Ferrari Mailing List: Re: Illinois speed traps

[JAshburne (JAshburne]

1.  If there was oil on those leases, don't you think that they would  drill 
there before drilling 5,000 feet into the seabed?  I know that I  would, 
drilling on land is much less capital intensive and less costly.
2.  Of course it would sell on the open market, it is a global market  unless 
the taxpayers subsidize it, like in Venezuela.  Increased supply  does matter 
in helping prices come down, just as keeping prices unnaturally low  will 
create shortages against a fixed supply.  Look what happened when the  govt. 
tried price controls in 1973 and 1978:  controlled price led to  unchecked 
demand 
which led to long lines at the gas stations.  Thankfully  people are rationing 
themselves this time and it is working much better than  having the govt. try 
to manage prices.
3.  If you are the owner of the raw materials and the price goes up,  yes you 
make more profit.  That's why you bought the reserves  and spent the capital 
to develop those reserves in the first place.   Increasing supply against 
depletion of those reserves ain't so easy.  Not  everyone in the oil business 
is 
making more money.  Have you seen what has  happened to the profits of those 
who are not integrated?  The  refiner/distributors have gotten reduced profits 
because the price of crude has  gone up more than the price of gas (lower crack 
spread), so it could be worse  for drivers if the price of a gallon of gas 
had gone up as much as a barrel of  crude.  The market is far more complex than 
a simplistic view that the oil  companies are controlling prices by holding 
back supply.
 
For those who don't believe that supply and demand is making the biggest  
impact on prices, take a look at the price of oil in the past month.   
$147/barrel one month ago, $115/barrel today, down 22% because people are  
driving about 
2% less as a result of the higher prices.  Now that is price  leverage and 
shows that price elasticity does kick in at some point.
 
The average return on sales for a large integrated oil producer is 10%,  even 
in these times of "windfall" profits.  Even public electric utilities  that 
are regulated are able to convince the regulators that they need a larger  
profit margin.  
 
Exxon Mobil's profit margin is 11.3% and is the best in its sector.   
Google's profit margin is 25.3% and Microsoft's profit margin is 29.3%.  
 
Why isn't Congress looking into "windfall" profit taxes on Google and  
Microsoft?  The answer is that it is a lot easier to paint "Big Oil" as a  
villain.  
But if controlling profits of companies was the priority of  Congress (which 
it sure as hell shouldn't be in a free market economy) then why  wouldn't they 
start with those companies who are making the biggest profit  margins?
 
You may see $10/gallon for gas before you check out (move to Britain and  you 
can pay that today) but by then all of the alternative fuel sources will  
have become economic and will be replacing dino fuel.  Those sources may  not 
be 
cheaper than gas was in the good old days (that's why gas and oil became  so 
widely used, they are cheaper than the alternatives, even now) but they  
eventually will replace oil.
 
Just MHO
 
 
In a message dated 8/8/2008 8:19:34 P.M. Eastern Daylight Time,  
sherman [at] wildblue.net writes:

1.When  the Oil companies use the leases they have I would support off shore 
but  not until then.
2. Don't expect American Oil not to sell on the open  market.
3. Think about it:If your raw materials have gone up and your  product has 
gone up and you are selling less of your product AND you HAVE  RECORD PROFITS 
would you increase your supply
of raw materials or build  more factories so you produce more product and 
make less  profit.

Don't think so.

I was in line at a fast food  establishment after Katrina and was talking to 
an oil man about the  $3
gasoline and he said 'I did not see you complain when I was getting $10  a 
barrel for my oil.

And remember these are the good days. I am 64  and I expect to see $10 a 
gallon b4 I check out.

Stephen
81 308  GTSi


 



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