both proportional AND fixed components. The proportional component is determined according to average fuel prices based on some schedule (protects the tax revenue against price volatility/sudden decrease in price), and provides the state a certain percentage of the fuel revenue, and then there's a fixed component assessment that sets a guaranteed tax -- so in other words, it's in a sense a fixed gallon amount, but not really.
Example: Vermont: [vermont.gov] The Vermont Gas Tax rate is $0.20 per
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Re:Yes, better transparency! (Score:5, Informative)
By the way, what where Exxon and BP's reported profits last year?
Annual 2012 reports not out yet in most part so these are quarterlies.
* signifies Dow Jones Industrial Average component.
Apple's profit margin was 26.67% [yahoo.com].
Google's was 22.20% [yahoo.com].
*Intel's was 22.13% [yahoo.com].
*JPMorgan Chase's was 21.97% [yahoo.com].
*McDonald's was 19.85% [yahoo.com].
*Coca-Cola's was 18.48% [yahoo.com].
*Cisco's was 17.90% [yahoo.com].
*American Express' was 17.12% [yahoo.com].
*Pfizer's was 15.58% [yahoo.com].
*IBM's was 15.53% [yahoo.com].
*3M's was 14.89% [yahoo.com]
*Microsoft's was 14.21% [yahoo.com].
*Walt Disney's was 13.44% [yahoo.com].
Ford's 3rd quarter profit margin was 13.35% [yahoo.com].
*Johnson & Johnson's was 12.90% [yahoo.com].
*Proctor & Gamble's was 12.72% [yahoo.com].
*Travelers' was 10.87% [yahoo.com].
*Chevron's was 10.70% [yahoo.com].
*Exxon's 3rd quarter profit margin was 10.40% [yahoo.com].
*Catapillar's was 9.74% [yahoo.com].
*GE's was 9.39% [yahoo.com].
*United Technologies Corp's was 7.57% [yahoo.com].
*Bank of America's was 6.75% [yahoo.com].
*Merck's was 6.58% [yahoo.com].
*DuPont's was 6.07% [yahoo.com].
*Home Depot's was 5.91% [yahoo.com].
*Boeing's 3rd quarter profit margin was 5.47% [yahoo.com]
*UnitedHealth Group's was 5.14% [yahoo.com].
BP's 3rd quarter profit margin was 4.75% [yahoo.com].
*Wal-Mart's was 3.57% [yahoo.com].
Pulte Homes' was 3.57% [yahoo.com].
*AT&T's was 3.49% [yahoo.com].
*Verizon's was 2.70% [yahoo.com].
*Alcoa's was 0.81% [yahoo.com].
*Hewlett-Packards was -10.51% [yahoo.com].
This a long line because for some reason SlashDot is saying that "Your comment has too few characters per line (currently 20.4)" but I don't know the minimum and why is there a minimum require when a person may be wanting to report facts and I have to keep typing because now it's 25.7 per line which still isn't enough nor is 27.3 characters per line so I must keep typing yet more meaningless stuff here in an attempt to get even more characters per line because even 30.4 characters per line are not enough so even more typing typing typing (where are the infinite number of monkeys when you need them?) because 33.1 characters per line still isn't enough so row, row, row your boat while buying the stairway to heaven as 35.5 characters per line are still not enough and "you seem a decent fellow I hate to kill you" " you seem a decent fellow I hate to die" and 38.2 characters per line are still not enough "we'll never survive" "nonsense. you only say that because no one ever has" and finally
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And you have "governmental" interference in MMO economies, too. Namely:
- Artificial price supports by vendors offering to buy things, giving a floor to the minimum auction house price.
- Artificial restriction by bind-on-pickup or equip, causing artificial scarcity to...prevent the capitalist market from finding the natural price, which would be significantly lower.
- How hard would you grind if 30-50% of your stuff was taken and distributed to others who didn't grind?
-
-
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My state government isn't putting citizens on "kill lists" or making secret "no fly lists".
I'm not saying you're wrong, but that's not necessarily true. Collusion between US federal and state governments against Americans is generally increasing.
For a few examples of what I'm talking about, please see some of the incidents of abuse listed under criticisms of fusion centers on Wikipedia. [wikipedia.org]
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So you are opposed to transparency when it might hurt something you approve of. Interesting.
I'm not at all opposed to "transparency" with how oil companies operate. As well, I don't have a problem with gas tax that pays for roads and transportation that we all use.
I am, however, opposed to people who pontificate as "Anonymous Cowards" and expect to be taken seriously. Man, if you believe it, log in to your account and post. Posting as as an "Anonymous Cowards" is the sure sign of a Karma Whore - learn to take your "Flamebait" and "Troll" along with your Interesting" and "Insightful".
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Lastly, if gas tax money is supposed to fix roads...why are all the roads that aren't toll or interstate in such poor shape?
Because 20 cents a gallon doesn't buy what it did the last time Texas gas taxes were raised... in 1991!
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> Because Gas Taxes are spent on Caviar and Hookers, right?
Ha Ha. Money spent on Caviar and Hookers is marketing expense. As such it isn't profit.
Profit goes into dividends which generally get paid out to pension funds and individual investors, or is retained for future investments, or is paid to governments in the form of taxes.
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Why don't fuel pumps mention the $0.18/gallon federal gasoline tax?
They do. It is listed on the pump.
Or the $0.38/gallon (California) state gasoline tax?
Yup, the state tax is also listed on the pump.
Here is a photo of the notice on a pump [fourwheeler.com].
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Which subsidies are those? Surely you can point out some specific ones.
Surely.
http://www.reuters.com/article/2012/03/29/us-obama-energy-idUSBRE82S11P20120329 [reuters.com]
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Stop calling me Shirly.
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Our road taxes are a pretty good investment.
This video [youtube.com] shows otherwise.
So does this one. [youtube.com] Well, sorta... but mine's more fun to watch.
Blame Regulation (Score:2, Insightful)
Regulators (state & federal) have forced refineries to shut down or prevented them from being built in the first place.
NIMBY'ism is also a factor.
Then there is the problem of too many different fuel blends. Dozens across the US, with a small number of refineries servicing each area.
The result of all this, combined, is that a single refinery going down causes huge issues.
Reduce the number of fuel blends across the country. Dont make it take 10+ years just for the possibility to build a new refinery bec
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Whatta ya mean! The US was a net exporter of gasoline last year. We have plenty of refineries but the oil companies don't want to carry a lot of extra capacity because it costs money to maintain it. The most cost effective way for them to process petroleum is with fewer bigger refineries with minimal extra capacity. So yes, if a significant disruption like a refinery fire occurs it echos through the system. But don't think anyone wants to build new refineries. Perhaps you could give some examples of r
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I wasn't saying that the Volt and Leaf were making a difference now. But their sales curve so far is similar to the Prius when it first came out. There will be enough sales in the future to make a difference. It takes time to build out the infrastructure but it will happen.
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Which one? Did it ever exist in the first place?
I think you'll find bulk transport issues and economies of scale are the reasons why there are so few refineries in the USA. That may change with increasing amounts of shale oil since it arrives by land instead of by supertanker.
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It seems correct, but it's categorically false. Since the mid 1970's there has been exactly ONE request for a new refinery of significant size, and it was granted. Refineries are very expensive to build and it's cheaper to expand the existing ones. It also makes no sense for them to expand refinery capacity past what exactly what the market demands, since that would lower prices (and m
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Yeah... Refineries aren't the best neighbors. Within a mile, you get a a grease build up on everything, even out of the prevailing wind. The particulate emissions (I think it is the particulate at least) cause all kinds of respiratory joy.
I moved from about 3/4 mile to ~1.1 miles from our local refinery, and the number of sick days and doctor's visits I had to take have dramatically dropped. (And people pay millions of dollars to live in the neighborhood...)
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1) Why do new refineries need to be built when companies are meeting capacity by upgrading and retrofitting old ones?
You have apparently never heard of the concept of "single point of failure". The fewer refineries there are, the greater the amount of disruption that occurs in the market (and the greater the increase in price) when one of them experiences a problem in production.
Willfull ignorance certainly a factor (Score:4, Insightful)
They suffer from "political myopia." They can't really be bothered to notice occurrences in the physical world. Only politics is real to them. So, like the Roman emperors who couldn't be bothered to attend to their water systems or roads, our government can't be bothered to look at refineries, or how net energy from hydrocarbons is declining even as supplies increase, or what happens when the potash is all mined out, or what happens when a few more major aquifers are completely drained. They won't be in office by then, they figure. It'll be someone else's problem.
Thin margins (Score:4, Informative)
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Just think about this. Those oil refineries with thin margins wanted the tax payers to build a pipeline from Canada for them.
I have done the math and have seen just how thin their margins are(5% is typical profit)
the other trick is those same refineries are shipping the refined gasses overseas for higher margins(good business).
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1. Taxpayers are not funding this.
2. The reason for the pipeline is to reduce costs. It's much cheaper than rail or trucking. That will translate to a mix of several positive effects.
a. lower prices
b. less oil imports
c. better profits
d. more exports of finished products
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ah no
only C and D. Not one part of it would stay in the USA. As it sits now the oil companies are exporting refined gasoline as they get better prices for it over seas instead of using it to lower prices in the states.
Incase you weren't aware but CANADA is a foreign country. you have to IMPORT oil FROM Canada.
Of course you realized that right?
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True true... But then they fund panty raids, not suicide bombers with the profits.
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You really don't understand economics, do you?
This is a world market and any increase in supply is going to reduce prices.
And as far as safety, I'll take a pipeline over a fleet of rail cars or tank trucks every day and twice on Sunday.
And as far as imports, oil would enter the pipeline from not only Canada but also crude oil would enter at Baker, Montana and Cushing, Oklahoma.
Re:Thin margins (Score:5, Interesting)
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The dirty little secret is that the big bad oil companies are not taking in oddles of tax payer subsidies... the big boys were exempted from many of the tax advantages which are being vilified... or are things which are available to nearly all companies in nearly all industries.
"Among the top 10 most profitable companies, energy companies ConocoPhillips (NYSE: COP), Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) were on the low end of the list, paying 8 percent, 4 percent and 2 percent, respectively, of their total earnings to the U.S. federal government."
http://www.bizjournals.com/houston/news/2012/08/06/conocophillips-exxon-chevron-paid.html?page=all [bizjournals.com]
Doesn't look like they were exempted from much.
You mean reduced supply increases the price? (Score:1)
Let's summarize:
Lack of diversity increases the risk of supply disruption.
Decreased supply increases the price.
In other words, more refineries would increase the supply and reduce the disruption risk.
Capacity (Score:1)
The problem is that refinery capacity is constrained and every time someone tries to build a new refinery they are nimbyed to death.
Re:Capacity (Score:5, Informative)
Wrong. There is excess capacity.
What really happens is that excess refinery capacity is either mothballed or used to manufacture products for export.
http://www.reuters.com/article/2011/03/21/valero-klesse-idUSWEN981620110321 [reuters.com]
With the crappy worldwide economy and high prices of crude demand for gasoline is decreasing.
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Refinery capacity in other areas of the US couldn't help gas prices on the west coast.
There is sufficient capacity to make gasoline for the west coast issues. The problem is that it's illegal in California to sell it, as CA has specific requirements that only the refineries that regularly supply it are set up to deliver.
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Errr except all over the world refineries are being shutdown or divested as a major glut in capacity (not helped by Reliance Petroleum bringing online a 1million bbl/day refinery). The glut in capacity has driven the refinery margins so low that refineries are spending a small fortune increasing upgrading capacity so they can run an ever shitter and more corrosive mix of cheap and nasty sludge to try and turn a profit.
No refinery right now can afford a nice sweet crude oil unless they are nationalised or po
Too Much Regulation (Score:5, Informative)
I spend 10 years working in the oil and gas refining industry, and I can say first hand that most of these problems and prolonged reductions in output are tied directly and wholly to excessive, brutal, inflexible, and sluggish government red tape.
At one refinery we were doing a new control system for, the refiner discovered a bad gas overpressure valve that was leaking slightly. The process for handling such an event is to immediately scram the refinery, and file 12 different applications with EPA, OSHA, and other government agencies to beg for permission to fix it. In that particular case that whole section of the refinery was down for 9 weeks.
Most people have no idea just how difficult it is to deal with the administration, and this one especially, when it comes to oil and gas production. This administration is not at all interested in a steady and cheap supply of oil and gas products - and I say that with firsthand experience.
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Pumping the black stuff out of the ground is convenient and currently the only reasonable alternative. Replacing oil derivatives with fuels derived from grown crops will simply take up too much of the available arable land on the planet for it to be a reasonable large scale replacement(unless we accept massive starvation is an acceptable cost, and even then
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It remains that oil has a lot of benefits when it's in our fuel tanks or in our plastics. But not so when it's in the ground.
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Somebody says to ignore the problem as long as they can. Then they band-aid it.
Then senior management looks at how much the band-aids cost, and targets a 10% across-the-board cost reduction next year.
See: BP Texas City refinery fire.
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$3.63/gallon?!? (Score:5, Informative)
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The difference is most of what you pay is tax, that gives you a lot of benefits in return. In the US, it goes into the pockets of Big Oil, never be seen again.
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That's why I own oil company stocks. The dividends are nice.
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yes!! in australia, the other day i filled up at AUD$1.63/L
the above "highest ever OMG" equates to AUD$0.91/L
fuck you, americans. you'll start wars to keep the price so low that even the poorest of you can drive F-350s? running a car is a privilege, not a right!
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Here in Australia the other day I took my kid to the dentist. Kid spent half an hour in the chair while a dentist and a nurse hovered over him making sure everything was as it should be. Poking and prodding, a bit of plaque removal, fluoride gel, etc. When he got up they handed him a bag with toothbrushes and floss.
Cost to me: zero. Walked out without paying a cent. Because socialism works.
The USA can keep its cheap gas. I'll take a society that looks after its citizens every time.
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The USA can keep its cheap gas. I'll take a society that looks after its citizens every time.
The abo's might object to your insinuation that the Aussies take care of their citizens.
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fuck you, americans. you'll start wars to keep the price so low that even the poorest of you can drive F-350s? running a car is a privilege, not a right!
Absolutely. In fact, in honor of your lovely attitude and communications skills, I think I shall drive mine without using the overdrive for the next week, just to spew a little more pollution into the atmosphere.
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I think such behaviour is called "cutting the nose to spite the face".
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fuck you, americans. you'll start wars to keep the price so low ....
Don't kid yourself. We started that war to keep prices high. At what time did prices ever drop to near prewar levels? If we wanted cheap oil, we would have just cut a deal with Iraq like France, Germany, and Russia did. The US is an oil producing country with lots of the oil companies and their refineries. If there was an ulterior motive to that war it was to jack the prices up.
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Sweet jesus, that's less than a dollar per litre. I haven't seen prices like that since the twentieth century.
Seriously America, you're a guy complaining that his imported Perrier is less fizzy than it used to be to an audience of people who are getting used to drinking rainwater. STFU.
Re:$3.63/gallon?!? (Score:5, Funny)
They get free health care up north and other things we don't.
No, we don't. We pay for it in taxes, and the next imbecile that says we get "free health care" will get smacked with Lake Erie....before it was cleaned up.
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We pay for it in taxes too, but the paycheck calls is a payroll deduction.
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One of the big reasons we pay so much is that the Americans charge us a lot and our government discourages Canadian refineries. The attitude of our current governments is sell the raw materials, get dividends to replace the lack of taxes from lack of good jobs (every oil job is balanced by 30 manufacturing jobs lost) and screw most Canadians as they only need 1/3 of voters to vote them a 5yr dictatorship.
At least in BC, we have to pay for medical unless poor and that has been going up like crazy so income t
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And how much of that is tax?
Why do people compare gas prices in different countries without looking at the tax rate. That tax doesn't have to be there, the money supposedly brings some benefits for you guys. If you aren't getting good benefits for your taxes then you should consider complaining to your elected officials.
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Major spill? (Score:2)
7,700 gallons is a MAJOR spill? Isn't that about what one semi hauls?
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OK. We'll cry for the little fishies. But in the grand scheme of supply and demand, its nothing.
How would it help? (Score:4, Interesting)
The problem is that for the most part people did not respond appropriately to those price signals. Rather they went to the government to complain, went to their churches to hear conspiracy theories about how the liberals wanted to destroy the christian way of life, blaming regulation, speculators, evil oil people gouging the common people. All these are partly true, and gouging people who are too stupid to make adjustments so they don't get gouged is fun and profitable, but it does come down to choices.
If a single shut down can raise prices, then we are at capacity and there are only two choices. The first is to raise the price of the commodity, i.e. refined petroleum, so the refiners will have an incentive to build more capacity. Regulation will raise this costs, but so will the need of refiners to pay the expected huge salaries(sometimes well over 100K to a college grad).
The other is to use less so that current capacity is sufficient, reserves can be built, or older plants can be shut down and maybe updated.
The problem is that neither of these are acceptable to the whiners who expect the government to give them everything for nothing. Who expect to live in suburbs and have the city people subsidies their lifestyle. For those that will not drive their cars so they can approach 30 mph instead os 20 mph
Re:How would it help? (Score:4, Informative)
If a single shut down can raise prices, then we are at capacity
Actually you're missing one very key market force. Time.
There is an absolute glut worldwide in refining capacity. In many countries refineries are closing down. Margins are razor thin that many refineries are run at a loss and the profits are made up by retail sales. What would happen if Cherry Point burnt to the ground completely? Nothing different than what happened when they burnt through their crude unit and were taken offline for a month.
Your problem is time. It takes about 12 weeks for oil to get from the ground to the bowser. Most of that time the products are in transit or in terminals. Refineries purchase crude oil months in advance to seal in contracts. The stuff is on ships many weeks before it gets used and gets blended in tanks thereafter. What happens when a refinery is suddenly taken offline is that for a period of 1-3 weeks there's a major upset in the supply chain. Not a lack of total production, but a lack of deliveries in a timely fashion. The only way to get around this is to ensure your entire country is a net exporter of petroleum products.
Even then, if you're a net exporter, and you have a glut of capacity, all of your products are likely under a retail contract. The sudden loss of a refinery will still upset the market as one needs to weigh the possibility of being blacklisted as a supplier due to failure of meeting existing contracts in favour of handling a local emergency.
We see very similar things in my country which a net importer of gasoline by a massive margin. The refineries are small but our net import shields us from such problems to some degree. When the only refinery in our city shutdown due to an explosion in their cracker it was down for 3 months, the price spiked for a week then returned to normal. The net import meant we had a lot of supply already on the way and didn't need to rely on local production.
There's really no way to win this.
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So you're suggesting we spend money to buy products which form dead working capital in the form of products that just sit there waiting for a disaster?
Sounds like something an economics student would suggest, and something that an MBA would shut down and try to sell off to some poor sucker.
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That system only works in a market where supply is constrained. I.e. throttling oil production at the well like OPEC already do to influence the crude oil price.
It doesn't work in a market where supply is both constant and saturated. There's never a shortage of ways to sell fuel at a profit and there's never a shortage of upstream supply. The end result is to maximise profit you run your refinery as hard as it can go during the good times, and you run it as hard as it can go during the worst times.
A massive
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The point is that it doesn't make economic sense to store fuel if you can sell 100% of your inventory today and make a small profit and then still sell 100% of your inventory tomorrow and make a large profit. Maximising profit based on speculation only works if you don't have production and supply always running at its limit like you do in the oil industry.
To maximise your profit in the oil industry you sell all you have all the time. That is exactly how the oil industry works. Regardless if margins are goo
Bad dog, sit! (Score:2)
We go to war to keep the price of oil down (Score:2)
We executed Gulf War I to prevent Saddam from controlling Kuwait's oil fields and stop threatening the Saudi fields. [wikipedia.org]
Greenspan said that we were in Iraq for oil. [washingtonpost.com] Controlling global energy sources was likely a significant sweetener for going into Iraq.
It's directly linked to our quality of life. So you better believe the society, via the government, should be getting a clear picture of WHAT EXACTLY is going on with the oil supply chain.
Oil companies' idea of petroleum transparency... (Score:2)
...is called Vaseline.
Refining capacity is also a problem (Score:2)
If states like California would allow more refining capacity to be built, then the supply end of the market would have more of a 'buffer' to supply problems (if you have a refinery they build these large things called tanks to store petrol in, this boots your supply and you can crank up capacity if you need more). If you don't believe me you can read this: http://www.slate.com/articles/business/moneybox/2004/06/the_great_refinery_shortage.html [slate.com]
There hasn't been one built in California for at least 30+ years
what? Huh? (Score:2)
"Or does our government and the electorate who put them there have a right to know what's really going on?'"
Last time I looked the electorate was the oil companies and they know exactly what is going on.
transparency? (Score:2)
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There is nothing inherently hostile about demanding transparency.
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Cut
Kill
Dig
Drill
Love, Sarah P.
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Build more refineries, bigger refineries, and we won't have this nonsense
Er, by nonsense you mean higher profit margins every time a refinery goes down? Guess who goes "envirowacko" and lobbies against competitors building new refineries based on environmental grounds? Guess who reports their refineries are down and enjoys the spike in prices while their refineries are actually still producing and they are stockpiling gasoline?
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The oil industry was effectively nationalized decades ago. The industry operates under absolutely strangling regulation and government essentially dictates everything that happens at a refinery right down to when the workers take a leak.
I agree oil industry and govt seem one and the same, but it doesn't quite look like the govt taking over the oil industry. On the contrary, it looks it is the oil industry privatized the government... the result is quite the same for consumers, though.
Re:Did we nationalize the oil companies overnight? (Score:5, Insightful)
The oil industry was effectively nationalized decades ago. The industry operates under absolutely strangling regulation and government essentially dictates everything that happens at a refinery right down to when the workers take a leak.
Um, So The Fuck What?
If you want to see tight regulation, try working in a pharmaceutical facility. Or maybe a nuclear plant. Guess what: if your workplace is likely to affect the health of LOTS and LOTS of people, I WANT it tightly regulated.
Re:Did we nationalize the oil companies overnight? (Score:5, Interesting)
Actually, the best way to demonstrate what happens without any kind of regulation at all, is to look at what is going on in Nigeria:
Almost 1.9 million barrels have have been spilled into the Niger river delta in the 20 years between 1976 and 1996 in close to 4,900 different incidents, and there doesn't seem to be any indication that this is going to reduce in the future.
See, in Nigeria there seems to be absolutely no business consequences to any kind of oil spills or accidents, so when the expenses of fixing a problem is greater than the expenses of the losses of oil, there's no incentive to pay for a fix.
After all, the only ones feeling the consequences is the local population, and they obviously aren't worth much to anyone.