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FIB - Scams 101 - Ye Olde Archives

Re: Question regarding fuel prices

Posted By: Larry Foster
Friday, 21 April 2006, at 9:03 p.m.

In Response To: Question regarding fuel prices (Jim Wilson)

Hi, Jim.
I spent 23 years in the industry and may be able to shed some facts on this emotional debate.
Following is some history and, probably, way more than you wanted to know.This is a fairly complex subject and many people respond by what they see without knowing this.
I also am including a response I sent to a friend who sent me the boycott Exxon/Mobil letter.
First, to answer your supply-demand question.
Traditionally, gasoline (and oil)was regulated by the government During that time, prices moved very little over year's time. Most of the time, any increases were caused by increases in taxes. The blame for the 2 "oil shortages" of the 1970's went to the fact that there was no economic incentive to explore for more crude.
In 1981 Reagan deregulated the oil industry and, at first, that seemed like a big mistake. However,after a year or 2 of fairly high prices, the trend was for prices to fall and that continued (generally) until the last year or so.
Sometime in the latter part of the 1980's petroleum products were permitted to be traded on the commodity markets. Anyone could "speculate" that could afford to buy "contracts". A contract was for 1000 barrels or 42,000 gallons.
One effect of this was increased volatility in pricing. Rumors or fears about international conditions could cause a rapid jump in prices.
The unsettled state of international affairs and the present fear of reliable oil supplies have a great deal to do with present pricing.
Some more info is included in this response I send out to all my friends who forward the latest "feel good" topic.

"I see this every year when prices go up. The problems are much more complicated than just the greed of Exxon/Mobil.
I have some qualification to speak on this since I spent 23 years in the industry.

I dislike Big Oil as much as anyone. When I started in oil in 1981, there were many, many oil companies; now there are really only about 5. The lack of competition is not good but that's not the main cause of this problem. A great deal of this consolidation happened in the Clinton 1990's; not during the evil Republicans terms.

Here are the reasons why gas prices are high and will continue to get higher.
1. World-wide demand has been increasing for a relatively limited commodity. As the economies of places like China and India have been growing, the bidding for the barrel of oil increases.
2. There have been no new refineries built in this country since the early 1970's. Environmental regulations have made it economically unfeasible to build them here. We Americans are Nimbys (not in my backyard). The vast majority of oil brought into the US is no longer crude oil but finished products.
3. The same environmental restrictions deny us the opportunity to get our own oil, reducing our dependence on foreign juice.
4.A real plan to reduce foreign imports doesn't exist. For example, we have hundreds of years of supply of oil shale. The technology has existed for over 60 years to convert this shale to usable fuel. Hitler ran the last years of his war on shale oil. and South Africa used it when they were boycotted.
5. Oil is political. Remember the Arab Oil Embargo of the 1970's? Gas lines? Today, we have crazy ayatollahs in Iran who produce a lot of the oil in the Middle East and who want nukes. We also have Chavez in Venezuela; a Communist dictator who will use oil as a weapon against us. If you want to boycott anyone, boycott Citgo which is owned by Venezuela.
6. Allowing exploration wouldn't harm the environment. The Alaskan pipeline and the exploration have caused NO environmental problems. Even the wreck of the Exxon Valdez, which has been called one of the worst environmental disasters, has had no long term effects. There are enough safeguards in place to ensure that we can explore and be clean and green.
7. I don't like this, but we need to build nuclear power plants here. A lot of oil goes to producing electricity.

So, in the end, here is the real answer.
A. Develop the oil we know exists in our own territories.
B. Conserve.
C. Build some refineries here.
D.Look at real alternatives to oil.
E.Tell the blackmailers to go to hell.

Clay, please pass this around. What I have stated are facts. None of this may feel as good as hating the big oil companies or Republicans.
And it will work."

Jim, hope this answers your questions. If I can add anything, please let me know.

Messages in This Thread

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You'll find great information in this "Read Only" Archive, but remember..... things change.
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