Fun With John McCain and the Oil Boys
Many of us have been trying to argue with folks like John McCain, the Flat Earth Society and National Public Radio that drilling in offshore protected areas will not affect the price of gas because there is too little oil there to make a difference. At least that is what the Energy Information Agency tells us, and no one has produced any evidence that suggests a qualitatively different story.
But, evidence obviously doesn't matter with such people. So, let's give em what they want. They get to drill anywhere, with one small qualification. Since they insist that drilling will bring down the price of gas, we take them at their word. The deal is that we put a 100 percent windfall profit tax on gas prices in excess of $3 a gallon.
If they believe what they claim, they should jump at this deal. After all, drilling everywhere should get us back to $2 a gallon gas in no time. What do you say Senator McCain?
I say if 64% of Americans believe off-shore drilling will lower the price of gas, who am I to say different!
August 5, 2008 8:04 AM | Reply | Permalink
When a candidate for public office faces the voters he does not face men of sense; he faces a mob of men whose chief distinguishing mark is the fact that they are quite incapable of weighing ideas, or even of comprehending any save the most elemental — men whose whole thinking is done in terms of emotion, and whose dominant emotion is dread of what they cannot understand. So confronted, the candidate must either bark with the pack or be lost . . .
All the odds are on the man who is, intrinsically, the most devious and mediocre — the man who can most adeptly disperse the notion that his mind is a virtual vacuum. The Presidency tends, year by year, to go to such men.
As democracy is perfected, the office represents, more and more closely, the inner soul of the people. We move toward a lofty ideal. On some great and glorious day the plain folks of the land will reach their heart's desire at last, and the White House will be adorned by a downright moron. H.L. Mencken Baltimore Sun (26 July 1920)
August 5, 2008 8:17 AM | Reply | Permalink
On today's Morning Edition, they had a story about competing energy policies in which the reporter stated that the Energy Department and NASCAR have both said that Obama is right on this one. So, at least NPR is getting it right.
Not that it will make much difference.
http://www.npr.org/templates/story/story.php?storyId=93293382
August 5, 2008 9:52 AM | Reply | Permalink
I see no news reports concerning an oil shortage as the casue of the rise in prices, so if supply isn't the problem, how can more drilling alleviate the rising costs?
August 5, 2008 10:56 AM | Reply | Permalink
Worldwide demand for oil is 38 million bpd, production is 35 million bpd. That is the problem, and demand is growing, especially from CHINDIA. Increase supply, reduce demand, or pay more.
August 5, 2008 11:05 AM | Reply | Permalink
theClever,
It seems to me that oil supply/demand doesn't always work according to market forces, what with OPEC, futures speculation, consolidation of the industry/refineries, etc.
I certainly understand the world demand increasing
but the price of oil is too easily distorted regarding market forces.
Or maybe its just OLE skeptical John
August 5, 2008 12:04 PM | Reply | Permalink
Price can be affected by many things over a short time span: speculation,hoarding,politics,etc. But eventually supply/demand always wins out.
August 5, 2008 1:24 PM | Reply | Permalink
theCleverB says:
So, (recent prices) if $145.00 per barrel of oil gives us $4.10 per gallon of gas, then $80.00 per barrel should give us $2.10 per gallon gas?
(if my math is correct)
August 5, 2008 2:04 PM | Reply | Permalink
Actually you have to deduct about $.70/ gallon first for the tax bite before playing with any numbers, and it isn't a straight proportion proposition. Refineries make gas, not crude providers.
As an aside saying it isn't worth starting the process to bring more supply online, is like saying it's a waste of time to get an education before getting a job.
Lastly, why aren't isn't nuclear being pushed? Pick a design, make it modular, build a bunch of them and we'll be set. If the French can do it, so can we. As for waste recycle it like the French do. Apparently all their waste is used or deposited under one building.
August 5, 2008 4:05 PM | Reply | Permalink
shooter says;
The French Government runs the nuclear power industry there, over here it would be run by
American capitalists, you know, ENRON types, the bottom line zealots.
A nuke plant is almost prohibititively expensive to build and it takes about 4 years to build it.
But the main problem with nuclear is that the industry can't get anyone to insure them, that's why Republicans are pushing for Government subsidies to help pay for insurance.
Free market Republicans my ass.
Oh, suppose they want to build a nuke plant a mile from your house.
August 5, 2008 7:11 PM | Reply | Permalink
Free market Republicans my ass. Oh, suppose they want to build a nuke plant a mile from your house.
Heh. I'm glad you brought that up. It depends on what they are paying, to be in my back yard. Alaska has a pool of money derived from the oil companies pumping there, that pays a sum every year to residents. The same model would work well with nuclear power.
Like a UPS shipping rate card, concentric circles expanding outward from a plant would get a risk premium of "x" dollars, and/or free power. The amounts would drop the farther away from the plant, one is.
It would simultaneously do many things...
* Plants would be built in less populated areas to keep premium payments down....
* Those ambivalent or positive about safety issues would be compensated,
* Those fearing proximity, would sell their homes and move to a safe distance. I predict demand for free power would be a no-brainer selling point for many,
* One could argue that arrangement would stimulate huge growth centered around the benefits and power availability. Much like the caribou and the pipeline warmth. Entire cities could evolve in that space. That translates into tax dollars.
I hope, I'm the first, or near first, to come up with this argument because it's frickin' brilliant. Thanks John. Your pessimism could be the beginning of everyone else's profit.
August 6, 2008 11:07 AM | Reply | Permalink
Shooter, it isn't pessimism, its cynicism :-)
Your solution to the NIMBY problem is interesting, could be a problem solver.
August 6, 2008 5:57 PM | Reply | Permalink
Clever, ...I thought politicians were supposed to promise a "chicken in every pot."
Now they are promising less of everything, for example:
"If I am elected, we will all eat less, turn our thermostats to an uncomortable level, drive little boxes, dim our lights, conserve our dwindling supplies, stop growing and consuming."
We will end up working peacefully in the rice paddies.
August 7, 2008 11:56 AM | Reply | Permalink
Wow are you an idiot! If you put a 100% tax on gas over $3 per gallon, you simply won't have any gas, so get used to walking, idiot. We need to reduce demand, but if we don't also increase supply we will still face problems. Idiots like to say we can't drill our way out of a shortage. That's debatable, but we certainly can't conserve our way to surplus. Build nuclear plants, increase CAFE standards and require a certain % of electrics/hybrids, and drill for more oil here.
August 5, 2008 11:11 AM | Reply | Permalink
You're clearly a moron. The offer that Baker is talking about is an attempt to show that the drilling claims are false. It's a way of trapping the people who are advancing this idiotic "solution."
Drilling for more oil here is going to do absolutely nothing to change the price of gas. It's a ridiculous proposal.
http://www.salon.com/tech/htww/2008/06/18/offshore_drilling/index.html
http://www.salon.com/tech/htww/2008/06/19/offshore_drilling_2/index.html
Click on the second one at least.
August 5, 2008 11:15 AM | Reply | Permalink
So according to you, increasing the supply of oil will not affect the price of oil? Supply/Demand, ring a bell ? And you say I'm an idiot?
August 5, 2008 1:19 PM | Reply | Permalink
Drilling will increase supply if it shows results, and when it shows results.
Since there are large unexploited leased areas now, why do we think selling more leases means more production? And how could it affect supply in the near term? By the time any new fields come into production we will (with luck) be way past needing them.
Obama is right that if everyone checked their tire presuure, the demand would drop somewhat, right now. Ditto carpooling.
August 5, 2008 1:33 PM | Reply | Permalink
Why must every solution be 'right now'? This short term mentality is why drilling was blocked in ANWR back in the early 90's. That oil would be on the market now if people would have had a long term view. Assuming that we will not need oil in 10 or 15 years is a pretty foolish gamble to take. Regarding the unexploited leases, do what I did, go to the API website and do some research. You will see this claim is false.
August 5, 2008 1:41 PM | Reply | Permalink
And if we'd drilled in all those places there's be that much less oil available now. (That's assuming there's actually enough oil to have made it worth drilling.)
We could have saved a lot more by keeping the speed limit at 55 and raising mileage requirements, but that would have made a lot of Big GOP Donors unhappy.
August 5, 2008 3:33 PM | Reply | Permalink
55 is just too slow for highways, human time is worth more than gas. I just drove to Texas, 1200 miles at 70 mph, and my car averaged right at 50mpg for the whole trip. Raise the CAFE standards, but realize there will be a cost (in lives, as smaller cars are less safe), and that you can only raise mpg so much, you can't break the laws of physics. If more people drove hybrids and electrics we could provide for all our energy needs, but we still need to drill for more oil.
August 5, 2008 5:19 PM | Reply | Permalink
Are you expecting a 'contribution' from Hess Corporation for your trolling here?
August 5, 2008 5:30 PM | Reply | Permalink
Do you remember investing in windmills 25 years ago?
We all did for the income tax credit and you can still see thousands of windmills in the Palm Springs desert.
We also drove 55, stood in gas lines, bought solar panels, etc. during the Carter years.
I don't believe any of that worked, did it?
Can an 18 wheeler run on big batteries? How will the politicians commute to Europe without Jet fuel? Big batteries? Solar panels?
August 7, 2008 11:47 AM | Reply | Permalink
I love Ellen's posts, but every so often she zings us with a level of cynicism that I think is overkill. That was the case when I read her posts today. Then I continued reading the thread until I got here.
Damn you, Ellen! I hate it when you're right!
August 5, 2008 4:42 PM | Reply | Permalink
Isn't Cindy McCain a big Nascar fan? You would think she would know inflating your tires and regular tune ups WILL save GAS!!!!!!!!!! She is full of air and her husband is full of sh*t.
August 5, 2008 1:09 PM | Reply | Permalink
Drill, nuclear, drill more, I know war, I win wars,drill, drill blah blah blah
I'm John McSane and I approve this crap
August 5, 2008 1:12 PM | Reply | Permalink
I think Baker's idea is perfect. Republicans and indies don't want to listen to reason and deal with reality? Fine. Let's get this bill introduced in the House and Senate and watch Repubs vote against it. Then they can explain to the American people why it's so important to protect Exxon/Mobil's record setting profits every quarter instead of drilling for oil on your front lawn. It'd be hilarious to hear oil company execs explain how $3.00 dollar gas would bankrupt them.
Oil companies hold leases on 68 million acres onshore and offshore in the USA. Much of it on the 80% of the outer continental shelf already open to drilling. But they do little to nothing with it. With modern technology oil companies know where there's likely to be oil without sinking a rig. The fact is there aren't any undiscovered big viable fields worth drilling for left on US territory. They don't explore in the US because it's much cheaper to find and pump oil in countries where it's closer to the surface and the politicians are cheaper to buy off so environmental protections can be ignored.
August 5, 2008 1:15 PM | Reply | Permalink
First, oil companies profit margins are about 8.8%, much less than most industries. If they had the same margins as Microsoft, gas would be over $15 per gallon now, so stop claiming they are gouging. They make massive profits, but they also pay massive taxes, and gov't makes more per gallon of gas than the oil companies do. Are you are so foolish to think you can freeze the price of gas here, and companies will still sell it here? No, it will all go elsewhere, and you will have none. Your stupid democrat based claims regarding 68 million acres is totally unfounded. Do some research, go to API.org for real info about oil instead of getting it from ignorant politicians.
August 5, 2008 1:31 PM | Reply | Permalink
8.8% is actually a pretty sweet margin. Compare it to much GM loses on each SUV it sells these days. And yeah the government should have broken up Microsoft years ago but Repubs don't do
antitrust.
http://www.factcheck.org/askfactcheck/are_the_democrats_correct_in_stating_that.html
"According to the U.S. Department of the Interior's Mineral Management Service, there are nearly 68 million acres of federal lands (onshore and off) that are part of non-producing leases as of fiscal year 2007."
Is there oil under that land? Um, oil companies seem to think so, they've spent hundreds of millions of dollars to lease it. Is it worth pumping? Probably not until the price rises to the point where the rest of us are fighting over scraps at garbage dumps looking for something to eat. Is there cheaper oil elsewhere on US territory where they're prohibited from drilling? Probably not much. Certainly not as much as where oil companies have already placed their bets. Once again, there's no big pot of sweet light crude left in the USA. We used it up.
The Chinese aren't drilling off the coast of FL in Cuban waters. The Brazilians and Spanish looked in 2001 and 2004 and found no viable deposits. As much as the Cubans would like someone to the US Geological Service estimates there's about 3.6 bbls in Cuban waters. That comes to about 230 days of US consumption at 2007 rates. Not even that much on the US side around FL. Let me repeat there's no big pot of sweet light crude left in the USA. We used it up.
August 5, 2008 2:46 PM | Reply | Permalink
And who says I want to freeze the price of gas? Repubs think we can drill our way out of the problem. Ok, go ahead and every penny over the price of $3 dollars for a gallon of gas gets taxed by the government for alternative energy research and development.
Tell me again how we have all this oil on US territory and how if we just allow the oil companies to look everywhere for it, even in your closet, the price of gas will come down. But when they do we can't bring the price of gas down to 2007 levels because the oil companies will go broke. Certainly with all the oil you think they're going to find the price of oil will come down too and their margins will go up.
I'm having a hard time keeping up with your logic because it makes no sense.
August 5, 2008 2:56 PM | Reply | Permalink
Your logic implies that 10 years from now, when the oil drilled for now comes on line (as you claim), it should cost the same as in 2007, ignoring the increased demand worldwide in the next 10 years. If we do nothing, $3 gas will be a dream, it'll be $10 or more. We need to produce more, use less, use bio fuels as possible, produce more hybrids and electrics. It will take all these measures.
August 5, 2008 5:31 PM | Reply | Permalink
Jeez you sound almost like Obama there Monkey boy. Shame McCain doesn't agree. So giving Exxon the right to drill in your closet won't bring gas prices down right away? Another Republican lie bites the dust. *sigh*
August 5, 2008 10:44 PM | Reply | Permalink
F2007 Net Profit Margins:
Exxon - 10.04%
Walmart - 3.5%
Toyota - 5.8%
Merck - 13.5%
Pepsico - 14.33%
Disney - 13.6%
IBM - 10.55%
I'm not really feeling the empathy for the Oil and Refining industry I think your post meant to imbue in me.
August 5, 2008 5:03 PM | Reply | Permalink
Even using your selected comparisons, it is clear that there is no huge disparity, ie oil companies are not 'gouging', their profits are inline with other industries.
August 5, 2008 5:11 PM | Reply | Permalink
XOM reported second-quarter earnings of $11.68 billion last Thursday: Net income for the April-June period came to $2.22 a share, up from $10.26 billion, or $1.83 a share, a year ago.
Total revenue rose 40 percent to $138.1 billion from $98.4 billion in the year-earlier quarter. For the first six months of 2008, Exxon Mobil said it earned $22.57 billion, or $4.25 a share, from $19.54 billion, or $3.45 a share, in the first half of 2007.
Which works out to a margin of… drum roll… 8.9%.
Better check your math.
August 5, 2008 5:25 PM | Reply | Permalink
. . . Exxon Mobil said it earned . . . .
Yes, but what did it really earn?
August 5, 2008 5:28 PM | Reply | Permalink
Note, I referred to F2007; not the current quarter. I also benched it against F2006 and F2005 to make sure there were no significant changes. In general it's not a good idea to annualize against a single quarter's results.You are welcome to check Google Finance or Yahoo Finance to validate the Net Profit Margins.
If you look below to Ellen's post, she makes a good observation that these are just standard metrics and do not indicate actual profit. It's kind of interesting that your beleaguered oils giant Exxon-Mobile claims their paultry net revenue for the quarter was up 14% the same period last year, and that the poor cash strapped behemoth has an ROE rate of 34.5%.
It's curious that your initial post said that oil profits were much less than other industries. When confronted with other industries' profits, you stated that I just proved your point.
I don't think you understand what you are talking about.
August 5, 2008 8:08 PM | Reply | Permalink
Just in case you don't get back to where you posted a nasty insult under my blog, because of a mistaken link, here's the correction:
I linked to the wrong story. Newsweek reports on its own poll at http://www.newsweek.com/id/143258/output/print
"The day the Democratic convention ended in San Francisco in 1984, the Newsweek poll showed Walter Mondale 18 points ahead of President Ronald Reagan."
But instead of doing a little research themselves, FreeRider and Markg8 just lay out a few nasty insults.
Will they return and apoplogize, if they even bother to follow the corrected link?
Obama's "friends" have made him a lot of enemies.
August 5, 2008 1:52 PM | Reply | Permalink