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| Posturing at the Pump; George Will | |
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| Tweet Topic Started: May 17 2007, 08:51 AM (794 Views) | |
| Red Rice | May 18 2007, 12:09 PM Post #26 |
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HOLY CARP!!!
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No question the refining companies are modifying their production to ensure maximal profits. OPEC does the same with the oil it supplies. And with demand actually growing, they have no incentive to do otherwise. It makes sense. Say I have a commodity that everyone wants, but it's in limited supply. Do I dump it all on the market at once such that supply outstrips demand, resulting in low prices? Or do I dole it out slowly at the highest price I can command over the longest period of time? A no-brainer. |
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Civilisation, I vaguely realized then - and subsequent observation has confirmed the view - could not progress that way. It must have a greater guiding principle to survive. To treat it as a carcase off which each man tears as much as he can for himself, is to stand convicted a brute, fit for nothing better than a jungle existence, which is a death-struggle, leading nowhither. I did not believe that was the human destiny, for Man individually was sane and reasonable, only collectively a fool. I hope the gunner of that Hun two-seater shot him clean, bullet to heart, and that his plane, on fire, fell like a meteor through the sky he loved. Since he had to end, I hope he ended so. But, oh, the waste! The loss! - Cecil Lewis | |
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| ivorythumper | May 18 2007, 05:29 PM Post #27 |
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I am so adjective that I verb nouns!
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Hey, my energy fund is up 94% this year. I'm happy. |
| The dogma lives loudly within me. | |
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| JBryan | May 18 2007, 05:30 PM Post #28 |
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I am the grey one
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Refineries are running at capacity. If oil companies are holding back it is difficult to tell how. |
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"Any man who would make an X rated movie should be forced to take his daughter to see it". - John Wayne There is a line we cross when we go from "I will believe it when I see it" to "I will see it when I believe it". Henry II: I marvel at you after all these years. Still like a democratic drawbridge: going down for everybody. Eleanor: At my age there's not much traffic anymore. From The Lion in Winter. | |
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| George K | May 18 2007, 05:31 PM Post #29 |
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Finally
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They're refining Kool-Aid. |
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A guide to GKSR: Click "Now look here, you Baltic gas passer... " - Mik, 6/14/08 Nothing is as effective as homeopathy. I'd rather listen to an hour of Abba than an hour of The Beatles. - Klaus, 4/29/18 | |
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| JBryan | May 18 2007, 05:32 PM Post #30 |
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I am the grey one
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They need to pull back on that. This country seems to be awash in Koolaid |
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"Any man who would make an X rated movie should be forced to take his daughter to see it". - John Wayne There is a line we cross when we go from "I will believe it when I see it" to "I will see it when I believe it". Henry II: I marvel at you after all these years. Still like a democratic drawbridge: going down for everybody. Eleanor: At my age there's not much traffic anymore. From The Lion in Winter. | |
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| Frank_W | May 18 2007, 05:50 PM Post #31 |
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Resident Misanthrope
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C'mon!! DRINK the Kool-Aid! DRINK the Kool-Aid!! You KNOW you wanna'!!
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Anatomy Prof: "The human body has about 20 sq. meters of skin." Me: "Man, that's a lot of lampshades!" | |
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| JBryan | May 18 2007, 06:29 PM Post #32 |
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I am the grey one
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No way. You fall asleep and when you wake up. POD PEOPLE!!! |
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"Any man who would make an X rated movie should be forced to take his daughter to see it". - John Wayne There is a line we cross when we go from "I will believe it when I see it" to "I will see it when I believe it". Henry II: I marvel at you after all these years. Still like a democratic drawbridge: going down for everybody. Eleanor: At my age there's not much traffic anymore. From The Lion in Winter. | |
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| Frank_W | May 18 2007, 06:31 PM Post #33 |
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Resident Misanthrope
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Hahahaha.... That's what we call the people that come in on the cruise ships, when we're in Cozumel. LOL |
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Anatomy Prof: "The human body has about 20 sq. meters of skin." Me: "Man, that's a lot of lampshades!" | |
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| Red Rice | May 18 2007, 06:46 PM Post #34 |
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HOLY CARP!!!
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Why did so many oil companies shut down refineries in the past decade, and drive so many independents out of business? We may be running at 95% capacity now, but we have less than half as many refineries than we did in 1981, with less total refining capacity. According to internal memos, it looks like they were trying to increase profits. Market consolidation had a role in this as well. http://www.consumerwatchdog.org/pr/?postId=5110 Why did Shell want to shut down a refinery as recently as 2004, claiming is was not economically viable, despite margins being higher than ever? http://quote.bloomberg.com/apps/news?pid=1...0SrBF8&refer=us I'm not saying market forces aren't playing a role... unprecedented demand is the most important factor in gasoline prices. But I don't buy the explanation that the oil companies would increase refining capacity in a heartbeat if it weren't for those pesky environmental regs. That's the Kool Aid I think y'all are drinking. Remember those electrical blackouts in California in 2000-2001, when everyone was blaming Gray Davis and the irresponsible consumption of Californians? Of course, we now know that Enron traders were gaming the system and shutting down power plants at times of peak demand. It would be naive to think that the oil companies aren't also controlling supply to maximize their (record) profits. |
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Civilisation, I vaguely realized then - and subsequent observation has confirmed the view - could not progress that way. It must have a greater guiding principle to survive. To treat it as a carcase off which each man tears as much as he can for himself, is to stand convicted a brute, fit for nothing better than a jungle existence, which is a death-struggle, leading nowhither. I did not believe that was the human destiny, for Man individually was sane and reasonable, only collectively a fool. I hope the gunner of that Hun two-seater shot him clean, bullet to heart, and that his plane, on fire, fell like a meteor through the sky he loved. Since he had to end, I hope he ended so. But, oh, the waste! The loss! - Cecil Lewis | |
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| George K | May 18 2007, 07:05 PM Post #35 |
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Finally
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Not that simple. Suppose you owned a hardware store, and you made a $3000 profit at the end of the fiscal year. In absolute dollars that's the best year ever - in fact, a record profit. What would you do with it? Buy your spouse a diamond? Put it in the bank? Suppose that you took that $3000 and an additional $2000 and invested it in the store. You know, advertising, spiff up the shelves, add a new computer system to keep track of inventory, and did a market study to see how you could get more business. Would that outrage anyone in your community? Of course not. It's a good investment, well-spent. That's EXACTLY what oil did last year (2006), but increase it by a factor of a million: The Washington Times reports on an interesting study by Ernst & Young that supports oil companies' argument that substantial profits are necessary to support oil exploration and development efforts: ig Oil's record profits attract attention and outrage, but an independent study has found that oil companies do exactly what economic textbooks say they should do with all that money: They invest it in oil exploration and development efforts that eventually should relieve pressure on prices. The top 20 U.S. and Canadian oil companies actually invested 50 percent more than they earned in the past 10 years in efforts to produce more oil, but adverse geopolitical developments conspired to give them fewer opportunities to expand production while fading oil fields in the U.S. and elsewhere forced them to spend substantially more just to maintain current production, according to the study by the Ernst & Young accounting firm. The study found that the top companies -- including Exxon Mobil, ConocoPhillips and Chevron, among others -- took in a mind-numbing $5 trillion in revenue from sales of oil and related products between 1995 and 2005. After subtracting the cost of equipment, leases, labor and other operating expenses, the companies posted whopping profits of $336 billion. Over the same time span, however, the companies spent even more than they earned -- $550 billion -- on oil exploration and development. Some of them went deeply into debt to finance new ventures, especially during times of lean profits. Despite the massive sums of money oil companies spent trying to find more oil for the world's fuel-thirsty consumers, returns on investment over the past 10 years declined sharply because most existing oil fields in the West are in decline and the most promising new discoveries are not available for development, Ernst & Young found. "Most of the new reserves are outside of North America, and much of the global reserve base is off-limits to Western oil and gas companies," said Mr. Swanson. Moreover, oil-rich countries such as Venezuela and Russia are exacting onerous licensing terms and costly royalty payments from Western companies seeking access. |
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A guide to GKSR: Click "Now look here, you Baltic gas passer... " - Mik, 6/14/08 Nothing is as effective as homeopathy. I'd rather listen to an hour of Abba than an hour of The Beatles. - Klaus, 4/29/18 | |
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| JBryan | May 18 2007, 07:16 PM Post #36 |
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I am the grey one
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They shut down two refineries in my home town in the 90s. It had nothing to do with price fixing. The cost of upgrading them to bring them up to new environmental standards (which the Clinton Administration was applying with zeal) was prohibitive. You have to realize that many of this country's refineries were running old outdate technology that was not friendly to the environment. The old "cat crackers" have all been decommissioned and the only ones left are those that can take any crude, sweet, sour whatever and convert it into whatever mix of refined products desired leaving nothing but a big pile of sulphur which is sold to chemical companies. That is why refineries were being closed. |
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"Any man who would make an X rated movie should be forced to take his daughter to see it". - John Wayne There is a line we cross when we go from "I will believe it when I see it" to "I will see it when I believe it". Henry II: I marvel at you after all these years. Still like a democratic drawbridge: going down for everybody. Eleanor: At my age there's not much traffic anymore. From The Lion in Winter. | |
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| 1hp | May 18 2007, 07:23 PM Post #37 |
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Fulla-Carp
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I see a little merit in much of what has been written. Who would have believed that large corporations would artificially manipulate the supply and transmission of electricity in California to raise the price? Yeah, it ain't hard to believe the oil companies could do the same. On the other hand, the offshore drilling bans seem to be ironic given all the people talking about how it's our money that is funding middle eastern radicals, and how we're only in Iraq for the oil (yeah - if we could drill for our own home grown stuff then this wouldn't be an issue). A new refinery - doesn't take much imagination to realise the enviromental impact reports that would have to be produced, not to mention the million acres of land that needs to be set aside for the rare fly that would be displaced by the construction. More nuclear power stations? Can you spell "3 mile island". Besides, all the nuclear engineers were out of jobs and became software engineers, so there's none left to work on the design. However the best advice was from IT - get into the energy funds! If you can't beat 'em, join 'em. |
| There are 10 kinds of people in this world, those that understand binary and................ | |
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| Red Rice | May 18 2007, 07:36 PM Post #38 |
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HOLY CARP!!!
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Nothing of what you posted actually refutes my initial post. I wasn't talking about what the oil companies did with their profits... I was talking about how they made them. Of course, they can do whatever they want with their profits. |
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Civilisation, I vaguely realized then - and subsequent observation has confirmed the view - could not progress that way. It must have a greater guiding principle to survive. To treat it as a carcase off which each man tears as much as he can for himself, is to stand convicted a brute, fit for nothing better than a jungle existence, which is a death-struggle, leading nowhither. I did not believe that was the human destiny, for Man individually was sane and reasonable, only collectively a fool. I hope the gunner of that Hun two-seater shot him clean, bullet to heart, and that his plane, on fire, fell like a meteor through the sky he loved. Since he had to end, I hope he ended so. But, oh, the waste! The loss! - Cecil Lewis | |
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| Red Rice | May 18 2007, 07:49 PM Post #39 |
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HOLY CARP!!!
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The cost of upgrade was one reason refineries were closed. Market consolidation, as I mentioned previously, was another. And neither was the reason Shell wanted to close Bakersfield. |
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Civilisation, I vaguely realized then - and subsequent observation has confirmed the view - could not progress that way. It must have a greater guiding principle to survive. To treat it as a carcase off which each man tears as much as he can for himself, is to stand convicted a brute, fit for nothing better than a jungle existence, which is a death-struggle, leading nowhither. I did not believe that was the human destiny, for Man individually was sane and reasonable, only collectively a fool. I hope the gunner of that Hun two-seater shot him clean, bullet to heart, and that his plane, on fire, fell like a meteor through the sky he loved. Since he had to end, I hope he ended so. But, oh, the waste! The loss! - Cecil Lewis | |
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| JBryan | May 18 2007, 08:10 PM Post #40 |
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I am the grey one
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Market consolidation being a euphemism for price fixing? You really need to learn a bit more about the oil industry before you swallow these things whole. Whatever reason you think they closed Bakersfield the fact is that most refineries were shut down because they could not be economically retrofitted to meet new environmental regulations and new refineries have not been built for the same reason. Hence a shortage in refining capacity in the US. |
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"Any man who would make an X rated movie should be forced to take his daughter to see it". - John Wayne There is a line we cross when we go from "I will believe it when I see it" to "I will see it when I believe it". Henry II: I marvel at you after all these years. Still like a democratic drawbridge: going down for everybody. Eleanor: At my age there's not much traffic anymore. From The Lion in Winter. | |
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| George K | May 18 2007, 08:10 PM Post #41 |
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Finally
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Fair enough. Large amounts of money were earned, and then re-invested in the company. Also, the profit margin on those earnings was no larger than many other companies (as a percentage of gross receipts). You have more income, your profit will be larger if you're a larger comany. If your hardware store profits $30,000 on $300,000 of sales, your margin is 10%. Oil companies did worse than that. |
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A guide to GKSR: Click "Now look here, you Baltic gas passer... " - Mik, 6/14/08 Nothing is as effective as homeopathy. I'd rather listen to an hour of Abba than an hour of The Beatles. - Klaus, 4/29/18 | |
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| Red Rice | May 18 2007, 08:35 PM Post #42 |
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HOLY CARP!!!
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No, market consolidation meaning this: "The largest five oil refiners in the United States (ExxonMobil, ConocoPhillips, BP, Valero and Royal Dutch Shell) now control over half (56.3%) of domestic oil refinery capacity; the top ten refiners control 83%. Only ten years ago, these top five oil companies only controlled about one-third (34.5%) of domestic refinery capacity; the top ten controlled 55.6%." As with consolidation in any other industry, facilities that are deemed or projected to be less profitable are closed. Profits are maximized in the face of decreased capacity. Simple as that. Smart business. As for swallowing things whole, I think that I have demonstrated a far more nuanced understanding than you have. You are sticking to the single contention that the cost of meeting new, more stringent environmental regulations makes upgrading or building new refineries cost-prohibitive ie. it's the EPA/government's fault. There is a lot of truth to that, but I believe there are other considerations as well. In fact, I think that even if environmental regs were more lax, I doubt the oil companies would be building new refineries. It simply is not in their financial interest to do so. Why make that huge capital investment, when limited supplies in the face of nonstop demand ensures huge profits the way things are? I'm not making a value judgment here, mind you. If you have anything more to teach me about the oil industry besides the party line, I'm happy to learn. Otherwise, enjoy your Kool Aid. |
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Civilisation, I vaguely realized then - and subsequent observation has confirmed the view - could not progress that way. It must have a greater guiding principle to survive. To treat it as a carcase off which each man tears as much as he can for himself, is to stand convicted a brute, fit for nothing better than a jungle existence, which is a death-struggle, leading nowhither. I did not believe that was the human destiny, for Man individually was sane and reasonable, only collectively a fool. I hope the gunner of that Hun two-seater shot him clean, bullet to heart, and that his plane, on fire, fell like a meteor through the sky he loved. Since he had to end, I hope he ended so. But, oh, the waste! The loss! - Cecil Lewis | |
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| Red Rice | May 18 2007, 08:41 PM Post #43 |
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HOLY CARP!!!
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I agree, the profit margins of the oil companies is not excessive when compared to other industries. And in terms of re-investment, I don't think there are many companies that do it more wisely and with as much foresight as oil companies. |
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Civilisation, I vaguely realized then - and subsequent observation has confirmed the view - could not progress that way. It must have a greater guiding principle to survive. To treat it as a carcase off which each man tears as much as he can for himself, is to stand convicted a brute, fit for nothing better than a jungle existence, which is a death-struggle, leading nowhither. I did not believe that was the human destiny, for Man individually was sane and reasonable, only collectively a fool. I hope the gunner of that Hun two-seater shot him clean, bullet to heart, and that his plane, on fire, fell like a meteor through the sky he loved. Since he had to end, I hope he ended so. But, oh, the waste! The loss! - Cecil Lewis | |
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| Rainman | May 18 2007, 08:52 PM Post #44 |
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Fulla-Carp
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You guys are discussing this at a much higher level than I am capable of, so apologies for following along at a distance. But, I don't understand how the high prices and huge profits will not eventually cause the economy to tailspin. As much as government economic indicators paint a rosy picture, I own my own business, and I do notice a drop in sales reflective of the rising cost of gas. It's not that people are not buying, the number of purchases is constant. But, the dollars spent per purchase go down as the price of gas goes up, and the cost of staples (groceries, etc.) go up. People are stretching their dollars of course, as more goes to the oil companies. So, if I don't make as much, I don't spend as much either. And, true with the next business or the next employee that is spending more and more for gas as well as consumer goods and utilities, the end result is that the economy takes a hit. Are my concerns valid? Perhaps there is no choice, gas will go to $4 per gallon or higher, the oil companies will post their obscene profits, but then for the overall long-term health of the economy. . . ? |
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| Red Rice | May 18 2007, 09:04 PM Post #45 |
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HOLY CARP!!!
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Your concerns are very valid. As you've noticed, as gasoline goes up, the cost of almost everything else goes up, and in the worst case scenario, inflation goes up, the Fed raises interest rates... and the economy contracts, or we get the dreaded "stagflation", and it takes us years to recover, by which time our economic pre-eminece is premanently diminished as China and India rise to the fore. The counter to this scenario is that, eventually, gasoline prices will rise to the point that demand will be suppressed and prices will fall as Americans adopt conservation or alternative energy sources... the old supply-and-demand argument. What everyone's wondering right now is exactly what that price point will be. So far, record high gas prices have not made a dent in consumption. |
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Civilisation, I vaguely realized then - and subsequent observation has confirmed the view - could not progress that way. It must have a greater guiding principle to survive. To treat it as a carcase off which each man tears as much as he can for himself, is to stand convicted a brute, fit for nothing better than a jungle existence, which is a death-struggle, leading nowhither. I did not believe that was the human destiny, for Man individually was sane and reasonable, only collectively a fool. I hope the gunner of that Hun two-seater shot him clean, bullet to heart, and that his plane, on fire, fell like a meteor through the sky he loved. Since he had to end, I hope he ended so. But, oh, the waste! The loss! - Cecil Lewis | |
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| JBryan | May 19 2007, 05:19 AM Post #46 |
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I am the grey one
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As the price of gasoline goes up then it should become more attractive for independents to build refining capacity to capitalize on the higher prices. Why do you think they are not doing that? What makes the refining business a closed industry to all but the biggest oil companies? As I said, my brother works at one of the few independents that are left. The reason they remain open is that they employ the newest technology that allows them to refine any kind of crude as well as meet all the regulatory standards. All of the older refineries were closed because they could not meet those standards cost effectively. Sure, for the big oil companies that meant consolidating production was more cost effective versus upgrading but for the independents it meant closing. Again, with gasoline prices tied to refining capacity why are no independents capitalizing on this by building new refineries? What is really the driving force behind leaving the majority of our refining capacity in the hands of the majors? |
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"Any man who would make an X rated movie should be forced to take his daughter to see it". - John Wayne There is a line we cross when we go from "I will believe it when I see it" to "I will see it when I believe it". Henry II: I marvel at you after all these years. Still like a democratic drawbridge: going down for everybody. Eleanor: At my age there's not much traffic anymore. From The Lion in Winter. | |
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| Red Rice | May 19 2007, 05:53 AM Post #47 |
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HOLY CARP!!!
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Good questions. But then you might as well ask why there aren't more small independents in the profitable pharmaceutical, computer, and investment banking industries. Very high development and capital costs in competitive sectors inhibit the participation of independents. An even better question, which you didn't ask and which doesn't get side-tracked by the issue of independents, is why the majors aren't building new refineries. Despite the costs, they certainly could afford to. But it is more profitable and less risky for them to do what they're doing. |
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Civilisation, I vaguely realized then - and subsequent observation has confirmed the view - could not progress that way. It must have a greater guiding principle to survive. To treat it as a carcase off which each man tears as much as he can for himself, is to stand convicted a brute, fit for nothing better than a jungle existence, which is a death-struggle, leading nowhither. I did not believe that was the human destiny, for Man individually was sane and reasonable, only collectively a fool. I hope the gunner of that Hun two-seater shot him clean, bullet to heart, and that his plane, on fire, fell like a meteor through the sky he loved. Since he had to end, I hope he ended so. But, oh, the waste! The loss! - Cecil Lewis | |
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| JBryan | May 19 2007, 06:15 AM Post #48 |
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I am the grey one
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Exactly, and for the majors that is a valid point. They don't build more refining capacity because they would increase supply and lower the cost. WHy do that? The only reason they can get away with that is because there is no.... Wait for it. Competition. |
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"Any man who would make an X rated movie should be forced to take his daughter to see it". - John Wayne There is a line we cross when we go from "I will believe it when I see it" to "I will see it when I believe it". Henry II: I marvel at you after all these years. Still like a democratic drawbridge: going down for everybody. Eleanor: At my age there's not much traffic anymore. From The Lion in Winter. | |
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| Red Rice | May 19 2007, 06:25 AM Post #49 |
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HOLY CARP!!!
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Yep. |
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Civilisation, I vaguely realized then - and subsequent observation has confirmed the view - could not progress that way. It must have a greater guiding principle to survive. To treat it as a carcase off which each man tears as much as he can for himself, is to stand convicted a brute, fit for nothing better than a jungle existence, which is a death-struggle, leading nowhither. I did not believe that was the human destiny, for Man individually was sane and reasonable, only collectively a fool. I hope the gunner of that Hun two-seater shot him clean, bullet to heart, and that his plane, on fire, fell like a meteor through the sky he loved. Since he had to end, I hope he ended so. But, oh, the waste! The loss! - Cecil Lewis | |
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| JBryan | May 19 2007, 06:38 AM Post #50 |
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I am the grey one
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So, the high cost of regulatory compliance has brought about an environment of a few big refiners with little competition and higher prices. If it didn't take mucho years and dollars to start up a refinery we would not be in this situation. There would be more independent players. |
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"Any man who would make an X rated movie should be forced to take his daughter to see it". - John Wayne There is a line we cross when we go from "I will believe it when I see it" to "I will see it when I believe it". Henry II: I marvel at you after all these years. Still like a democratic drawbridge: going down for everybody. Eleanor: At my age there's not much traffic anymore. From The Lion in Winter. | |
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