Riddle me this.....

[Roy]

Originally Posted by JPalmer

Speculators.

Alex Mills, president of the Texas Alliance of Energy Producers, said to the Times Record News (Wichita Falls) that "“It is the speculators on the futures market that are causing the prices at the pump to go up. They are gambling that the prices of crude will increase, and gasoline, too. The speculators in the commodity markets are speculating they will rise in the future. They are buying the contracts at higher prices than what the industry indicators are showing. They are bidding up the price.”

Now... does that mean that oil co. insiders aren't pushing the speculators to put higher and higher bids SO THAT the price of crude/gas/heating oil will rise?

Like my magic 8 ball would say... Prospect Good

Ding Ding!

[kenw]

Originally Posted by photonewb

what's worse is that law makers want to add more taxes to your gas. This was on the local news a couple of weeks ago that apparently they're trying to work in a new 10 cent federal tax, and a 7 cent state tax. This is PER gallon mind you. The excuse is that they don't have the money to perform maintenance etc...but my question is what about the taxes that have been sitting on this gas that aren't needed anymore because the reason they were added has long since been paid off!

not sure i follow you on this one. The fuel taxes are a per gallon, not % as is almost every other "sales" tax and that's part of the problem. If we went to a % sales tax it would have the effect of slowing consumption as prices rise, but would have less revenue decrease for the gov't.

It would also (not always a positive for us consumers) result in, as inflation increased the cost of the fuel, the tax (as a %) also going up. Yes, it would be a so-called double hit. But this helps pay for the also increasing cost of highways and bridges.

But we already have the double hit on everything else: as milk goes up, so does the tax since it is a %. A double-whammy that we have been ok with for years. Why is it ok on milk but not gasoline?

The things that the fuel tax pays for have NEVER been paid off, simply because we still need more and more freeways, bridges and such. And worse, we now need to replace a few 100,000 bridges that are falling apart (like the one up north that fell into the Mississippi River). These cost money and the predominant source of funds for these ever-costlier projects is the gasoline fuel tax.

And when you get under those highway bridges to take pics, don't look too closely. You may not like what you see......

[iCe]

Now... does that mean that oil co. insiders aren't pushing the speculators to put higher and higher bids SO THAT the price of crude/gas/heating oil will rise?

The simple answer is no. They don't wield that kind of power. Now if you are talking about board of directors? Yes. Probably so. If not directly, through their contacts. The Board of Directors is not typically comprised of people that know what the oil and gas business is about. They are "financial types".

I've watched what happens when you get a good CEO, that knows how to sell shtuff for shinola, meet with prospective stock holders and convince them to buy the company stock. That's a pretty amazing process. Are there SHAREHOLDERS out there with the power to manipulate the markets? Yes, I think so. If the average consumers eye is on the "evil oil company CEO" then it's not on the real manipulators of the markets.

There are two pov's in the oil / gas business (obviously there are more than that but lets keep this simple for now). The little guy and the big guy have slightly differing modus operandi but not that different insomuch as how they decide if a project is a go or not. Both have investors to please, though some small companies are not listed on any stock exchange. Their investors are private. Both have capital projects to pay for. Both have an R.O.I. (return on investment) benchmark that makes or breaks a project. The major oil companies ROI is a much higher number than the little guys. For one thing they are typically over-bloated pigs of a company that have a huge overhead to add to each projects capital cost estimate. For another, they are dead in the center of regulatory agency radar and they have to add a lot of money up front to cover the various requirements of numerous regulatory agencies. The little guy is out there on the fringe of that radar and while they can't get away with out and out illegal activity, their pockets aren't deep enough to expend the energy on catching them and fining them. I can guarantee you that when prices were high everyone, large and small, was doing capital projects that are now not paying off. The more prudent companies did not raise their cap limit and they will be fine. More prudent is generally a trait of the smaller companies that have scrapped and fought to stay afloat. The employees are typically more protective of their company and therefore more cost conscious. They are the people that buy assets at a discount from the large companies when commodity pricing is low. At the current pricing, there are small companies out there that are buying assets that the big boys depreciated long ago and can't afford to operate. The asset makes money but not when all of the big-boy overhead is added in.

I could ramble on about this all day long. The short version is that it's not the "evil oil company" that's driving the boat. It's much more complex than that.

[Cajungaltx]

Originally Posted by Wes

The price of oil just closed below $35 today. Why is the price of gas going up?

Please do not turn this into any kind of political discussion. I'm genuinely curious. I was always under the impression that the price of gas was tied to the price of oil. As far as I know, there are no refinery shutdowns or anything, so therefore.... I'm perplexed.

Honestly - while my entire upbringing was around nothing but offshore hands, rough necks, and company men (my dad) - the fact that it is going up, isn't an issue - I 'want' it to go up.

In fact, I'm HAPPY it's going up. It needs to be up around the $2/gallon mark for my comfort level.

The price of gas is tied to oil - yes... BUT... the cost of refining said crude oil varies... AND as Don so nicely mentioned - there is actually a shortage of 'land' storage, so there are a few (I think I read 5?) super tankers that are just floating around in the ocean because they want the price to go up, so that when they 'land' the cargo has more value than it currently does. Sneaky... maybe... but I like the radio discussion.... profit IS the name of the game. And as long as companies CONTINUE to make profit... they will continue to stay in business, etc. I have yet to be employed by a broke man...

I grew up during a time when there was 'no' work in the offshore industries...mid 80's or so I think... I was a teenager... and it was rough for a couple of years. My family really struggled... thank God we lived on a farm where there was walking steak, and growing food in the ground... but it was rough....they used credit cards alot....and we sold our horses....and a few tractors, and a dozer....and things like starting school became an issue. A serious one because school requires clothes and school supplies... bought with cash they didn't have. So I wore quite a bit of hand me downs from my older brothers... it sucked... seriously. I was the only girl in a family of 8 boys... and wranglers just don't fit a girl like they do a guy...

I didn't 'know' how bad it was until someone mentioned that my dad hadn't worked in over 2 years... once I was an adult. As a teenager - my parents were 'constantly' busy... making ends meet... and on a farm there is ALWAYS work. The fact that dad was home was cool... we had food, and life was fairly normal... but it was VERY difficult for them making it work.

Ithink that $2/gallon keeps the economy stable as well.. at least TEXAS economy... We (especially here in Houston) are under a nice little 'umbrella' called 'big oil'.... 40% of our economy here is attached to that particular industry...which isn't decimating if it struggles... but it will hurt. So I like to see it make money... LOTS of money...and they can pay their CEO's whatever the bloody hell they want to... if they are helping that industry make money all the more power to them.

Yes - if the rest of the countries economy goes to crap - it sucks ...but for Texas... $2/gallon oil is not a bad thing... it will keep 'our' economy moving. And as self-centered as I am... that's a good thing.... employed people hire photographers...

As for the taxes... DON'T GET ME STARTED.... I tried to figure out once how much I paid, income tax, sales tax, property tax, business property tax...all of it... I gave up out of sheer frustration.. I pay taxes on what I make, taxes on what I buy, and taxes on what I own... death & taxes dude... death & taxes due. For those who are annoyed about the property tax issue - google CLOUT (citizens lower our unfair taxes (property)...

[iCe]

One other point- Oil and Natural Gas prices seem like they should be tied together, and in some ways they are, but they don't follow each other like you would think that they would.

Natural Gas is made up of Methane, Ethane, Propane, Butane (iso and normal), Pentane (iso and normal), and Hexanes plus (lots and lots of CnH2n+2's in Natural Gas.) The stuff that you get at your home is mostly Methane with a little Ethane. The bulk of the Ethane, etc is sent to be further refined or processed. The plastic industry uses ethane as a feedstock. Propane is used for a lot of other things besides fuel. Zantac is made, in part, from a high purity propane feedstock for instance. And... lets not forget that West Texas light crude (sour and sweet) or any light crude for that matter, comes from Natural gas wells, for the most part. Oil and Gas are different versions of the same stuff. So... in theory they should be priced the same, if all you look at is the composition. That's not how it works. What it's used for, how it's transported, what it's environmental impact is (as it relates to regulations and fines) if it gets out, and investor perception, to name a few things, define the price.

[kenw]

yes, but moreso, the demand for a product determines the price. Otherwise we would pay 4 cents for a bottle of water.

[iCe]

Originally Posted by kenw

yes, but moreso, the demand for a product determines the price. Otherwise we would pay 4 cents for a bottle of water.

If not for the wildly fluctuating prices that we've seen over the last 12 months I would agree. Demand hasn't risen or declined enough to cause that to happen. That was the result of influence from the financial sector.

[nastytrucker]

If politicians (all of them on both sides) would quit sticking their hand in the cookie jar (highway fuel taxes) to fund pork barrel spending projects that are not related to highway use, then we would have all the highway money we need.

[kenw]

Michael, remember that PERCEIVED demand often has the same end results as REAL demand. Speculation is all about PERCEIVED demand, as viewed thru someone's dim crystal ball.

It's all about supply and demand, always has been and always will be. The issues that make it seem otherwise are in reality affecting demand or supply (or the perception of them at some future point; ie, "speculation").

Lack of financing for new wells (for example) decreases supply and therefore increases price. (the situation now)

New emerging markets hungry for energy (India, China) increase demand so the price goes up. (the situation last year)

As economies collapse from unrealistic credit extensions, the demand for fuel to power those economies levels or drops, so the price drops. India and China were in effect driving the increases, and now have collapsed worse than the USA.

But love those low prices now, they won't be around forever. We are in a glut market and once that glut dries up, fuel will increase. Altho probably not at the rate it did this past year as the booming economies that served to increase the demand will take a longer time to recover. Remember, we dealing with BOTH high supply and low demand at the moment. Changing either one has an impact. Changing both has a bigger/faster impact.

cautionary reading: http://en.wikipedia.org/wiki/Supply_and_demand

OT: is it just me or is Wiki collapsing on itself?

[iCe]

Ken- Excellent post... I agree now that I see the word "perceived"