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Gas Prices Drop: Big Oil Must be Sleeping

By Last Night in Little Rock, Section Huricanes Katrina and Rita
Posted on Sun Nov 27, 2005 at 03:55:10 PM EST
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by Last Night in Little Rock

I-40 Exit 125 @ US65, Conway AR: Exxon, Mobil, Shell, and Phillips 66: $1.849, and they've been that low since Wednesday.

That's slightly more than half the $3.599 I paid over Labor Day weekend. Crude oil was $56.34 last week, down from a high of $70.85 August 30.

The oil industry has been telling us that it was the price of crude and production capabilities hampered by Katrina that drove up prices. When I flew to Central New York Labor Day weekend where my cousin picked me up at the airport, she said that the price of gas rose 30 cents a gallon in the hour between when first she drove past that station and we drove back by it.

Gas station operators are like heroin dealers. They can raise the price at will, without regard to what they paid for what is in the tanks in the ground. We're all hooked and can't survive without it. I feel like I've been attacked after bending over for the soap in the prison shower.

Back during the Gulf War, 14 years ago when there was an alleged shortage, one local supplier jacked its prices up immediately. One or two others did, too. Most did not raise prices until they had to pay more. I still boycott those stations. I hold a consumer grudge.

The worst looters of all during Hurricane Katrina were from Big Oil and Halliburton. Nobody said "shoot 'em." Why? Looting in the name of war profiteering or capitalism is the "American Way." This is a wonderful country, if you have stock in the profiteers.

And so it goes....

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    Gas Prices Drop: Big Oil Must be Sleeping | 21 comments (21 topical)
    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#1)
    by roy on Sat Dec 17, 2005 at 01:06:28 PM EST
    Gas station operators are like heroin dealers. They can raise the price at will, without regard to what they paid for what is in the tanks in the ground.
    Wow. That's just... wow. But yes, they are like heroin dealers in the same sense heroin dealers are like any other retailer.
    We're all hooked and can't survive without it.
    Therefore the gas belongs to us, regardless of what the current "owner" wants in exchange?
    The worst looters of all during Hurricane Katrina were from Big Oil and Halliburton. Nobody said "shoot 'em." Why?
    Because "looting" is pretty much the exact opposite of trading. Which is what the oil companies due, albeit at terms you don't like very much. But here's a little exercise to help you feel better. Next time you're at the pump, ask yourself "Would I rather have $1.849, or one gallon of gas?". If you're answer is you'd rather have the gas, buy it. If you'd rather have the money, push your car into an alley and walk home. Either way, congratulations, you got what you wanted.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#2)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:06:28 PM EST
    How so beside the point. Whining because it's either higher than you think you should pay or lower because "they" gouged enough and are now letting some slack to the noose. The price is what the market will bear. The market is now worldwide, the supply/demand split is nil, and six bucks a gallon will teach a few lessons. Repetitively.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#3)
    by BigTex on Sat Dec 17, 2005 at 01:06:28 PM EST
    A huge portion of the problem is that we as a society only use 14% green energy (6% renewable and 8% nuke.) Back in the crisis in the 70's we ramped up production of green energy, and cut back energy use by about 5% and broke the embargo's back. Now, the process wouldn't be as easy, because of China and India buying fuel, but if, as a society we decided to do so, we could break the oil producing countrie's will and drive proces back to 22-27 a barrel like they once pushed for. Casting balme on the oil companies is an out. I have no doubt that collusion occurs on some level, but this is a problem we have let ourselves get into, and can work our way out of if we wanted to.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#4)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:06:28 PM EST
    Wow! Three commenters who get it. On TL no less! I am waiting for a post about how us north americans should pay as much as europeans do. The oil industry must have been running rampant over there in europe for decades.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#5)
    by roy on Sat Dec 17, 2005 at 01:06:28 PM EST
    Legal question for Last Night in Little Rock. A man walks into a store and walks out with an item priced at $5. He knows the price tag says $5. He leaves only $4 on the counter. Has he commited a crime? Does the answer hinge on some subtle technicality, or is it painfully obvious?

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#6)
    by Ernesto Del Mundo on Sat Dec 17, 2005 at 01:06:28 PM EST
    Looks like some folks really like getting it up the a-s-s, judging from the above. BigTex is on the mark. The monopoly has to be broken, and soon. Before six bucks a gallon gets here (probably by the end of next hurricane season).

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#7)
    by sarcastic unnamed one on Sat Dec 17, 2005 at 01:06:28 PM EST
    I wonder if the US and China decided to join forces and form an Oil Purchaser "cartel" if it'd have enough clout to dictate lower purchase prices from the suppliers.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#8)
    by roy on Sat Dec 17, 2005 at 01:06:28 PM EST
    I wonder if the US and China decided to join forces and form an Oil Purchaser "cartel" if it'd have enough clout to dictate lower purchase prices from the suppliers.
    The only weapon that would add is the threat of a boycot, which would be an obvious bluff. Either country's economy would quickly crash without foreign oil. When we've improved efficiency or alternative fuels to the point we don't depend on oil, we can threaten a boycot -- but then we won't care so much. And to arrange the cartel, the U.S. government would have to prohibit Americans from buying oil at the going rate -- which would be an obscene policy as people freeze for lack of heating fuel and lose their jobs for lack of transportation.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#9)
    by peacrevol on Sat Dec 17, 2005 at 01:06:28 PM EST
    To think of the recent gas price changes (hikes) logically, you have to consider what happened and the effects on the economy. The hurricanes in the Gulf Coast knocked some of the production off of its course. At the same time, people on the gulf coast were moving to and fro a little more than usual (ie evacuations, people returning home, contractors going to build, etc.) The supply was temporarily down due to the amount of gas that these companies could produce and the demand was temporarily up. That causes a price surge. Add that to the extra risk of the gas companies not knowing when it would be at full production again and you have a definite price increase. On top of that, we are experiencing some degree of inflation right now, which, generally, the gas companies can indicate as a leading indicator with continually higher prices. Given the reasons above, the price surges we saw at the pump should not be that surprising. Guessing at the equilibrium range within which it will eventually rest is a different story. I would imagine that we are probably pretty close to that equilibrium and would not expect to see prices drop much lower than they are right now. I think the days of buying a gallon of gasoline for less than $1.40 are over for good. The prices are changing with the times, just like everything else does.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#10)
    by sarcastic unnamed one on Sat Dec 17, 2005 at 01:06:28 PM EST
    roy, all good points and also the US oil-producers probably wouldn't want to go along with the gag either. However, I think it comes down to a classic buyer/seller "who needs the benefits of the transaction more?" scenerio, and I'm not sure it's as much of a one-way street as some may believe. A boycott and the resulting economic hardship on oil-producing nations would probably quickly foment rebellion in those nations. The House of Saud would likley fall quickly so they probably wouldn't want to take a chance on a boycott from such a massive buyer's cartel. I also don't think efficiencies or alt fuels will help much unless they reduce our foriegn oil dependency to tiny levels. If we massively reduced our FO dependency to, say, "just" 50% or even 25%, which 25% of our economy is disposable?

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#11)
    by kdog on Sat Dec 17, 2005 at 01:06:29 PM EST
    Hugo Chavez is on the case. We should be seeing the first shipments of reduced price Venezuelan gas to the South Bronx in the next few weeks, according to the NY Daily News. Hopefully, the program takes off and spreads to other working class areas. Most of us can afford the current price levels as long as we somewhat reduce our consumption. Anybody who has an SUV, or a house twice as big as they need has no right to complain. Waste and over-consumption is part of the problem, when we see high gas and oil prices the first place we should look is in the mirror. Of course, the oil companies gouged and took advantage of the situation, that is what capitalism is all about...making as much profit as you can get away with. There is no compassion, mercy, pity, or charity involved. Others are not so fortunate and are already at wits end. The Chavez program is a small ray of hope for them.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#12)
    by BigTex on Sat Dec 17, 2005 at 01:06:29 PM EST
    The hurricanes did different types of damage to the oil industry. Katrina briefly shut down some production in the Gulf. Rita did too. Rita came ashore where the refineries are. The refiners knew when they would be back up... that's my home area that was hit by Rita. Port Arthur is a very heavy refining area... at one point it accounted for 10% of world refining capability. They were saying in the immediate aftermath that they were largely undamaged and that it would be weeks, not months before they were back operating near full capicity. The problem is that the refining capibility is stretched too thin. When the refineries have to go down, for whatever reason other than routine maintence, it makes a mini crisis. Forming a cartel with China is not possible now for reasons mentioned above thread. A bigger question is even if it were possible, should it be done? If we really wanted to, we could convert to a coal system and have the oil producing countries bend to our will. Why depend on China to do what we can do if we want to? The solution is two fold, first we have to change to more renewable resources/nuclear energy and/or cut back consumption. This is relativly easy to do. A simple two point plan would go a significant amount to reducing our dependence on foreign oil. First, Detroit could start cranking out hybrid vehicles, and make large vehicles lighter to raise CAFE standards. In 2,000, transportation (road, air, water, and rail) uses 243 billion gallons of gasoline equivilent a year. Of that 167 billion gallon equivilent was sued for highway transportation. Of that, 2% was through alternative sources giving a reduction of 8 million barrels. 1 barrel = 42 gallons. If hybrid engines were standard, that would be a 7% fuel efficiency increase. That would be a savings of 11,690,000,000 gallons or 278 million barrels a year. Figure an average of $60/barrel and that's a reduction of $16+ billion a year in oil costs. Add to that more green sources of energy (including nukes) and then soon the oil cartel would take notice.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#13)
    by BigTex on Sat Dec 17, 2005 at 01:06:29 PM EST
    P.S. this would be a 7% decrease in oil imports.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#14)
    by sarcastic unnamed one on Sat Dec 17, 2005 at 01:06:29 PM EST
    "Add to that more green sources of energy (including nukes) and then soon the oil cartel would take notice." Yep, as a businessman, if I were part of the oil cartel, recognizing that significant changes in consumption from oil to coal would cost my customers trillions of $, cause significant economic and individual hardship and dislocation, and take decades to accomplish (which thereby increases dramatically the odds of successive congresses and white houses to fail to complete the changeover), I would raise my prices to offset my declining revenues. BigTex, what is your answer to this: If we massively reduced our FO dependency to, say, "just" 50% or even 25%, which 25% of our economy would you declare disposable? In my view, broad strokes, our FO dependance would need to be in the single digit %'s for us to have any real energy sovereignty.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#15)
    by BigTex on Sat Dec 17, 2005 at 01:06:29 PM EST
    We may not acieve total energy independence, but we could take steps in the direction. Double our nuclear power plants. That can be done in a 2-5 year range, and would be 8% cutback in oil use. We import 60% of our oil, so taking the entire amount of imports gives us a 11% reduction. Add the 7% standard hybrid, and we're up to 18% foreign oil reduction. Which at $60/barrel would be ~$40 billion a year in savings, enough to pay for the building of the nuke plants, and making hybrid vehicles standard. It's not 25%, but it is enough to see how the cartel reacts. Odds are it would put a dent in their bottom line, and get the price of oil back down so that we didn't continue "greening" our power sources.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#16)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:06:29 PM EST
    Kdog: Here is some reading on Chavez's deal: Venezuela's Oil Shenanigans Wash Up on American Shores On a scheme to hoodwink America's poor: Hugo Chavez enlists a Kennedy for his anti-U.S. campaign From the articles: In 1999, it was Chávez who stopped PDVSA from increasing shipments when other producers cut theirs. He then urged OPEC to reduce oil production to boost global prices and shelved plans to increase production capacity. His 2001 Hydrocarbons Law doubled royalties on foreign operators and restricted future private investment. Following a devastating oil workers strike in 2003, he took personal charge of a new national council that controls PDVSA. Today, oil prices are higher than they would be otherwise because of Chávez. His talk of suspending exports to some countries creates a climate of speculation, artificially raising prices as refiners scramble to secure suppliers. His deferrals of investment in field equipment have lowered production capacity, also contributing to hikes. Despite accusations at home that he is squandering public patrimony, Chávez still supplies Cuba’s Castro regime with 50,000 to 80,000 barrels of oil and oil derivatives per day, all at below-market prices and on easy credit, reportedly financed over 15 years at 2 percent interest. Cuba allegedly owes Venezuela more than $1 billion in arrears.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#17)
    by sarcastic unnamed one on Sat Dec 17, 2005 at 01:06:29 PM EST
    BigTex, I'm all for making as much nuke power/hybrids as we can. It's the right thing to do. That said, yes maybe we could double our nukes in 2-5 years, but likely it would take 5 to 10x as long. Ditto for hybrids. Given that time frame it is very likely that worldwide demand will have escalated dramatically despite us, and thus make our attempt at putting a "dent" in their bottom line completely ineffective. Again, I think we should invest in nukes/hybrids but should not expect it to significantly affect the prices of mid-east oil producers. In fact, considering their economic power, they could retaliate by threatening to raise our prices if we embarked on a significant consumption reduction.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#18)
    by BigTex on Sat Dec 17, 2005 at 01:06:29 PM EST
    In fact, considering their economic power, they could retaliate by threatening to raise our prices if we embarked on a significant consumption reduction.
    They might, but they would have to be unified in order to make the threat real. It is a good concern, so if we are going to go green we need to go full throttle. We couldn't do this as an energy independence measure, but we could do it as a pollution reduction measure piece by piece. Start with hybrids. That knocks out 7% of imports, but would probablly not draw cartel ire because it is only an incrimental step and the drop in need could be balanced out by a cut in production. They keep their high prices, but we start the weaning. The cartel may even support the measure because it allows them to cut production back without any political reprecussions. Then we do the nukes. We pass a statute or promulgate a reg saying that such and such areas of high pollution need to switch over to nuclear power. That gets the increase in nuke power in the time frame. We can couch it as an effort to reduce global warming or some such measure. Once agiain, it's not seen as an economis stab at the cartel. It may raise concerns, but likely will not draw any retaliatory measure. If we couched it as a way to reduce carbon emissions, that would gain the support of a chunk of the world, and would act as an extra safeguard since would pressure would limit how much the cartel could inflate prices by reducing supply. With the gradual implementation of wind power at the same time we could achieve 20% reduction in imports, and have global support for doing so. The cartel may be displeased, to keep it polite, but in the face of broad international pressure, it is unlikely they would be willing to do anything significant about it. Prices would drop. Not as much as I would like to see, but there would be a drop, or at the worst a leveling off of prices. But having said that, I doubt that we have the will to do so as a nation.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#19)
    by sarcastic unnamed one on Sat Dec 17, 2005 at 01:06:29 PM EST
    Sounds good to me BigTex.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#20)
    by roy on Sat Dec 17, 2005 at 01:06:29 PM EST
    I'm all for nuke plants, assuming we regulate the hell out of the safety systems (my hands-off libertarianism doesn't extend to plants that can melt down and destroy a city). The cost per watt is lower than any fossil fuel, indicating they grow the economy faster than convential plants over the long run. As for hybrids, here's my hunch for the future: instead of driving gas-only cars that average 30MPG and do 0-60MPH in 10 seconds, we'll be driving hybrids that average 30MPG and do 0-60MPH in 8 seconds. See, we've always been able to buy cars that were more fuel-efficient than an SUV or Mustang. Plus, the efficient gas-only cars are actually cheaper up front and in the long term. Hybrids offer only long-term savings. We buy inefficient cars because we like them. The fun, convenience, and sex appeal is worth the extra money. Those who currently want efficient cars can buy a cheap Geo Metro, or a nice Civic, or a quite posh VW Jetta TDI. They may want a hybrid in the future if they don't already have one. Those who want a SUV or Mustang won't want a hybrid, or they'll want a powerful hybrid that won't actually save gas.

    Re: Gas Prices Drop: Big Oil Must be Sleeping (none / 0) (#21)
    by jimakaPPJ on Sat Dec 17, 2005 at 01:06:29 PM EST
    Big Tex - I agree we need to work on other energy sources, but:
    One barrel of oil-42 gallons refiners usually can get up to about 20-24 gallons(varies due to type of crude) of gasoline(when cracking process is used, and the residual will make 1-2 gallons of wasted product(due to cracking process), and remaining will make lube oils, etc. 1 bbl of oil can make 18-22 gallons of diesel, and remainder will make heavy oil, lube oils, etc, with less wasted crude, not to mention that much less energy is required to make diesel than gasoline(a heater and a centrifuge is all that is needed to separate the diesel from the crude) so it is pretty much a wash or slightly in favor of diesel.
    Link So you need to go back take a look at your numbers. Basically speaking, the number of barrels used/saved will be cut by half. As for the "renewable," I keep looking, but I have never seen figures/estimates on how much diesel can be produced from a bushel of "soy beans" (or others) and how many bushels per acre on average. Anyone have these? Alcohol can be produced from almost any biomass, but the truth is in how efficiently you can convert, so the sources aren't infinite. Plus, alcohol produces less power, so as you add it to gas, performance and mileage go down. Sun power requires photo cells which are expenses and have a definite use life. In addition, you have to a storage system, which is batteries, which are costly, dangerous, require routine maintenance, ventilation, and replacement. All of this to reduce electric use by the home owner and charge a battery in a car. Wind power suffers the same storage problem as sun power, plus it is noisy, as anyone who has ever been around a windmill knows. It gets worse as size increases, as anyone who has ever been to Boone, NC knows. The windmill/generator also will require maintenance and is expensive. The current favorite is hydrogen/fuel cells.. The ones I have seen are slow, small and expensive. Plus, I have seen no information on the reliability of portable high pressure storage systems. They seem more suitable for Europe.... Remember, Germany is only slightly larger than Wisconsin. Basically, There Aint No Such Thing As A Free Lunch… TANSTAFL (per Heinlien). If I was King I would immediately start pouring money into fusion research, building nukes and drilling for oil every place in the US I thought I could find it. Better distraught animals than old ladies eating cat food so they can pay their utility bill. If this be harsh, okay fine. As to pressuring the cartel, I think torching off a nuke about 800 miles SE of southwestern coast of SA might be helpful in remind them they live solely on our good will.

    Gas Prices Drop: Big Oil Must be Sleeping | 21 comments (21 topical)