Lower gas prices

Hey,

Can't we all just ride our bikes and get along?

I don't know much about the oil industry or gas so I'm totally out of the loop on this. But I do know we have a finite amount of resources in oil but we do have alternatives for fuel. What about all that surplus corn those Indiana farmers keep growing? Can't we turn that into ethanol?

September 22 is World Car Free Day. Just sayin'...

www.worldcarfree.net

PLEASE don't buy into this - the same thing circulates at least once a year, and I don't think it ever does much good.

Just FYI - I used to work for ExxonMobil and the amount of profit they make off each gallon of gas is approximately a whopping 4 CENTS.  They aren't going to decrease gas station prices by a dollar just because of some dippy email floating around - they'd shut down the refineries before they'd lose that much money on an operation that big. They have to raise gas prices with oil prices because when oil prices go up, refining costs increase likewise.  They have to regain the money they put into the process somehow - they therefore charge more at the pump.

I'm not pro oil company or anything (there's a reason I don't work there anymore!!), but everytime I see this thing I cringe at it - it's BS. Seriously.

They show record profits because while the price of oil increases, the cost to the oil company to produce a barrel of oil remains the same for a given oil field.  For instance, if a company in the US produces a barrel of crude in the Gulf of Mexico for $19/bbl, they're thrilled when the price of oil skyrockets to $71/bbl.  They can sell it in a global market at the price because there is sufficient demand at that price.  However, a refinery in Houston also has to buy crude at that price, which increases their production cost of gasoline, hence the high gas prices.

These companies make their big bucks selling crude oil.  Gasoline is not the main source of those record profits.  Take a look at EM's profits for a given year - the majority of earnings are usually in the exploration/production side of the business.  In 2004, 65% of EM's earnings came from the upstream business (production of crude oil), while only 20% of earnings came from the downstream business (gasoline, motor oil, etc.).  Earnings from the upstream business increased ~40% from 2002 due to increased oil prices - hence the "record" earnings.

Hope I don't sound too cranky here -  I just want people to understand why a big oil company could never sell gas for $1.50/gallon with crude selling at $71/bbl.  They would simply lose too much money.

Some things to think about. I have no answers though.

Retail fuel prices are currently increasing at a rate unheard of in U.S. history. Now it is true that as a nation we are huge consumers of this fuel, but as a nation we are also huge extracters, transporters and refiners of it. If you look at the price of fuel in producing/refining vs. non-producing/refining nations what do you see? That's quite a difference. Now limit this to include only politically stable nations. Hmmm.

How much did fuel prices increase last quarter? Did demand increase by that much?  Did the supply decrease by that much? Did the cost of refining it and delivering it increase that much? Did our ability to deliver decrease?  Supply and demand were relatively stable and were in line with what had been predicted months earlier.

So why did prices increase so much? I know that oil company profits were at record highs. Where did the profits go? Who got all that additional money that was paid by consumers? Did that translate to record dividends? Record investment in R&D and exploration? Record executive compensation? Record tax breaks and giveaways in the latest energy bill?

I would think that any market with spiralling prices but stable supply and demand would have something seriously wrong with it.

And I know supply took a big hit this week, but I'm talking about the past 6 months.