"The reality is that [US] consumers are willing to pay high prices."

[deereman64]

There is still upward pressure on crude prices. We have argued over demand from China and India, but the brutal fact is we are still prepared to pay up for gas. I dont think we have figured out where the US demand peaks out.

 

[CDsdad]

I can sympathize with everyone over gas prices. I work in the oil and gas industry. I pay the same price at the pump as anyone else.

BUT.

Overseas prices have been higher than US for years. Those people drive cars with 1.2L engines in them and walk to work if they live in town. Heck, I even seen a picture where there was 4 of them on one bicycle.

Americans won't do that. They also didn't worry about a guy like me in 1998-1999 when gas was $.89/gallon and I was hoping I had a job next week. At that time, accounting for inflation, oil and gas were cheaper than they had EVER been in the history of commercial hydrocarbon production. I knew what I was getting into in this industry, so I'm not looking for sympathy. My whole point is, there has to be middle ground. A lot of your gasoline prices are hiked by taxes and govt regulation of the different blends refineries must produce. The gasoline in Mississippi is not the same gasoline used on the left coast. The left coast has to have their air polluted by a special blend. It's that way in lots of regions of the country.

I will agree the oil company profits are excessive. But we help drive those profits. I have noticed however, that sticker prices on new vehicles comparable to my 1997 vehicle are closer in price to the 1997 price than I remember in a while. Talk about excessive, talk vehicle prices.


The price of gasoline will be directly proportional to what the market will bare. If we pay $3/gal, I figure they'll raise it until we slow our consumption. I personally hope it goes down. However, when a guy driving a 2008 4wd, 1 ton, double cab, hemi cummins 9.9L triple barrel turbo diesel pulling a 26' gooseneck with a tractor and two 4 wheeles on it fusses to me at the pump about $2.75/gallon diesel, well I wonder why it's that high? Sorry for the rant. I do wish it would at least go below $2, but I don't see it.

 

[jayhaitch]

I recently read that total gasoline refining capacity in the US is something like 20% less that actual gasoline used, so it must be made up by imports. In economics, the phrase used is "at the margin." Prices become volatile at the margin. If there was excess refining capacity, and bit of demand volatility would be easily met and wouldn't effect prices. In the current situation, any excess capacity is dependent on imports, ie increase volatility.

Why doesn't the US build more refineries? Curious how environmentalists and government regulations have prevented any new refineries for something like 20 years. Curious also, how having tight supply also increases oil companies profits. Eisenhower's phrase "military industrial complex" comes to mind.

Prices will only drop if we reduce consumption. Or the govt reduces taxes. The phrase combining snowball and hades now comes to mind........

 

[Z-Michigan]

From what I've read, refining shortage and gasoline imports are a major part of the price issue. The refinery shortage is partly because of environmental laws, but it sounds like a lot is driven by the fact that all the oil cos. make more money by refining smaller amounts that sell at a higher price. Go figure. None of them are going to start new refineries if their total profits would go down, and probably not if their profit margin would go down even if their total profits went up.

 

[scott_vt]

Maybe the Chinese should build some refineries, that way we could buy it CHEAPER from them !

 

[NFA Fun]

driving a 2008 4wd, 1 ton, double cab, hemi cummins 9.9L triple barrel turbo diesel

Thats funny right there!



So, can I get one in black?

 

[CDsdad]

From what I've read, refining shortage and gasoline imports are a major part of the price issue.

This is very true. But not just having to import the gasoline itself but the effect imported oil has on refineries.

My wife's uncle worked at Chevron's Moss Point, MS refinery for over 20 years. He related that imported oil wreaked havoc in the facility. I don't know if this is true for every facility, but I do know that some overseas oil is more suited for asphalt than gasoline.

Another factor is oil company operating inaptitude. Some of these guys will go over budget by millions, and even tens of millions on wells drilled right here in the Gulf of Mexico. Granted they recoup their money and are making a profit within 6 months after the well is on line, but who pays for their screw ups? You and me. I'm surprised one green and yellow brand of gasoline isn't $10/gallon. The mid-majors and independents often operate much better. The problem is they don't have the budget to venture into ultra-deep water in search of the big paydays.

More refineries here in the US would help alleviate some of the problem. However, I've been told the intitial investment for a new refinery is around $20 BILLION by the time the red tape and actual construction is done.

I guess I'm not smart enough to have a solution, or I wouldn't be just a peon out here. I can sure identify the problems, though.

 

[cp1969]

More refineries here in the US would help alleviate some of the problem. However, I've been told the intitial investment for a new refinery is around $20 BILLION by the time the red tape and actual construction is done.

That's a lot of money...but Exxon Mobil made more than that last year; I'm thinking it was like $39B. In fact, wasn't it them that gave their CEO a 1/2 billion retirement?

I'm probably alone (as usual) in my thinking, but I don't think it would be an excessively magnanimous gesture on the part of Exxon to build one (just one!) new refinery in the USA. If we are running at 90+ percent capacity now, and consumption is growing at a rate of 3-5 percent per year, it doesn't take a PhD in math to figure out that soon we will be importing a large portion of our refined petroleum products, not just crude oil. Or that when refinery capacity is running at full tilt all the time, any little news item will cause a .15, .25 or 1.00 fluctuation in gas prices.

Of course, that would require Exxon to think about the well-being of it's customer instead of simply figuring out ways to bleed him white.

 

[slowrev]

I keep hearing about environmental concerns preventing refinery construction.
But by the same token I cannot find were any recent years permit processes to build a refinery either....

 

[CDsdad]

I hear you cp1969. You'd think they would turn loose of some of it. And they do, but not always (seldom) in a fiscally responsible way.

I've never understood why there aren't more partnerships in the refining process. There are some, but I don't think near as many as seen in the drilling and production end of the business. The well we are currently drilling has 2 partners. So did the last 2 wells I was on. Before that I was on a platform that had 3 BIG partners, Shell, BP, and Exxon. If you think 1 oil company can step in a big pile of mess, you should see the trouble 3 can cause for each other.