5 myths about gas prices, Big Oil, and the presidency
1. Gas prices rise every summer because oil companies gouge us
Most Americans don't know that gas is made of different ingredients in winter than in summer. In winter, a cheap additive, butane, makes it less expensive to fill 'er up. But in hot weather, butane evaporates. Refineries must replace it with other, more expensive ingredients. So blame chemistry, not conspiracy, for higher summer prices.
2. We get most of our oil from the Saudis
our top suppliers are Canada and Mexico. For national security and economic reasons, U.S. oil supplies are well diversified.
3. Oil companies rake in obscene profits
A cross-section of well-known American companies showed profit margins higher, in some cases much higher, than Big Oil: Boeing, McDonald's, Disney, Apple, and many others, for example. Few Americans complain about the success of these companies. But look at the numbers. Using S&P data, Boeing's average net margin was 19.0 percent, McDonald's 18.8 percent, Disney's 15.9 percent, Apple's 13.5 percent — and Exxon-Mobil's 8.9 percent.
4. Drilling for oil would solve all of our problems
Oil tankers are actually being rented to store oil offshore because we have nowhere else to keep it. And if we did drill, baby, drill, we couldn't even process the excess oil. Refining capacity has shrunk in recent years. Existing refineries are running near capacity, and the U.S. hasn't built a new refinery in decades.
5. We must tap into our emergency oil reserves
The Strategic Petroleum Reserve — which only holds about a five-week supply of oil (727 million barrels, and the U.S. guzzles 21 million a day) — is meant to be used only in a national emergency like a war. And even if Obama did tap the SPR again, we can only process about 4 million barrels a day. And even then it takes several weeks for the gas to make it to market.
How to Manipulate the Oil Market for Just $1 Billion
According to the complaint, the defendants in early January 2008 bought up 4.6 million barrels of crude oil, representing the vast majority of physical barrels available at Cushing, Oklahoma, for February delivery. That was enough, according to the complaint, to create the impression of tight supplies, driving market prices higher.
At the time Arcadia et al were allegedly building this position, Cushing crude oil cost about $93 a barrel. So ostensibly it cost about $428 million to buy up enough physical crude to manipulate the market.
When the defendants allegedly took their second bite of the apple, in early March, according to the complaint, they amassed 6.3 million barrels of crude. At the time, Cushing crude cost an average of about $107 a barrel, so 6.3 million barrels would have cost about $674 million.
My second thought is that, if we assume for the sake of argument that even the concept alleged here is realistic, that relatively small operators could accomplish corner the WTI crude-oil market with just $1 billion, then how easy must it be for far larger players to manipulate the market for even greater gains?
Republicans' reckless spending bill, H.R. 1, would reduce funding for the Commodity Futures Trading Commission (CFTC) by a third, forcing layoffs to the watchdog that polices market manipulation by oil speculators and other abuses that drive up oil prices.
Exxon reported net income of $9.4 billion, or $1.97 a share, in the fourth quarter. That's up from $9.25 billion, or $1.86 a share, in the same period in 2010.
Analysts were expecting earnings of $1.96 a share, according to a survey by Thomson Reuters.
Revenue rose 15% to $121.6 billion, the company said.
Originally posted by ThisIsMyName
Number 4 is definitely a fabrication. Why else would oil companies in Canada want to build the Keystone Pipeline to refineries in the US if there wasn't spare capacity?
Sharks off the British coast: Oil tankers refuse to unload until prices rise... keeping YOUR fuel costs soaring
These tankers have been parked off our shores for months, refusing to unload their oil until prices have risen even higher. The delay makes millions for speculators... and keeps your petrol costs soaring. Laden with fuel, three oil tankers sit idly within sight of the British coastline, playing a waiting game that is driving up petrol prices for hard-pressed motorists.
They are part of a flotilla of ten vessels refusing to unload their cargo until market speculation has driven up its price to the level they want.
Originally posted by intrptr
reply to post by FortAnthem
Thanks for putting the work in on your thread. I was misled at first thinking that you were dispelling the "myths of Big Oil". They do enough of that themselves though. Number three was obscene about insane profits... which they do make a boat load of.
Today, U.S. Senator Maria Cantwell (D-WA) demanded federal regulators use the authorities that Congress granted them last year to crack down on excessive oil market speculation that may be contributing to artificially high gas and diesel prices in Vancouver and around the country.
Cantwell called on the regulatory body to not delay any further in implementing overdue rules on speculative position limits. The 2010 Wall Street Reform bill called for the CFTC to implement speculative position limits in energy markets within 180 days of enactment. The CFTC is more than three months late on their January 2011 deadline to take action, while consumers continue to pay high prices at the pump.
CFTC Commissioner Bart Chilton – one of five commissioners at the agency – said in a March 25, 2011 letter to Cantwell that oil speculation is at “an all time high,” up 64 percent since June of 2008. According to analysis compiled by Chilton, excessive oil speculation costs drivers between $8-16 per tank, depending on the kind of car they drive.
In August 2009, the FTC finalized its Petroleum Market Manipulation Rule, which was promulgated in compliance with legislation Cantwell authored in 2005 and successfully shepherded into law in 2007, making it a crime to manipulate wholesale oil markets. She is now calling on the consumer protection agency to use its new authority to meet their responsibility to protect consumers.
In the letter sent last month to the FTC, Cantwell noted that the price per barrel of oil over the past three years has varied drastically despite comparatively little change to the world’s supply and demand.
Fighting the Oil Speculators
Gouged at the Pump
Earlier, the head of Exxon/Mobil estimated that speculation was responsible for over $40 per barrel in price increase at a time when oil was more than $100 per barrel.
Last June, the Commodity Futures Trading Commission (CFTC) Chairman, Gary Gensler, declared in New York City that “huge inflows of speculative money create a self-fulfilling prophecy that drives up commodity prices.”
Mr. Gensler and the CFTC received more legislated authority to police these Wall Street gamblers, but key members of Congress refused to give him a budget to, in his words, “be a more effective cop on the beat,” at a time of sharply-increasing trading volume. Congressional campaign budgets are being swelled by campaign contributions from those very Wall Street gamblers. This is called “cash-register politics.” Meanwhile, you the people pay and pay at the pump and wonder why no one is doing anything about it.
But an inadequate budget only explains part of Mr. Gensler’s problems. He is continually undermined by other CFTC Commissioners who do not want real enforcement action. He also seems to be wearing down under the pressure.
Mr. Obama and Energy Secretary Chu keep saying that there is enough oil in world markets and that speculatively-driven higher oil prices are undermining the U.S. economic recovery. Yet Mr. Obama seems unwilling to fully use his administration’s existing authority to crack down on the surging speculation.
There is much more action possible under current statutory authority for the regulators to use and earn their salaries. They need to hear louder rumblings from the people.