After the heated debates that we've had about the gas prices and why they are so high , I decided to try and find out a little about what drives the prices. We all know that supply and demand is the governing force behind all capitolist ventures. With this knowledge in hand you look for the reason that supply cannot meet demand. The obvious reason is our insatiable lust for gas to fill our suvs and such but why can they not up the supply to meet the demand? The answer is found in the clean air act. Everyone is familiar with this law , atleast in theory. The "leftwing pigeons from outer space" and the tree hugging hippy types on the hill had to save the spotted owl etc etc. You would be wrong.....The energy industry was fully behind the clean air act and actually paid for the favors that would slant this bill in their favor. The clean air act states that any gas refinery or coal burning power plant that was built before 1970 could conitinue to operate at levels that were legal in 1970 but any new refineries would have to adhere to much stricter rules that included air scrubbers etc and would have costed the oil companies billions to implement. But thats okay because no oil company has even wanted to build a new refinery since the '70s, to the contrary, they have closed down over half of the ones that were operating at the time of the bill's passing. This was an ingenious stroke of law that pretty much allows them to stay behind in production perpetually thus driving the price of their product up to record levels. They dont care to make more gas faster as that is less profitable for their companies. Hell we all know that they could build four new refineries with just this quarters profits but why would they? This in turn strips the clothes from Bush's talk of opening the outer shelf to drilling. He can open it all he wants, no one will drill there and if they do, they will still have half the refineries that they need to produce gasoline so how will this help? It's just another passifier for the american public (did everyone get their check from uncle W yet???) Dont look for the problem to change or get better. The four dollars a gallon summer was just to soften us up for three dollars a gallon being the norm.
I've stated the same opinion about the refineries or lack there of. But how do we make the big 5 oil companies and their subsidiaries expand their refineries and build more? I don't know the answer but maybe a start would be if they were striped of all their tax incentives and political favors until they are able to refine in a timely manor 100% of all the oil produced for fuel in this country. I did see on the news last week where one of the refineries, in Texas I think, is starting to do a major expansion (finally). I just saw the tail end of the story so I didn't catch all the details.
There is an abandoned refinery in a nearby town. I bet it's been closed for 15 years or more but it looks like everything is still there (infrastructure). What a waste for both gas production and wasted tax dollars on this abandoned land/facility.
It's no accident and theres no way to stop it from happening. There wont be any stripping anyone of anything as long as the checks clear the bank. I am only pointing out the problem as I see it. I dont think there is an answer other than to reduce the demand by cutting our gas consumption. Since that is a no go for most working men and women, dont look for anything to happen soon.
There is an abandoned refinery in a nearby town. I bet it's been closed for 15 years or more but it looks like everything is still there (infrastructure). What a waste for both gas production and wasted tax dollars on this abandoned land/facility.
Maybe we could all get together and buy the refinery and get it operational again. Charge just enough to cover operating cost, figure a pay increase for employees based on profit, (from top to bottom). Maybe some competition will change things.....
We could call it Crappie Oil!!!
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Birddog,
I pray that I may live to fish until my dying day. And when it comes to my last cast I then most humbly pray. When in the Lord's great landing net and peacefully asleep. That in His mercy I be judged, BIG ENOUGH TO KEEP.
Maybe we could all get together and buy the refinery and get it operational again. Charge just enough to cover operating cost, figure a pay increase for employees based on profit, (from top to bottom). Maybe some competition will change things.....
We could call it Crappie Oil!!!
I like It ! ! !
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I've "NEVER" told a lie in my life ! ! !
Maybe we could all get together and buy the refinery and get it operational again. Charge just enough to cover operating cost, figure a pay increase for employees based on profit, (from top to bottom). Maybe some competition will change things.....
We could call it Crappie Oil!!!
I suggested a similar thing a while back. I thought it would've been a good use for those "stimulus" checks. Nobody from Washington or Wall St. called me though.
Big E, I think You are dead on. They control supply and will have to be forced to build refineries. Steps can be taken. Cut tax breaks, special taxes imposed on them and virtually giving another party a contract to build refineries at big oils expense. strip away drilling rights top individual companies. Break up Exxon Mobile for being a monopoly and throw some competition in there. Pass legislation to keep big oil out of alternative fuel. and at the risk of sounding communist, force them by gun of U.S. military. I say that if this became an absolute crisis of National survival. They can be forced. What we need is leadership. That is something that is long gone in washington. CF
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When You gripe about the Farmer, don't talk with Your mouth full!!!
What do You mean there is water coming into the boat!
The rise and collapse of the SEMGroup and others like it are responsible for the wild fluctions in oil/gas prices.
Speculative market forces are the main cause of blame. Not supply and demand, no refineries, the Chinese, hurricane's in the Gulf, terrorists in Nigeria, etc......whatever excuse they want you to believe.
The rise and collapse of the SEMGroup and others like it are responsible for the wild fluctions in oil/gas prices.
Speculative market forces are the main cause of blame. Not supply and demand, no refineries, the Chinese, hurricane's in the Gulf, terrorists in Nigeria, etc......whatever excuse they want you to believe.
The Speculators are being blamed for everything right now. It is not the speculators fault. They are raising the price on the futures market because they are trading the future supply demand ratios. Looks like everything is gonna run out so the price goes way up. As soon as private reports start showing more stocks in a particular commodity than they had estimated, the market crashes to the new level ratio. What happened with crude was just that. Future supplies were looking like they were gonna be depleted at current demand levels and demand was starting to skyrocket so they ran up prices to curb demand. It worked and now the prices have fallen off some. Now they are waiting to see if we are picking demand back up. If not, it will fall again and continue to do so until demand starts to rise. This is called a bear market and looks as if crude is finally in one.
This particular energy company was hedging their expected product supply on the futures to protect their profits. A smart move. The problem is when You go through such a tremendous bull market and come close to doubling 80 dollar crude, You have to pay millions, maybe even billions to hedge your supply in energy futures. Most companies/businesses don't have the cash flow to invest in a hedge and have to borrow money from a bank. Since the credit crisis has begun, the banks have no money. So businesses can't hedge. So if you buy a commodity from a producer to refine or whatever and then the market falls 1/4 to 1/2 of its value before you can sell it, then you take a loss and possibly go out of business. Hedging allows you to take the opposite side of the futures market from your position with the physical price to allow you to lock in a profit. You will either get your profit from the physical product returns or take a loss on the physical but take the profit on the futures position. Doing this right will always keep you making a profit. It takes money though and lots of times the bank has to provide the money. Now the banks have no money because of careless lending caused by greed of the bankers and the Federal Government allowing them to make bogus loans.
The speculator allows you to hedge by taking the opposite side of your position in the futures market. The buyer has to have a seller and the seller always has to have a buyer. This is called liquidity and is essential to our free markets working.
The government and the banks are to blame here and it is their greed that got us into this crap. Not Speculators. The more speculators, the faster you will find true value of any traded commodity.
The government is pointing its fingers at speculators when it is their fault. They don't want to or ever do take responsibility for anything but will gladly give someone else the spotlight when it comes to a problem. Thats what they are doing now. Don't trust the government. The minute we all do is the minute We all become Communist. CF
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When You gripe about the Farmer, don't talk with Your mouth full!!!
What do You mean there is water coming into the boat!
Last edited by crappiefarmer : 08-26-2008 at 10:21 PM.
clean air act and gas refineries...
gas prices
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