POLITICS - Oil again

[Quick Karl]

What is so hard to believe that just maybe we are running out of the stuff and maybe, just maybe, there is a teensy teensy possibility that the days of cheap energy are over.

So, all of a sudden, out of the clear blue sky, we're running out, and none of the experts had a clue it was coming, yet somehow Exxon-Mobile's profits are through the roof...

It defies logic. If the supply is running low, and the price is going up, Exxon-Mobile's profits should be down, not up.

[Wrangler John]

Some thoughts on oil:

The oil companies don't need to worry about crude supply, they raise prices when it's low - to recover cost and maintain profits. They lower prices when it's abundant and still recover cost and maintain profits due to larger sales volume.

I shifted some retirement investments into energy companies (oil, coal, & ng) and energy services (drilling rigs, drilling ships and platforms, and tankers) to offset the cost of gasoline and diesel. With the recent discoveries off Brazil and in the Gulf of Mexico, the demand for drilling services will be a growth market for a while. Use the market for your own profit - get on board and reinvest the earnings, oil companies pay dividends.

There are around 100 regional blends of gasoline produced to meet the environmental regulatory demands of various state and local governments. What can be sold in one area is outlawed in others. This reduces nationwide supply and requires capital investment to modify refineries to produce the fuel used in a limited area. For example, California required the addition of MTBE and/or ethanol to reduce smog, this required a change to refineries to blend the gasoline adding cost. The requirement for Low Sulfur and Ultra Low Sulfur Diesel Fuel required process changes to the refineries and addition of lubricity and CETANE agents to the fuel - an investment that raised the cost of diesel above gasoline. The ULSDF has less caloric energy than the old #2 diesel and further exacerbates the problem with less mileage per gallon. One or two standard gasoline formulations would greatly decrease the cost of production and distribution - lowering the pump price.

The mandate of E-85 ethanol gasoline blends further increases costs, because ethanol production requires slightly more energy to distill than it produces on the road; E-85 blends also produces less mileage per gallon than regular gasoline (about 10%). Ethanol can not be shipped by pipeline, so its shipped by rail car and tanker truck, and blended just before distribution - adding to the cost. Use of food grains to produce ethanol raises food costs and is detrimental to the overall economy.

There is a growing body of evidence that oil is not a fossil fuel, but is a continually produced product of the earth's mantle. Read Black Gold Stranglehold: "The Myth of Scarcity and the Politics of Oil" by Jerome R. Corsi, Ph.D. and Craig R. Smith. Natural processes with in the earth's crust produce oil and gas due to biological chemical reaction, heat and pressure exclusive of dinosaurs and ancient forests (in other words oil is a natural biofuel being produced continually). Another recent study of Gulf oil deposits show no relationship to fossil sources, adding validity to the theory. Depleted oil wells are slowly refilling - confounding some experts. There are aromatic hydrocarbon clouds in interstellar space - and no dinosaurs ever walked there! Indeed there is a discussion that such hydrocarbon pools were incorporated into the Earth at its formation.

So - long post but I tend to rant.

[Peter M. Eick]

Your not thinking about the upstream vs. downstream part of the business.

Downstream meaning refining is making a bit of money off the crack spreads, but not a lot like a few years ago. The downstreamers have had to absorb a lot of the costs of refining and not pass them on to the consumers "yet" to stay competitive. They will pass it along the first change they can get.

The Upstreamers (exploration, and production) we have been making more money because we are having problems finding places to explore so our overall exploration budgets are flat or actually down and the product we are producing out of the ground is worth more. So overall costs are down and the product we produce is worth more. Thus profits are up.


Now to address the expert comment. Actually, as an industry, we have been discussing this and worrying about it since 1956. Please refer to "Hubberts peak". M King Hubbert predicted what we are now experiencing in 1956 and it has been discussed extensively for my whole career in the industry. Most everyone excepts that he is right, the only question is when the peak will occur or if it already has. As part of the exploration group, I would say it occurred last year, but we will need another year or two of data to be sure. The issue is that to the lay folks (I presume you are not part of the oil and gas industry or you would have known all of this), do not know that not only was this predicted, it was absolutely inevitable.

The end of the age of oil is coming (I always feel like a preacher when I say that!) the only question is when and how gracefully society will handle it. My child will not enjoy the fun of cruising in the car for fun as gas will be expensive. The country as a whole will suffer greatly because we are a suburban culture and not used to being told NO. Our nanny state government will have a conniption and lay blame on everything and everyone but themselves.

Lets face it, this whole thread is proof of what I am pointing out. While I don't take it personally, you and others are basically accusing me and others in my industry as trying to take away something you believe is rightfully yours, ie energy. While you lash out at us for making a profit off this situation, I have to ask what you expect us to do? Not make a profit?

The problem for most folks I talk to about oil and the industry is they confuse the folks like me and big oil as the root cause of the situation and yet they ignore that the devaluation of the dollar and the demand in the far east is the real issue.

Next lets address your comments about the big oil profits. Yes, they are big and they darn well better be! If we take our big profits and normalize them to gold, then you will see that we are not actually making that much money, it is only that money is not worth as much so it takes more if it to pay a reasonable profit. While I have not run the numbers, I would bet that if you took EM's profits and divided them roughly by 3 (the run up of gold value) they are actually smaller now then they were say in 98. I should really do this to be sure, but I would say that was probably a safe bet. You would have to do it for both Exxon and Mobil though since that was pre-merger.


Final thought on the matter for a bit. Did you plan for the high prices? I mean, come on, if you were keeping up with things, this peak has been predicted since 1956? We as an industry have been talking about it a lot since 1998. The run up has been going on since 2000. I am just curious? Have your last few cars been fuel efficient ones? (I bought a hybrid and a very good gas mileage SUV). Have you insulated your house? (I did and made sure I bought an energy efficient one to start with). Have you turned up your thermostat for AC season (we run ours at 80F). Have you serviced your AC and fans? (I did already). Do you check your tire inflation? (weekly). Do you car pool or walk to work? (I do when I can). etc. etc. etc.

My job is to find oil and gas for my company. I know how hard this is to do and have been adjusting my lifestyle because of it since 1998 when it first really dawned on me personally that this was going to happen. Over the last 10 years I have eased into a less energy intensive lifestyle and yes even sacrificed a bit. The problem is most of the country has not, and now they have to make real change real quick. Thus I was laughed at when I bought my first hybrid but you know, I see a heck of a lot of them in the company garage lot. Far more then you see by percentage at the local mall. Thus I bought small instead of full sized. I went for aerodynamic SUV instead of F150. Others in the industry did the same. We live this stuff day to day and have reacted accordingly. It appears that the country as a whole seems to be surprised by this.

So, the real question in my mind, is are we/you/any of us going to suck it up and buckle down and accept the situation and make the best of it or are we going to complain and whine about it? Are we as a country going to open ANWR, Offshore California, Florida and the east coast to drilling or are we as a country going to put Sage Grouse ahead of oil?

Right now we put "a sense of place" and Sage Grouse ahead of oil and pay $4 to $5 a gallon for gas. Ok. That is what the elected officials chose and the electorate (you and me) told them to do No problem, just don't blame those choices on the oil industry. Put the blame on the federal government where it belongs. And while you are at it ask them for some serious deflation so we can get the price of oil down and put some value back in the dollar again.

[Peter M. Eick]

Wrangler John,

Your analysis of oil refilling fields is correct. We have several fields that there is absolutely no possible way they cannot be refilling. We have produced more oil from them then the mappable closure could possibly have held.

The problem is rates of production to the surface vs. rates of production from mother earth to the oil pool.

Basic mining is defined as removal of any deposit faster then it is being replenished. This is mining. Removal at a rate slower then replenishment is called production or extraction.

Right now we are basically mining the accumulated oil in the earth. We are consuming it and removing it faster then it accumulates. This is the root cause of the problem. While I am not a petroleum engineer, my understanding as a geologist/geophysicist is there is a sustainable rate that you can produce the oil and maintain pressure but then you must balance that with the economics of production and demand. This is where things break down and we are caught.

[Quick Karl]

The problem for most folks I talk to about oil and the industry is they confuse the folks like me and big oil as the root cause of the situation and yet they ignore that the devaluation of the dollar and the demand in the far east is the real issue.

...

Final thought on the matter for a bit. Did you plan for the high prices? I mean, come on, if you were keeping up with things, this peak has been predicted since 1956? We as an industry have been talking about it a lot since 1998. The run up has been going on since 2000. I am just curious? Have your last few cars been fuel efficient ones? (I bought a hybrid and a very good gas mileage SUV). Have you insulated your house? (I did and made sure I bought an energy efficient one to start with). Have you turned up your thermostat for AC season (we run ours at 80F). Have you serviced your AC and fans? (I did already). Do you check your tire inflation? (weekly). Do you car pool or walk to work? (I do when I can). etc. etc. etc.

I drive a Honda Accord, I live in AZ and my thermostadt is set on 84, I check my tire inflation once every 2-weeks, I work from home so car-pooling is a moot point -- just a suggestion, maybe yould should stop presumming that Americans are spoiled and over comfortable?

So, the real question in my mind, is are we/you/any of us going to suck it up and buckle down and accept the situation and make the best of it or are we going to complain and whine about it?

Yes, when the Oil Companies start to suck-it-up with us, instead of sucking-it-up from us.

Are we as a country going to open ANWR, Offshore California, Florida and the east coast to drilling or are we as a country going to put Sage Grouse ahead of oil?

See, that's the REAL issue - to maintain Big Oil's record profits, YOU need to convince Congress to open the ANWR, not me. And I doubt you will make any headway with Congress or the eco-crowd, while posting record profits in a down economy.

And while you are at it ask them for some serious deflation so we can get the price of oil down and put some value back in the dollar again.

Ok, let start that with the Oil Companies setting the example....

So what I get from all of this is:

Oil is running low.
The cost goes up.
The oil companies are doing the people a favor by making record profits from it.

Sure, I'll buy that ocean front property in Nevada…

This is the same story that has been going on for all of history – those in power squeeze those who aren’t for every cent they can get, justifying it as a service to the community all along the way. And it is precisely what brings down every society that does it.

It is NOT the average man that starts wars, invades countries, uses religion to justify murder, taxes people to death, runs Enron into the ground taking the property of hard working people with it, manipulates the stock or commodities markets (the biggest scam to ever be perpetuated)…

It IS the “paragons of societyâ€

[oldmax]

Just learned something, When you see 'Blue'
The thread is dead....

[Wrangler John]

All this doom and gloom is quite symptomatic of a particular mindset, the one that involves guilt over our national success and wealth. I am reminded of the dire predictions I read while folding my newspapers for delivery back in 1960. We would run out of oil in twenty years, the population bomb would cause famine and pandemics wiping out mankind, etc. O' woe.

Some always demagogue the issues:

"Less is more." Jerry Brown.

"We can't drive our SUVs and eat as much as we want and keep our homes on 72 degrees at all times ... and then just expect that other countries are going to say OK." Barrack Obama.

Or Prince Phillip stating that we only have eighteen months to solve global warming or we'll all die!

These folks are always on the left. And today's news is that Obama has direct historical ties to the Communist Party during his time in Hawaii. How come I'm not surprised?

I have a great faith that we have yet to learn the extent of untapped petroleum reserves, or how to manage them for sustainable output. There is no reason to stifle economic growth over the junk science of climate change, or the desire to assuage our self-destructive guilt, or the insufficiency of past belief systems. We do not fold the tent and shiver in the cold, but use our innovation to develop every source of energy in an efficient comprehensive way. That means developing an energy policy worthy of our technological prowess, something we may not have the political wisdom and will to accomplish without a major political upheaval.

[Old Time Hunter]

Anybody wonder what would happen if NOBODY bought any gas for 48 hours????

What would happen if we all went to a single person income source for all families?

I remember back in the late fifties and early sixties, my ma taking the bus and my dad saying that we had to stay home this weekend because we only filled the gas tank twice a month (except for special occasions like going to the family cabin). 'course our cabin had gas lights, not electric and our water pump was operated by human power. Heat was a whole different situation, had to split alot of wood! Wonder if we all did the same now, what the price of gas would be.

[Quick Karl]

The main problem with not buying gas for 48-hours would be getting enough people to do it to have the desired effect.

Most would just talk about doing it, like so many things.

PS. I've selected a new color to keep the threads from dying.

[bunklocoempire]

Peter M. Eick, and others in the industry,thank you, I appreciate your posts on this subject, It's always good to know the nuts and bolts concerning the topic and leads to a greater understanding of how it all works.

I had implied in earlier posts of Repubs and Dems being beholden to oil, I apologize for confusing the issue. Following the money and knowing how the Federal Reserve works is key. Beholden to the dollar was the original intent of this post, and getting a mule.

Since there is very little ever mentioned about the Federal Reserve other than increasing or lowering interest rates, it's no wonder our emotions will run high when our government hauls out the oil execs to intentionally (I believe) direct the attention away from the real issue. Smoke & mirrors. Divide and conquer.

Directing attention away from the real issue is what we all have to expect and sort out. I am still trying to "de-program" myself. Now are any here members of the board of directers of the Federal Reserve?

Thanks, Bunkloco

[Thunder50]

Rusty==get ahold of the Florida Corporation commission, if there is one there and get ahold of the oil and gas division. Tell them about the well and have a description of the section, township and range and get a final production report to see just what the well produced and from what depths.

Quick Karl --remember, when XOM makes 10 billion, the governments make 40 Billion in taxes. Why don't you whine about that for awhile. All I hear is complaints about BIG Oil. Try complaining about big government for awhile, please Remember, they also get royalties from production on gov't land, so I imagine they are enjoying the income from $135 oil also.

When you talk about big oil, remember there are many of us that are "very little oil" I try to get ahead of some of the big companies and get an acre or less, to participate in the drilling of the well. Been doing it for years and now make about 20K a year from it. Course, I spent 15K last year in participating costs. A deep test costs 13 million to drill and the dry holes hurt. With one acre, it would cost me $18,000 You put windfall profits tax on oil, I won't be able to afford to do this and only "big oil" will be able to do this (and probably incorporate also overseas to avoid taxes) I am also a geologist, but an independent one.

We have enjoyed cheap oil for years and somehow we figure it is out "birthright". Its not. I have been "preaching" about our production falling, but it has fallen on deaf ears. Saw the $100/barrel oil coming, but not the $135 oil. The devaluation of the dollar, because of gov't bailout of Wall Street has quite an impact on the cost of energy, and I wonder if much of this cost is due to speculation on Wall Streets part. They lost the "gravy train" on the mortgage business, so are speculating on energy, and you are paying for it. Perhaps $10 gas would be a good thing. It would cut down on the 10,000 sq ft houses, and quarter million dollar motor homes and force car companies to offer models that get better mileage, instead of pushing the 10mpg behemoths that made them so much profit. They made more in profit off an Excursion, than some smaller cars cost. Add the additional peple in this country and you have a much higher demand for energy.

OK, I'll get off my soapbox now.

[Grizz]

when XOM makes 10 billion, the governments make 40 Billion in taxes. Why don't you whine about that for awhile. All I hear is complaints about BIG Oil. Try complaining about big government for awhile, please Remember, they also get royalties from production on gov't land, so I imagine they are enjoying the income from $135 oil also.

Thunder50

Thanks for bringing this up.

Can you elaborate on this? I was discussing this with my wife the other day. It would be good to get an actual number so that we could see how much the governments, plural, get out of every barrel of oil.

It's hilarious to see the crooked corrupt politicians blaming the oil companies, without which we'd all be living hand to mouth like ants, and the crowd chiming in with them.

I still think the most agregious failure of the administration was to allow the dollar to devalue so far. Right now the dollar is worth 36% less than the euro, when it started out worth almost twice as much. In today's euro, the 135$ oil is $86.40, which is a whole big hit that Americans are paying for the weak dollar.

Anyone have the hard numbers?

Grizz

[Quick Karl]

Government only got where they are by people voting away our freedom and independence for their entitlements and handouts – this all started to snowball right after WWII. I wasn’t here voting for those 50-years that got us to where we are.

One thing about a mirror, it reflects everything, including flaws, which is why so few look at one for more than a second or two.

I’m no fan of government at all, but who else is the poor-man going to turn to when Big Biz OR Gov is sticking him? The only thing he has is his vote.

Same as with health care – instead of the rich devising a fair capitalist free market way to deliver it for an affordable price, they staunchly refuse to contribute, claiming they have no duty to help the less fortunate, and screw them if they need emergency care and the bill is $100,000 and they guy goes broke cause he really cant afford health insurance -- leaving the door WIDE OPEN for Obama or Hillary… and THEN the folks who get handed the bill, i.e. YOU, start crying.

THAT is the point that so many seem intent on denying. The companies and their political allies are handing the popular voice to those who they claim will ruin our country because they turn their back on the working man… then along comes Obama.

Big Oil AND Gov is asking US to cut back on everything as if we can do without gas to get to work and just ride a bike - I'm asking Big Oil to join The People and cut back on its profits and live on a little less, with us - look at the replies it generates...

Many of you can dislike me and what I say all you want, but I suspect that is because I say the things you don’t want to hear, or say it in a way you don’t like – but then again, political correctness is nothing more than a tool to silence what you don’t want said.

And let us NOT forget that the stewards of our country for the last 8-years, are OIL MEN. Our economy was better under Bill Clinton, of all people... how much more absurd can things get?

You're expecting to tell the younger voters of our society, who were raised by TV, that they now have to suck wind, and they are going to tell you to suck wind, by voting for Obama, if only to get even.

[Peter M. Eick]

A couple of points (albeit minor ones).

Actually, I am unabashed proud of my standing in the oil industry. I have tried to keep my personal history out these discussions, but what the heck since it was implied that I should consider leaving since I am now part of the problem.

To me working in exploration for big oil has been a dream job. Yes the down years (90's) were bad because when the economy is good for the country it sucks to be in the oil business. Watching your friends get laid off right and left sucks. I survived and I do remember this. When we were getting hammered with layoffs I don't remember any whining for the oil guys. No unions came forward, no politicians held inquisitions, no whining was heard on the land or in the pre-internet days. It was quiet and those of us that survived remembered.

Now oil is worth something. Not that we did anything, we (big oil) can thank congress, the fed and China/India for solving all of the problems we could not and make oil worth a lot.

So now it is my time to relish a bit of wealth. It is nice to work for an oil company and be highly valued. The stock bonuses are great. The new cars that are paid for are great. Paying off the house is great. Actually having enough cash in the checking account that I have to worry about the FDIC insurance limits is really great. Sure paying 50$ to fill the tank is expensive, but it brings a smile to my face when I do for I know because of that $50 a tank I can guarantee food on the table tonight. I get to write patents, do research, try out new ideas, buy hardware etc. Heck, my company is spending millions on research to push my personal ideas forward on how to explore for oil. I am proud of my patents, my inventions, my new ideas and how I personally have created several industry firsts. This did not happen in the poor funding time of cheap oil.

So where does that leave us?

If you work for the oil industry today now is the "good times" that will be talked of reverently like the last "good times" of the early 80's were for a generation. You might as well enjoy the ride, pay off all of your debt and start trying to figure out how to protect your income from the impending taxes.

If you don't work for the industry you have a few basic choices.
1) You can not buy our product. No problem here, we will just sell it to china and india. Nothing personal just business.
2) You can complain like most folks, and still buy the product.
3) You can buy oil company stock and get back a "piece of the pie".
4) You can ride out these high prices and wait till the next oil company crash and laugh at me when I am laid off. (Again, nothing personal here, just business)


Another thought. A real "oil man" would not have gone begging the Saudi's to open the taps like Bush did last week. A real "oil man" would have sat back and just worried about his business. No good for the oil companies could come from flooding the market with cheap Saudi oil (if they could) so how can you say he is a real "oil man".


Final comment since this is a lever gun site.

To me this would be like me complaining about all of those guys who got the cheap pre-64 and pre-war winchester 92's 73's and 94's in the great calibers like 38/55 and got near perfect condition guns 20 to 40 years ago at a song. Now when the price has gone up because of demand, I would be blaming big Winchester for going under just to spite me and make it very expensive to buy the really nice rifles like others have. I mean really I should get a senator or congress involved. This is not fair that I should have to pay more for a nice pre-war 38/55 in perfect condition just because it is 2008. I mean really I should only have to pay the price that others paid 20 years ago when no one wanted them.

Its all entitlements and handouts and it is unfair to the collector's who got in late that all of the good guns went cheap to those who started collecting long ago. It is big guns fault for going out of business and it is our president's fault for allowing it to happen.

(While the parallels are not perfect, the point is the same. )

[Peter M. Eick]

Grizz,

Hit the exxonmobil's tax page:

http://www.exxonmobil.com/corporate/ene ... taxes.aspx

Let me quote:
"from 2003 to 2007 their tax bill was 64.7 billion" and "their earnings in the us was 46.0 billion". The 2007 net effective worldwide tax rate is 44 percent.

Hit google for the royalty rate.

http://www.mms.gov/ooc/press/2007/pressdoi0109.htm

I found that the OCS area the rate is 16.7% for new leases and 12.5% for historic leases. Remember that is right off the top. They don't get a carry or anything else. The feds just take 12.5% of the oil with no investment.

Your numbers on the devaluation of the dollar are about right. That is the real crux of the problem. Our money is worthless now and things of value are much more expensive relatively. Even things like lead have gone up in price because even with shipping they are worth more other places because our dollar is worthless. This is the real reason oil, gold, lead, steel, and other commodities like food have gotten expensive.

[Quick Karl]

I surely hope that Hillary doesn't get a copy of that post.

In spite of what you might think, or what my poor writing skills may have implied, this is not personal at all.

I just believe that a 'hooray for me to hell with you" attitude it what is and will surely kill our society, even for your children and grandchildren.

That is the point I have been trying, in vain, to make.

[Quick Karl]

Grizz,

Hit the exxonmobil's tax page:

http://www.exxonmobil.com/corporate/ene ... taxes.aspx

Let me quote:
"from 2003 to 2007 their tax bill was 64.7 billion" and "their earnings in the us was 46.0 billion". The 2007 net effective worldwide tax rate is 44 percent.

Hit google for the royalty rate.

http://www.mms.gov/ooc/press/2007/pressdoi0109.htm

I found that the OCS area the rate is 16.7% for new leases and 12.5% for historic leases. Remember that is right off the top. They don't get a carry or anything else. The feds just take 12.5% of the oil with no investment.

Your numbers on the devaluation of the dollar are about right. That is the real crux of the problem. Our money is worthless now and things of value are much more expensive relatively. Even things like lead have gone up in price because even with shipping they are worth more other places because our dollar is worthless. This is the real reason oil, gold, lead, steel, and other commodities like food have gotten expensive.

When you get to your office tomorrow, why don't you start asking your bosses to take some of those profits and start posting those stats on a national TV campaign??? Sounds to me like that should be on TV every 15-minutes...

Or maybe I can change the system from my little soap-box here on the web?

Just a suggestion, of course - no disrespect.

[Hobie]

Quick Karl,

Just to note that your sarcasm does come through loud and clear.