Lower CA Gas Prices by Drilling!

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In 2004, then Attorney General, Bill Lockyer, updated his 2000 report on Gasoline Prices in California.  Looking back is an interesting read as we watch gas prices rise beyond $4.00 on their way to, as some are predicting, to as high as $6.00, if not even higher.

Evil Oil Companies Reap Big Profits Cause Gas Prices to Spike!

What is fascinating about both the current concern over the rise in gas prices and the report published by AG Lockyer is the consistent amount of spin on what it was that was causing the rise in prices.  As we move into the next few weeks and months, once again we will hear from the media, and many talking heads, how it is the “evil” Oil companies’ fault—how they are making record profits, preying upon the people of California, or on the national scale, the U.S. citizens, to enrich their shareholders and continue to pay huge salaries and bonuses to the 1%’rs and leaving the 99% in a worse and worse position. But there is a big problem with this spin!  For the most part it is just not true.

I have no vested interest in the Oil companies.  I am also not a fan of some of what they do sometimes.  Sure, Oil companies make a huge amount of profits when you look at the overall dollars but, like other such vilified industries and their executives including, big Pharma, and insurance companies among others, the percentage of profit is ridiculously small, when compared to other businesses and most small businesses.  More telling, however, is that the real profit built into the Gas and Oil supply chain has reduced significantly since Lockyer published his updated report in 2004.  The enclosed chart shows the break out of costs for a gallon of gasoline as reported by the California Energy Commission in 2004 and again as of today in 2012.  What is startling is that the “evil” Oil companies’ and refineries have reduced the cost and profit part of the price over 27% while the state of CA has increased their percentage per gallon over 42% and the federal government has also increased their take per gallon by 20%.

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Another, great misconception—misrepresentation—is that the cost per gallon is driven solely by the per barrel price of crude oil.  Well again, if you look at the chart I prepared, you see that if that logic was, in fact, correct, the price per gallon would now be $6.02 per gallon already instead of the $4.04 it is today.  So, there is some disconnect in the price per barrel equivalence to the price at the pump.  Clearly, this is not a direct corollary.  While it likely does have some impact, I suspect there are a number of other things at work that drive the price at the pump. So, one may want to question if the conventional headline as shown at the beginning of this section is true?

What else could be driving up gas prices in California?

One other interesting segment of the Lockyer report is the change in 2004 from MTBE to ethanol.  For many who don’t know, and for those that do not remember, MTBE was the additive to California gasoline demanded by the environmental movement to reduce gasoline’s polluting effects.  With a large amount of money, and huge political activism, the activists forced CA to enact a law requiring this additive.  The cost of refining gas for use in California went up and so did the taxes on gas to help pay for the increased bureaucracy required to monitor compliance.

Now like most things driven by ideology, a number of years later the same environmental factions now came forward to demand the removal of MTBE from our CA gas as it was polluting the environment (it had been found in high concentrations in the water table of Lake Tahoe).  So once again Californians had to foot an increase in the cost of gas as a result of this change and an increase in the cost of the additive (ethanol) as well as an increase in the bureaucracy to manage compliance—oh and let’s not forget increase in fees and taxes. So far I have yet to see an acceptance of responsibility for the initial inclusion of MTBE in the first place, no offer to pay for the removal, and no apology for the mistake from those that promoted the MTBE solution in the first place!

On a side note, you will also be hearing how the profits made in California by the evil oil companies surpass the national average!  Well the percentage is actually less but the price per gallon is a lot more, so of course the total dollars will be higher.  Further, the costs of operating a business in California are intrinsically higher due to higher labor, infrastructure, legal, regulatory and insurance costs.  When you look at all the costs, what is surprising is that overall California gasoline retailers, distributors and refiners have fought to lower their costs significantly over 27% since 2004.  Not the work of evil geniuses!

The Law of Supply and Demand

Recently, some news outlets are questioning why, since the general demand for Gas and Oil in the U.S. is down significantly and we have had a surplus in supply; prices are still rising—not falling as predicted by the law of supply and demand.  Welcome to the One World Economy.  There are those in the progressive movement, evidently our President included, that have long desired the U.S. to become a member of the One World vision—a One world Economy.  For the past 20 years, much of Europe has been experimenting with this vision of utopian fairness.  Looking at the status of Europe today, particularly Greece, France, Italy, and Spain one would really want to ask how this is working out for the citizens of those countries!

The problem with the One World Economy is now supply and demand for our U.S. refined products, regardless of their in-ground point of origin, is based on demand anywhere in the world.  One can take a narrow view and determine that Oil refined in the U.S. should stay in the U.S. but economically that doesn’t work because when “evil” Oil companies ship this product to other markets, that will pay a higher price, it is actually a good thing for the economy because the U.S. adds revenue to its export sales, reducing the amount of money we need to print to pay for our international purchases.  We must remember that the U.S. is a net importer of products; therefore more of our dollars flow out of the U.S. than we get back in sales of our goods and services outside of the country.

As an example, suppose you live in a hose with your wife and one child.  Your Mortgage is $1,000 per month, your other expenses are $1,000 per month, you and your wife both work and you both get paid $1,500 per month.  You are selling your services in excess of what you are spending and each month you gain real asset value of $1,000 each month.  Now let’s assume one of you loses your job.  Now each moth you are buying $500.00 more in goods and services than you are taking in.  All things being equal you can do this for twice the amount of time of when you were both working. When you get to that point when you have spent all the money you accumulated, you look in your checkbook and see you still have checks.  So you keep writing them.  It won’t be long before someone comes and knocks on your door.  We have for the last 50 years been ignoring this very  problem of just writing checks because they were in the book and now have a $12 trillion accumulated trade deficit.  Not only is this a big problem for our general economy, it is a big problem when it comes to real value commodities like gasoline and oil.

Since we eliminated the international gold standard in 1972, countries whose economy is based on net exports of goods and services have currencies, like China’s Yuan, that are based on increasingly real tangible values.  The U.S. economy, being a net importer, has an economy whose currency is more and more based on intangible, perceived value.  While the U.S. dollar is still the benchmark currency, perception of many in the world is changing.  Oil is perhaps now the single most valued commodity.  Its price, like gold before it, is set by world demand. There are those who argue that “petrol dollars” should become the new world benchmark.  In other words it would be the new gold standard.  The day that the dollar is replaced, the U.S. currency will simply get crushed! If you think gas is expensive now…

So companies selling products today have an interesting problem when it comes to U.S. customers.  They can take their production and sell it to us and get paid in a currency that has a total amount of money in circulation of $16 trillion dollars with arguably a real tangible value of only $5 to $6 trillion. Remember they will be selling this valuable commodity to a country that each year is buying much more than it is selling so the tangible value of the assets backing its dollar are continuing to slide down or, they can sell them to China whose currency is now internationally recognized and is relatively stable and is backed by a constantly increasing national asset base due to huge net exports and low manufacturing costs.  Barring a simply patriotic reason, most will sell to the increasing asset value country.

Drill, Baby, Drill!

We can increase domestic production, and we can drill more, and we will find that we will reduce local prices somewhat.  While the President says, that drilling will not solve the problem, he is not telling the whole truth.  We can’t mildly increase our production; if we do then he is correct.  We have to significantly increase production to have the effect we seek. The break point for lowing domestic costs is when we get enough production to reduce the dependency on foreign oil to such a level that the vagaries of their price gaming become meaningless.  There are enough oil reserves in the U.S., with existing technologies to get to it, to replace most, if not all, reliance on foreign sources.  What is necessary to get there, is time and the will of the people.  Unfortunately, we are coming to the point when we simply must face the reality that while protection of the environment is a noble goal it cannot be the only, or preeminent, factor in our decisions.

Finding alternative sources for energy is necessary step and is a proper goal.  But, the solutions found in the alternate sources, can neither cost more than the available domestic oil, gas and coal sources, nor can they require us to collect taxes from some, or all, to subsidize the price to pay for us to use it.  Following the subsidized route is the height of lunacy.  The money we need can no longer come out of thin air as it has for the past 40 years.  Taking money from ‘us’ to pay for purchases by ‘us’ from ‘us’ is not only a zero sum game, it is simply increasing our costs as a nation and making us further uncompetitive with other nations who in turn are happy to produce the goods that we can actually afford to buy.  In the end, we get where we are with Gas and Oil today.  We can produce it, but we just can’t afford to buy it.  So then we have to sell it to countries like China that can.

(Tom Loker served as the Chief Operating Officer of Ramsell Holding Corporation. Prior to joining Ramsell, Mr. Loker was the founder and senior partner of Wild Tiger Holding Company and Thomas Loker Consulting. Visit his website at www.loker.com and his blog at tloker.wordpress.com.)

Comments

  1. You can find out more about me at http://www.loker.com.

  2. In response to a request I got from a reader I am including my reply. The reader wanted to know some more about where the money went, and if I was j not just being irresponsible and promoting wanton polluting. Here is my reply.
    —————————————

    Dear Reader,

    The chart I included is breaking down the cost. But if you want to see a more detailed example look here http://energyalmanac.ca.gov/gasoline/margins/index.php

    This article is not advocating “choking the world” It is simply pointing out, that like everything else we are hearing today, the argument is not framed in reality, it is only limited talking points form both sides.

    While we may wish we lived in a simply utopia where what we need has no cost, either in terms of money, impact to others, or impact to the environment, this is not the case. Each of these issues is multivariate and non linear. Seemingly innocuous changes in one area trickle all through the system and literally upset the apple carts down the line.

    As an example, it seem so easy to say lets increase the cost of gas by 5 cents per gallon and we can fund X technology, or Y programs. Look at all the good we can do. But back to that apple, The cost of that 5 cents is not 5 cents when you buy that apple. The cost of this simple tax on gas while linear at the pump (meaning that it is only 5 cents more when the gas is purchased at the pump) is non-linear at the apple. At the apple, the increase in the price of gas to send it to the distribution facility is added to the wholesale cost. The distributor calculates his wholesale price based on his cost. Let us assume he wants to make 13% gross margin (typical distributor margins are 9 to 15%) to cover his costs and to make his profit. To calculate the margin for a product you take the cost and you divide the cost by the reciprocal of the margin you want to get.

    So in this example the 5 cents is divided by (1 – 0.13) or 5 cents divided by 0.83 which equals the new cost factor of that 5 cents tax as 5.75 cents to a grower of apples.

    Now the product is sold to Safeway who ships it to their distribution facility. The same cost, now 5.75 cents per gallon is added to their purchase price for the apple. And they ship it from their distribution facility to a store and it is added again per gallon so you now have a base additional transportation cost of 17.25 cents per gallon by the time it gets to the store. Just to keep it simple, I am just including one gallon of gas in each segment.

    Now at the store they want to make 38% margin on the apple ( this is the low end of a retail margin which ranges typically from 38% to 50%) so this 5 cent tax now increases the price to 27.28 cents at retail.

    This simplistic example is just meant to show how one seemingly innocuous thing that looks simple has a very significant effect as it flows through a multi-step process. And please keep in mind this little 5 cent tax is not just on the apple and the trip to the distributor, the main purchasor or any other place, it is a cost on everything that affects this, including the gas that the buyer uses to get to the orchard to see the grower product, the cost of the tractors picking and hauling the products, the cost of the employees at each step in the chain. So the real cots to the economy of that 5 cent tax gets reflected across the whole economy and at many places it is also non linear, meaning it is multiplied buy the need to charge for its cost and administration at each step of the chain.

    So in the end I am just saying I don’t want to just pollute the environment, but I do want us to not just take one factor into the decision process. It is this history of looking at everything through these singular lenses that has gotten us to the point where we cost too much, we produce too little and we are simply non-competitive as a nation and are apparently resting on the verge of economic disaster!

    Let us do the best to keep our impact to the planet low, but let’s also recognize that the cost of doing this is not a simple one and we cannot not expect that our existence is fair. Life itself cannot be fair. Our very existence depends on this fact. We need to consume resources to survive, we always pollute some part of the environment we exist in, in the short term at least. And, we live in a one-word economy and as such now to survive and thrive we need to recognize that if others are not willing to adopt our higher cost philosophies, they become more competitive. And since they do not share our current philosophies as to life’s fairness or the need to be fair to others they are more competitive and are draining our resources, weakening our economy and existence to the benefit of their own. If we do not recognize this, make some hard choices and react we will face societal, if not personal extinction. We need a more effective balance.

    I don’t like this, I don’t want this–it just is–what it is!

  3. Cora Berkery says

    This is the difference between a mature decision to use resources we have vs. trying to cram an indefinable illusion (Grren energy is too expensive!!) down taxpayers throats. This system in California is bankrupting our state and putting unnecessary tax burdens on our citizens. It is simple economics to increase oil exploration and drilling in these times of strife and war in other oil producing areas. Let’s be self sufficient and make decisions that are good for our citizens and let’s now bow to shaky science and create more gridlock in government. So what’s right for the people of California and America!

    We didn’t learn a thing from the 70’s oil crisis. Brazil did. They are completey self sufficient and we are looking like a bunch of lame-brains still struggling 35 years with the same problem. Only now we have OPEC to make things much worse. We were once a great country that solved problems. Let’s solve this one…its as easy as a probelm can be. Come on! Put people to work building pipelines, pumping oil, building infrastructure and driving down gas prices. Solve the enrgy crisis by giving us the 200 years of self sufficient oil right hereat the Bakken oil reserve, the largest in the world! Let the next couple of generations find a renewable energy that will bridge the gap until we can come off of our deep dependency on oil. We’ll give them 50 years to do that, another 20 years to transfer technology and save 130 years of oil reserve for later. Helloooo!!!

    • Cora, sorry to disappoint you but the blame is on Washington and no one else. First you should realize that before OPEC, US corporations were stealing the oil from the countries who own it as our government was in bed with the dictators in those countries such as the Shah of Iran and many others in the Middle-East and North of Africa. However, countries get wise as time goes by and as such the formation of OPEC. After OPEC US companies could not steal the oil at will but instead pay what OPEC demanded and rightfully so. You must realize that we are now 5th in productivity worldwide and our economy is the worst. So, lots of things have changed for the worst including education. One thing people must accept is that we are no longer what we were 50 years ago but people never learn and for sure our government. You mention Brazil as being a country which learn the lesson of the 70s and that is true; Brazil is the leader in energy worldwide and they have a surplus and own part of our debt but what people do not see is that Brazil has never been involved in useless wars as we have, they do not have an arsenal of weapons of mass destruction (more than 1500 atomic warheads) as we do, they do not patrol the seven seas and 5 continents, they do not have more than 1.2 million defense employees worldwide each earning about a million dollars every year, they do not have close to 200,000 military forces in the middle-east alone, they do not have a military budget which surpasses all the budgets of advanced countries such as China and Russia. Now, if you start adding all the money our government throws away then you will realize that our economic problems are the cause of bad management of our government. The USA takes in about 2.2 trillion dollars every year from taxes and spends 3.5 or more trillion dollars every year meaning that right there we are almost 2 trillion dollars deficit every year; now, multiply that by the last ten years and you will realize then how stupid they are. People also vote blindly or on instincts but not intelligently and this is the result. Even if the ban on oil drilling is lifted…still we will never be what once we were. There is what in economic terms is known as “The point of no returns” and that is where we have been for the last ten years and still Washington don ‘t see it and continues throwing money away in defense and wars which we will never win and a good example is Vietnam. For starters the USA must forget about Israel and cut the financial and military help, secondly forget about defense for at least 5 years as we have an arsenal which can destroy the whole world; also, forget about financial help to other countries and recall all the troops we have worldwide. Only then we can make a dent recuperating ourselves from this nasty situation.
      I close this comment with the following quotation from Marco Tulio Cicerone, year 55 B.C.

      “The budget should be balanced, the Treasury must be replenished, public debt should be reduced, the arrogance of public officials should be tempered and controlled, and assistance to other countries must be removed so Rome does not go bankrupt. People must learn to work again, instead of living off the state. “.

  4. There is NO WAY the Old Crow brown would let us drill!!! The Gov. makes a big profit from oil by way of the tax we pay per gallon. Obummer Declining the Keystone Pipeline was just a way for him to spit in our faces. I am sure if he had NOT done that, prices would be going down. But that IS NOT what he wants. Gas prices going up and going up fast is Exactly what he planned. And the Old Crow Brown is fine with it to. After all the Politicians don’t pay for their gas, WE DO

  5. RAY STANKIVICZ says

    WE HAVE OBAMA AND HIS PARTY TO THANK.
    AND THE REST OF WASHINGTON TO THANK FOR THAT HE SHUT DOWN ALL
    THE DRILLING THE COUNTRY put the blame to where it belongs

  6. Hey…why not do what Texas is doing…tell the federal government to shove it! and do what is best for California….matter of fact should become an independent couyntry and the same for Texas and Arizona.

  7. In Ecuador they drill for oil and produce 880,000 barrels per day, yes, gasoline is cheap there, believe it or not $1.48 per U.S. dollar per U.S. gallon, at all service stations I was there in December and saw it with my own eyes! We need to get rid of the idiots in Washington then start drilling like mad, prices could then retreat to about $2.50 a gallon!

    • Craig, even if we drill for oil we will never attain the prices as in Ecuador, Venezuela, or any Middle-East country as the problem is “Government”. They want to get money off the working people to pay for their stupidity such as financing wars and giving money to those countries such as Israel. There is no reason, intelligent reason any way, why our government polices the whole world…for what? Who on hell wants a war? For sure we cannot sustain a long war against developed countries such as China and Russia, we would be destroyed in no time and for what? If you look at history, Israel has always been an aggressor since 1947 when the UN passed Resolution 181 by which “the world” recognized two states with the partitioning of Palestine: Israel and Palestine; however, the US was the only country which opposed the UN Resolution 181, and recently the UN voted to recognize a Palestinian state and the US opposed it again…the question arises though: Do we own the whole world as to mandate what we want? That was probably true 50 years ago but not now. We have to be careful how we play the cards as China, Russia, Brazil, and India own the biggest part of the pie and they will not stand idle if Israel attacks Iran and then what?…gas prices will soar to more than $ 10 dollars per gallon and for what?– Just because Israel tell us what to do?
      Another issue is the so called “proliferation of atomic weapons” concerning Iran. Question: why Washington complains about it when we have more than 1,500 atomic weapons; twelve, so they say, Trident submarines carrying 24 ICBMs each with 8 atomic warheads per ICBM. I have always thought that governments should put their mouth where the money is meaning that if we have such an arsenal why they complain because Iran wants to defend herself from Israel attack? It is called deterrence — besides, Iran is an independent country and as such can do whatever they want inside their borders just as we do without using their weapons for no reason what so ever…then yes, the world should intervene just as with WW-2. War is an evil really but our government does not see it that way and we invade retrograde countries for no reason what so ever such was the case with Iraq; so, whom is to blame for such a disastrous economy and gas prices?– Our government of course. The irony of all is that “the people” just duck their heads and take it. The new era calls for a revolution otherwise the government will take it all just like Thomas Jefferson predicted.

  8. DRILL HERE DRILL NOW!!! Clean out the communists,socialists,marxists,homo.muslims of the California State Govt. They have committed massive voter fraud for YEARS. Game over. They have absolutely no place near any kind of Local,State or Federal govt.position!!!!! DEFUND EPA,one of the biggest communist groups we have. Cut all the taxes and ridiculous regulations and get the United States of America up and running again. WE NEED SARAH PALIN,WHOM IS NOT FOR SALE.

  9. One thing that I did not see mentioned was why gas prices are rising is because our money is deflating. You can also thank Uncle Ben at the Federal Reserve for that. A dollar today is worth less than it was a week ago.

    • Dear Wild Bill,
      you are correct about the dollar reducing in effective buying power. I resist using the term deflation because some people will arrgue the textbook definition of deflation and inflation. The segment on the law of Supply and Demand covers a part of this reducution in purchasing power.

      See my blog at http://tloker.wordpress.com as I have numerous articles on this exact subject. This is one of the reasons that we are paying so much for healthcare and housing. It is the fractured and corrupted way our economic systems is structured and the compounding unintended consequences, foir the most part of short term fixes not systemic repair.

      Great Point!

  10. stephen casciotta usn ret. says

    same old bull d*mn libs won’t let us drill and we have a lot oil. this state will never get better , because the same #$%^ keep vote the same people in.

  11. The subject of deflation or the purchasing power of the dollar is academic but what really would make a difference is to decrease the demand…simply “Supply and Demand”. If people would use less gasoline there is less demand and hence prices would fall to encourage people to buy more; so, having said that, it is up to the people to consume less gasoline and then “probably” the prices fall. However, we have two big problems: “government and greedy companies”.

    The production of petroleum in the USA comes from six states, namely: Texas (the biggest producer), Alaska, California, North Dakota, New Mexico, and Oklahoma.
    As of January 2011 those six states produced 5.48 million barrels of petro daily; however, the USA consumes 19.6 million barrels of oil per day; which is more than 25% of the world’s total…are we greedy or what? So, where is the surplus as the author of the article claims?

    In the days when the USA was in bed with every single dictator in the world (so much for democracy, USA democracy any way) the oil companies just grabbed the oil at will practically and people were having here in the USA the time of their life with cheap gasoline; but times have changed and now we are at the mercy of OPEC. What really amaze me is the stupidity of Washington invading the Middle East countries because of our stupid policies and because of Israel tells us instead of treating those countries with dignity and give the Palestinians what belongs to them according to the 1947 UN Resolution and a unanimous vote a few months back to recognize Palestine as a state being the USA the only one against it.

    Craig, in this blog, mentioned the price of gasoline in Ecuador at $ 2.48 per gallon which tells me that they are also being taken for a ride and I explain why: In all of Latin American countries people are much more conservatives than here in the USA, not every citizen has a car and if they do it is a small car which are more economical than big SUVs, trucks, and luxurious cars like here in the USA. Also, Latin American people don’t drive as much as people in the USA with daily commuting times of 2 hours in metropolitan areas and what really piss me off is that I see one person commuting alone driving a huge vehicle. I would say that being Ecuador an oil producing country the price of gasoline should be at least one dollar below of what it is now according to Craig. About 6 years ago, the average cars per family here in California was of 3 cars per family; however, in Ecuador is not even one car per family as most people commute by bus, or any other public transportation…just like in Europe. The bottom line is that prices are controlled by “Supply and Demand”.

    Question: How come the price of gasoline in the above oil producing states is between $ 3.48 and $ 3.98 per gallon? Again, ”Supply and Demand”, government, and greedy companies.

    • In answere to your question. Demand for gas this year over last year is down very significantly due to lagging economy and move to more efficient vehicles. Deman for heating Oil is also down due to more mild winter and other smaller impact reasons. This year there was an over supply of crude and then refined products as the amount of softening in demand was not anticipated. This product has been shipped to China, for the most part. While I do not in some ways disagree with your statement about the declining of the dollars value, I do not totall agree either. The difference is perspective.

      The decline in the value of the dollar is in itself not what is spiking the price directly, it is the loss of the excess capacity in the U.S. to demand from other countries like China, where their currency has more value than the dollar. This is a much more complicated discussion but it does have an impact.

      It is hard to equate the damage that has been done to the economy as a result of the profligate printing of currency since 1972 when we dropped off the gold standard. Then there was only $500 billion in circulation, 40 years later we have over $16 trillion in circulation (not counting dirivitives). The effect of the change from a standard economy to that based on Finance, Investment, and Real Estate (FIRE) based economy has been staggering and is only now starting to become evident. A good book on this subject is “The PostCatastrophe Economy” by Eric Janszen.

      The issue this year is not U.S. demand driven as it has been in the past. It is international demand driven, One World Economy driven more so that before. Increasing domestic supply will help, not cure this issue. Moving to other fule sources will also help. They simply cannot cost significanlty more than the current fule sources or we just cripple our future economy in a different way.

      Both Government and Private Industry are part of the probelm. The point of this article was to clear some of the rehtoric that it is all the oil companies fault. In the end like almost everything else there is often one other bad actor on the stage and that is us!

  12. The idea that petro is being shipped to China or someplace else is also academic. Of course that the demand increases worldwide and that is natural but the issue is that “we” are not doing anything to curve the problem. For example, China has super trains to move people massively, 17 super trains to be precise, and has built more than 100 super bridges to decrease driving time. The same can be said for Europe but here in the USA nothing is being done and if we add the driving people do then that is part of the problem also. Why drive big cars when a small one will do just as well? Why the government does not build super trains to alleviate the oil consumption? Why people do not change their driving habits?

    If to the above we add the grid of the oil companies, then we are at the point of no return. Just to complement my comments in this regard, here is something to think about regarding the grid of oil companies:

    America’s largest oil and gas companies recently announced their earnings reports for the first quarter of 2011. The figures were eye-popping: Exxon Mobil alone posted $10.7 billion in profits. Chevron and ConocoPhillips–the next two biggest U.S. firms in the industry–posted smaller but still impressive numbers of $6.2 billion and $3 billion, respectively.
    We are talking about earnings in “one quarter” a year ago meaning that now earnings are even higher. If to this we add the 48% the federal government is taking from “the people” at the pump (not the big oil companies) then the average Joe Blow is the one suffering the consequences.

    The greed of Corporate America can be extended also to other industries but the average Joe Blow does not know that nor can do anything about it. The problem of our economic problems, not only gasoline at the pump, is complex but fixable if we had intelligent and decent people in Washington which in my book is only a dream.

    • While I do not agree that the world demand as related by China’s drive for more oil is an acadamic part of the discussion, it is not the central theme– just one of many components.

      One other point about the profits of the “Evil” Oil companies and other “Evil” corporations of which you are enraged. While there is an argument that U.S. Oil companies should keep the oil here to let excess supply and lower demand reduce the price at the pump (this is an argument made lately by Bill O’reilly) and thereby make less profits becuase it is the right thing to do for American’s and it is patriotic to the nation, there is a large downside–also someting I have tired to explain in the article. When U.S. Companies do not export these proucts, we are increasing net imports and increasing the net trade deficit. This requires us to either take on omre debt or to just print more money as we have been doing since 1972.

      So lets use the argument that the Oil companies should not have sold the oil to China and pocketed some of the $10.7 billion but should have held the reseve here domestically and lowered the price at the pump.

      I admittedly do not know how much of the excess oil was instead shipped to China and at the moment I do not have the time to research it but I think it is about 1/3 of the U.S. past demand is what is represented by the China sales so let us assume for the point of illustration that $3.5 billion of the Chevron profit came from China sales. If this sale had been domestic then the $3.5 trillion gain would have not offset the cumulative trade deficit (approaching $13 trillion at this point) therefore we would have to borrow or print another $3.5 billion to pay for the trade deficit and this would either be paid by the people of the U.S. as tax, fee, or increased currency resulting in loss of purchasing power of the dollar.

      I am not trying to argue with you. We disagree on some points but we also agree on others. Where we diverge is the focus of our anxiety. I am trying to continue to frame the complexity of the issues. It is easy to blame corporations, the government, greed, or peope for not doing X or Y, but in the end we are frail, faulty, irrational human beings. Our behaviours historically have often not been in the rational best interest of our species or as individuals. Debating who is at fault more often than not does not bring us to a method to solve the issue.

      I believe, one reason I write these articles, that we all need to really understand the mechanisms under which the problems are propogating and then we may all beable to do something to fix them. Most of my articles are a reflection of my own journey to understand the probelm. We can always find disagreement and argue whis point is right, but in the end it is not one point that is either the cause of the probelm or the fix to it. It is usually a series of many small steps, some big steps and lots of adjustment by all of us through a process that Benjamin Franklin framed as, “It is compromise on the basis of tolerance for others’ opinions that lead us to good solutions…”.

      • Again…here is the reality about US petroleum;

        The production of petroleum in the USA comes from six states, namely: Texas (the biggest producer), Alaska, California, North Dakota, New Mexico, and Oklahoma.
        “As of January 2011 those six states produced 5.48 million barrels of petro daily; however, the USA consumes 19.6 million barrels of oil per day; which is more than 25% of the world’s total…are we greedy or what? So, where is the surplus as the author of the article claims?”

        How can the USA be selling to China when we have a daily shortage of about 15 million barrels daily? We need oil for our needs and not to sell to China. You seem to be a fairly intelligent person…just do the arithmetic based on the daily amount we need to meet our needs. What the USA is selling to China is “San Tar Oil” which we have but do not want to use because of the environment, the same goes with the same “Sand Tar oil” Canada wants to ship this way through the pipe they want to build cross country to the gulf of Mexico…We don’t want to use that oil so it makes sense to sell it to whomever wants to buy it. I just posted a link regarding the control of oil the USA and the UK has had since the early 1900s, but then China and Russia were not what they are now and also Brazil and the Middle East countries. Now things are different and our government doesn’t want to give up even at the risk of another WW. Think about it and then write about the facts…I be watching what you publish and then will reply with facts not with suppositions. Do yourself a favor, go to the link I posted and then start thinking about what will happen in the next 20 years if we get there and not destroy the world just because of OIL.

  13. This country is doomed. I am thinking of moving to a third world country to have a better standard of life.

    • Jim…The best place to move to is Brazil and Argentina. The problem with most people here in the USA is that they do not know much or nothing at all about those countries. Those two countries are not 3rd world countries as they are as industrialized as the USA, Canada or Europe. If you’re serious to relocate someplace else those two countries are the best. Brazil owns part of our debt matter of fact and just signed a deal with China to sell petroleum from one of the largest reserves in the world which they own. Brazil, China, Russia, and India have also formed an allegiance for everything; so, the USA better be careful how she deals with them. Just to give you an idea, California fits almost 8 times in Argentina; however, the population they have is only 35 million people as compared with 70 million in California with illegals. Just do a search about those two countries; better yet, take some time to visit them. Also, they do not get involved in international politics as Brazil told the idiot of Bush in his visit to that country. I am selling all of my property here and will move to Argentina and will live like a king while people here are starving to death and with no job. Both countries are self-sufficient with everything. Go to Rio du Janeiro, Buenos Aires, etc. and you will see the difference. They do not have the illegal aliens either and specially Argentina which is 100% Caucasian population of European descent.

      • Get a hold of me off this Forum cicuta. I would like to talk to you further. Where do you live in the state?

        • Hi Jim, I live in California, Placerville to be exact but I have lived all over the states when working for the Department of Defense as a Civil Service engineer and scientist and also working for companies such as Lockheed Aerospace in Sunnyvale, CA. Martin Marietta in Orlando, FL, and Raytheon in Massachusetts. I know a lot about how our defense works as well as the government and although I am also a Veteran of the Vietnam era, a US citizen, and given my professional services to the government for a lot of years I do not agree 100% with what our government has done in the past, present, and plan to do in the future. No matter what people think, all the wars have been because of oil and we have stolen not only oil but a lot of natural resources from countries which at the time were underdeveloped. Most people here are not aware of what our government really is. I have also travelled all over Europe and Latin America and lived in several countries such as Germany, Argentina, Bolivia, Venezuela and Central America doing my own projects; so, I know what I am talking about. If I were you I move to Argentina if you can of course. If you have property here and can sell it you can buy a nice farm in Argentina already cultivated and with a nice house for about $60K and if you have retirement you can live like a king with about $1000.00 per month. Just to give you an idea, Argentina’s education is 100% free including University so you have an idea how civilized that country is. They are the largest producers of beef in the world among other things, they have their own petroleum and natural gas. They have been a nuclear power country since the early 1950 s and a few years back won the contract in Australia to build a nuclear plant…so, as you can see they are no idiots. The same goes for Brazil which by the way own part of our debt. I have relatives in all those countries including Europe; so, I am constantly in touch with people. If you want, we can communicate and I can give you links; so you can see for yourself but I advise you to just go down there and see for yourself how beautiful that country is and they can care a less about Israel and all those countries in the Middle East. Those cities are like you have never seen in your life and the people are super nice. By the way, most people speak English, Italian, French, and a lot of German and Swedish, is paradise. The only thing is holding me back now is my wife whom has lots of family here and wants to remain with them…otherwise I would had been gone long ago. I live well here and my property is all paid for but not as I would live down there in Argentina. By the way, I am 100% fluent in Spanish, Italian, Portuguese, and I get by with French and some German. Nice communicating with you Jim and if you need any info from HERE or abroad just let me know.

          • I myself live in Rocklin, Vietnam era vet also. Have worked in civil service in DOD, Teledyne MEC, GTE Sylvania Western Division (DoD Electronics), Mather AFB 71-74, Sac Army Depot, MCClellan AFB. Currently living on SSDI due to civil service injury a long time ago (screwed over by government on that, any surprise). Pretty much living on pain meds now unfortunately. I absolutely hate obumma and administration. If I knew someone living in S.America or someone here that was moving down there I would probably have moved there a long time ago. Perhaps we can meet up for a drink sometime……………

      • cicuta Get a hold of me off this Forum . I would like to talk to you further.

  14. This is for everyone who wants to know the truth about why the USA and the UK finance wars and kill people..even their own people and all just because of oil. The link is the following:

    http://www.oilcompanies.net/oil1.htm

    Then think about it and you will finaly realize how stupid people are here in the USA.

    The only way to fight imperialism is through knowledge.

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