Plant & Facilities Engineering

Money talks? Absolutely, positively correct.

Oil companies are publicly held entities. If the pricing strategy₁ of a particular fuel producer yields lower stock returns than competitors, most stockholders will do one of two things:
A) Find the rascal board members responsible for the strategy and can 'em
B) Move my investment elsewhere

As a corporate executive for this fuel producer:
A) I like my cushy job and don't want to get canned
B) Capital (money) is the blood of the business. Without it, I am sunk anyway

If this means product gets sold in Australia instead of the USA, so be it.

1. One such pricing strategy might be to keep the fuel prices low and sell here in the USA, so my friends and neighbors can get a fair shake at the pumps.

Don't people have friends and neighbours in Australia, then?

Well of course they do. And South Korea, Germany, Costa Rica, Samoa, Japan, UK...

The long and the short of it: Friends are friends, but money is money.

Why? We sell it for more than it costs us to make it from crude. It is called profit.

Was that a challenge question?

You are correct, we send crude to your country and purchase fuel from you, eventhough we have refineries here, they don't yield the volume required by us; and don't make me start on how are they administered...

This is nothing new, and not exclusive to petroleum products...In many cases it's cheaper logistically to trade commodities at various stages of processing, back and forth across borders...You can bet if we're exporting a finished product we're importing net quantities well in excess of any exported...

For the same reason they want to build a pipeline from the oil fields in Canada to the gulf of Mexico. To sell to the highest bidder $$$$$$$$. Meanwhile we subsidize the project and assume all the environmental risks because we are patsies.

We subsidise it too, because our politicians do not work for us. (I don't think any politician ever worked for the lower downs) Here is a question. Why do gas companies continue to frack faster and faster as the price of gas goes down? Are they trying to drive the other frack companies out of business by pushing the price and margins lower? I know they only have a few years until the frack fluids and various materials coming up from 2 miles under start making groundwater undrinkable but still, I find it curious. In a free market, with a non renewable resource, isn't it better to harvest it slower and keep the price high? From a country perspective, I also find it curious that Canada is in such a rush to get rid of the stuff as cheap as possible. Our Prime Minister almost had a fit when Obama was a bit slow on signing off on the pipeline. He wants to sell it to China too. But if he has a globe in his office, (probably not, he believes that the earth was created 6000 years ago) he would see that China is actually a long way away and much nearer the middle east and the gas fields of Russia that here. He is also probably ready to send the cavalry to drive the First Nations off the land to clear the way for his oil pipe to China. (Many are opposing the pipeline). He is also mad as hell about foreign environmentalists trying to stop his pipeline to China. (Going to change the laws to revoke the charitable status of Canadian environmental groups for starters). Even with global warming, we still expect snow in winter in 50 years. Will there be any oil to keep us warm?

Sadly, Canada's government is just as insane as ours. You can't talk conservation of the environment to a conservative who has been breathing so much FOXygen that they don't even realize the laissez faire economics model won't suddenly make everything alright if we can just get taxes down to zero and pare down the role of government to running a military so we can go kill little brown people in third world countries that won't bow down to the international financial policies promulgated by the banks. Frankly, I think the only solution is to hope a meteor comes soon and set us back a millennia or two.

That meteor is probably going to be the national debt. ;-)

I was hoping to get video. Can't really film that. I prefer the meteor.

Our Politicians don't have any say in the matter. The Oil Companies are above the law and above prosecution. CASE IN POINT: Standard Oil in New Jersey was selling fuel to Nazi Germany during WWII. US Government could not touch them even though Standard Oil was blantantly treasonous. The Rothchilds, Vanderbilts, Morgans...They all have their spoiled rich kid brats but you don't hear about them...Gee, I wonder why?$$$$ They are a governmental entity all their own and they are who make our Society a Facist society instead of a Democracy. They do as they dam well please. We had prices up to $5/gal and the oil companies bragging about having the highest profit margins they've ever enjoyed. Congress launched a probe for the oil companies to justify their high prices since they are having record breaking profit margins. That was it, just one mention of that, never another word and gas prices are still bouncing up and down between $3.50 and $5/gal.

coal fired power plants are having a hard time meeting pollution standards. many are going to switch over to to natural gas instead of investing more mony on new scubbers. that will push up the price of marcelles gas. invest now.

Gee, whiz. Why would US export anything at all?!? It is called commerce, international trade etc. Participate in a semester of Economics101, or at least audit it, Sherlock.

But economic calculations are complex, so get the bare bottom basics first.

This is correct. I am absolutely amazed that so few people have even a basic understanding of economics. There is a world market for oil, but spot markets can fluctuate widely. These fluctuations open up opportunities for profit, which is why all people risk their capital in business. Selling oil from he US at a higher price, and buying foreign oil more cheaply makes for profits, as well as benefitting Americans at the pump. I suppose it would be a complete waste of time to also mention the advantages of maintaining a stable world market, or how we benefit from our customers being able to maintain their own economies, so that they can continue to buy our products.

Question. Why do countries buy the more expensive US oil, if there is cheaper available?

Have you looked at the US balance of payments deficit recently? With the exception of military hardware, grain, software and a few civilian aircraft, fuel is one of the few things that you have to export that the rest of the world wants to buy. The US economy is in deep trouble! Stop exporting fuel and it is not a matter of if it will collapse, but when it will collapse.

Can you guarantee that all or even a major portion of that money is going to flow into the US economy? I'm betting not.

If not, then that simply means that the US is not a good investment.

What does that tell you?

However, as messed up as you think the US is, the US is where the investment dollars are going (mostly) as well as people wishing to immigrate.

Wealth = Energy

Energy can neither be created or destroyed.

Once we were more wealthy than now (and by we, I mean us common folk).

Now a big chunk of our wealth (worldwide) has mysteriously gone away somewhere.

Now if wealth is energy, and energy cannot be destroyed...

Where did it go?

So if banks only make money on selling debt.

And we now owe way more debt to the banks than we did before.

Could there be some kind of correlation here?

Well, economics is not my strong point as poetry is not yours. ;-)

However, the whole thing is a lot more complex than what you outlined and I don't think your outline is on target.

Part of the problem is a trade imbalance. That is, we seem to have a love for products from China (irrespective of quality or safety) as does the rest of the world. So competing with a country that does not play well economically with others (i.e., China's currency floats relative to the rest of the world) is hard.

Part of the problem is that we (as a society) have a social sweet tooth for government handouts and services that we really can't afford. Our government needs to borrow 40% of what it spends budget wise.

Part of the problem is a very weak economy, brought on, in part, by government social engineering programs that created a lending crises. That is, encouraging (if not forcing) lending institutions to loan money to individuals and corporations that would normally not have access to loans because they were at a very poor risk of being able to repay those loans.

That problem is not unique to just us. The rest of the world is in a very similar situation for similar reasons. Europe's woes may be larger than our own. Because we are all economically interdependent on each other it is like disturbing one vane of a hanging mobile. When one vane shakes, so too does the rest.

Lastly, your claim that wealth = energy and energy can not be created nor destroyed is a total fallacy.

While it may be true that in the world of physics energy can not be created nor destroyed, there is no absolute connection between energy and wealth.

If you simply pick up some history books you can see that wealth can be created and destroyed and has been many times in the past.

I agree the trade imbalances are horrific.

When I refer to wealth, I mean material wealth, not the intangible wealth of Wall Street that comes and goes in the blink of an eye. Material wealth that was created by actual physical processes such as converting raw materials to products by investing time and energy.

Since the advent of the industrial revolution we have had the means to produce adequate surplus for every man woman or child on earth. Anyone who argues from the neoclassical view point that those who don't or can't work should just depend on private charity fails to understand that no man is born free and clear with no debt to the thousands of generations of humans that have created a civilization that make all that we do and have possible.

If we didn't waste untold trillions of dollars on destroying the planet with war and we were sophisticated enough as a race to not let greed destroy us instead of worship it as the Hayek-Friedman-Rand cult do, it would be possible to coexist without destroying everything in our path.

True, I am no economist either, but if you investigate what some of the modern post Keynesian economists are saying, you will find that the neoclassical religion of economics is not the only belief system in the book. Keep in mind that none of economics is a true science, it's all based on deductive reasoning which is not a scientific method. No proofs, just one man's opinion over another's, just like religion.

And if neo-classical philosophy works, then why hasn't 40 years of progress in that direction worked so far? When should we expect it to kick in? When taxes are zero and the only function of government is to go kill little brown people that don't go along with our notion of how the world should work?

But none of this really matters. The human genome is only suited for survival in the jungle. We are skyrocketing into oblivion faster than we have the ability to evolve a solution because the fault lies in our basic nature and that we simply can't or worse, arrogantly do not want to change.

Material wealth's value fluctuates with its demand. So, material wealth is just as intangible as Wall Street numbers.

You can spend enormous amounts of time and energy creating a widget, but if that widget does nothing to solve a tangible problem for others it is doomed to the flop bin and the only value it carries is the lessons learned (if any) in its production.

There is a balance between social services and charity. Part of our social problem is we have had a government that has been grooming a populous to believe and expect that others owe them something. Not only has this been going on for scores and scores of years, it is written in every page and chapter of history and it keeps repeating itself.

We have been wasting untold amounts of energy, wealth, and life on wars ever since the dawn of time. The carnage is not new to the 20th Century. Nothing has changed except the tools we have at our disposal.

You can opine for social change in that department all you want. If you read history you will find that there has always been someone complaining about war from page one. Your choice is to either join that chorus or set a path to help curb it. I serious doubt that we will ever in the foreseeable future abandon war, crime, and hate, so we just have to mitigate it the best we can.

I am of the belief that free markets work every time they are tried. The problem with free markets is government intervention. Unfortunately, neither free markets and governments can exist without each other. The whole trick is simply getting the balance right so that both work to in synergy.

Now we have devolved the argument down to the crux of the problem from my perspective - politics.

Our forefathers understood quite well that politics is not so much a science. It is difficult to prove anything in politics, only sway opinions. That is why they created a Left and Right party - the two wings and both wings are needed to fly.

Unfortunately, both parties have been wildly polarized (some would argue that one party more than the other). However, it is difficult to fly when you have dysfunctional wings.

If you choose to do more than complain, this is where the good work resides. It is less important as to whether your opinions are right or wrong as it is that you are an active part of the process.

There is plenty of oil in the world.Just like there are plenty of diamonds.The market is controlled to maximize profits.There are billions of barrels of un-drilled reserves here in the USA.How do they know, why haven't they drilled them?

They know because of the seismic results accumulated over the years.Why haven't they drilled them? Because whoever finishes the game with the most oil wins.

Use up all of the middle eastern oil as soon a possible.Some are already almost pumped dry.The level is dropping every day.

When their supply dries up, who will be the new OPEC?

See where this game plan is going?

As for politician's, there is only one type of politician that is successful:

A politician that stays bought.

The word itself should be sufficient to the wise:

POLY means Many, TICKS means Blood Sucking Parasites.

Combine the two, and you get POLITICIAN.

IMHO(one of 7Gig).

I would like to see an effective argument for post #16.

Don't hold your breath.

A piece of that argument is that the US companies that refine the bitumen into diesel, gasoline, and other products in demand thereby make use of large refinery capacity tailored to heavy, metal laden crude from Venzuela, due to run out of contracts in a few years. These refineries paid for themselves decades ago, and this replacement crude source would keep the cash cows producing easy profits, rather than being idled or scrapped.

In short, there are profits available by refining this difficult petroleum in otherwise obsolete facilities. Canadians sell the oil, USA gets paid for refining.

USA gets paid? Do you know that for a fact? Large multinational corporations perhaps?

You are correct. This is private sector funds (excluding taxes).

Uh, no. Americans pay for the refineries but don't own them. We pay the shipping we also don't own-often enough to buy a ship outright. We pay to 'maintain' the refineries we paid for but don't own, as well as paying for all repairs that we already paid for on the equipment we paid for that we don't own. AND the we pay inspectors to accept pay from the oilmen to give passes on susbstandard equipment and process management so that we can pay yet again in the next planned 'accident'. The point is, we'd be going after that oil whether it be sweet or sour, crude or shale. 100,000 percent markup to start, on products that we purchase in negotiation that we assume all costs for--BEFORE turning it over to the oilmen--assures that people are being paid well to keep things as they are. It's only good business.

"Every new financial instrument is inevitably proven to be anything but." John Kenneth Galbraith

I am not sure post #16 is really a claim or argument, but I think the answer is that oil is sold on contracts of quantity over time at some set price per unit.

What you and I see is the fluctuating price of a unit of oil on a day by day basis. However, that is not how oil is bought and sold. It is bought and sold on large contracts based, in part, by speculation of market demand.

In some ways you might think of it like your home mortgage. The interest rate for a home mortgage varies day to day and on the type of loan. At some point you lock in to a rate or a rate plan. Once you lock in your rate is set according to the contract and does not necessarily have anything to do with day to day rate fluctuations or trends from that point onward.

Other factors that drive where people, governments, or companies buy their oil have to do with the grade of the crude, transport costs, geopolitics, and the expected availability of that oil.

They are not buying crude oil, they are buying refined products.

I wonder. Europe's price for gas is simply not just $9. In France 70% of the price of gasoline paid at the pump is taxes.

While economics may drive the situation of where to sell, your example of the $4 price of gas compared to $9 is misleading.

Yep that is correct. Norway is taxed 5.50 per litre (4.88 petro tax and 0.88 CO2 tax). http://en.wikipedia.org/wiki/Fuel_tax Oslo, Norway is the one that had 9.28USD per gallon for petro. currently 1.66 USD=10 NOK. They are taxed 0.913 USD per litre. That comes to 3.456 USD per gallon in taxes. The user pays 5.83USD pre-tax at the pump per gallon of petro.

Indiana has 3.299 USD per gallon. We pay 0.18 USD state tax and 0.184 USD in federal tax. The user pays 2.935 USD pre-tax per gallon of gasoline. http://www.progress.org/2003/energy22.htm talks about all of the US tax credits that are given to oil companies. Just remember that the oil companies get these credits no matter where they sell the gasoline.

So, yes my original numbers were a little inflated. Exactly how much, no will ever know or take the time to figure it out because the oil companies do not want us to know how much they are making off of our government by taking credits and selling the gas overseas.

Here is an excellent write up on the issues around Keystone XL. http://en.wikipedia.org/wiki/Keystone_Pipeline#Keystone_XL

I am thinking that since these oil companies are publicly traded companies that those tax credits as well as taxes paid, gross and net profits are all publicly available by law.

I can really care less that these oil companies make 8% to 12% yearly profit. That is ho-hum in the business world. I just find it disgusting when oil companies are used as a tool for class warfare on the political front. Apparently so do most people. A recent poll showed something like 2% of those polled felt class divide is a major cause for concern. That same poll taken by politicians would probably be 98%.

Amen!

Its also about cess taxes and other such things. It might be cheaper to produce the crude oil but the taxation on the refining processes might drive out margins. The same case might not exist in other countries and that is why fuel is exported. Same is the case for imports. The oil & gas industry is like a spiderweb network now with just too many points if you do not take care in keeping track.

When a question is:"Why do they..."or "Why don't they..." the answer is usually money, and the solution is simple:Follow the money.