Ferrari Mailing List: Re: Oil company bail-out

[JAshburne (JAshburne]

Amazing, isn't it?  With all of that money flowing to the FedGovCo, it  
really makes you wonder why they don't do everything possible to encourage more 
 
domestic oil and gas production.
 
Just another example of how irrational the government can be and why it is  
dangerous to let that type of thinking take over our lives!
 
John
 
 
In a message dated 1/4/2009 9:52:55 A.M. Eastern Standard Time,  
rolindsay [at] yahoo.com writes:

Thank  you John. 

Let me expand the story of the government's profits.  

Not only does the government make three times the profit on each  gallon of 
fuel sold - for no work other than ringing their cash registers -  they also;

1) Lease the offshore acreage to oil companies. In the Gulf  of Mexico those 
leases are 3 miles x 3 miles 'blocks' and the minimum bid for  a 10 year lease 
is about a million dollars.  But it doesn't end there.  Oil companies compete 
via sealed bit for the leases. $20mm to $50mm per block  is not uncommon!  
All of this paid years in advance of drilling.  

2) A typical deepwater Gulf of Mexico well costs about $100mm. This  money is 
paid to contractors, including the drilling company. No, we don't own  our 
own drill rigs. 

3) Typical success rate in the deepwater GoM is  one-in-five so on average 
$500mm - a half billion dollars - is spent to make  the discovery. 

4) Typical time from exploration to the first drop of  oil in the pipeline is 
8-10 years!!!  Yep, that's a half-billion dollars  spent a decade in advance 
so we can give 1/6th of it to the feds. By the way,  what is the price of oil 
in 2019?

5) Yes, that was no typo. The  government gets a 1/6th royalty on every 
barrel produced!  So right off  the top, Uncle Sam gets about 16% additional 
profit 
from every drop produced  added to their coffers! 

The point here, other than the government's  fingers in everyone's pocket, is 
that oil companies HAVE to make a large  profit because our business is SO 
capitol intensive with huge lag times for  payouts. 

I'm not complaining about the business I have chosen. I'm  trying to expose a 
little of our exactly-unlike-Walmart business model because  television news 
shows and 'specials' make it sound so simple. Halve the price  of a barrel of 
oil, halve the price of a gallon of gas. Easy, eh? If  only...

Happy Sunday Morning,

Rick
Sent via BlackBerry by  AT&T


 
**************New year...new news.  Be the first to know what is making 
headlines. (http://www.aol.com/?ncid=emlcntaolcom00000026)