stevie667

where did you get those stats from?
the problem with current europe is that because we have wildely different figures and numbers for each country it's hard to get a good average because of the variance.
however, over the past few years the major players in europe (Britain, France, Germany, Italy e.t.c) have greatly strengthend their economies.

Price rises for petrol don't really help towards putting people into public transport, charging a fiver a day to allow people the right to drive in big cities does that
More fuel economic cars are a way to go, but only a short term measure, you have to get the public thinking about saving energy and buying fuel efficient cars to really make a dent.

onetime2

Please feel free to post data that proves me wrong. I am going off the top of my head of what I've read about growth in the "EU" economy.

You can't put people into non existent public transportation either. I live about 60 miles from NYC and there are millions of people who travel the same route eastward towards NYC everyday. There are few options for those travellers. You may be able to get within a few miles of your destination by using buses, trains, or van pools but then you're stuck.

Adding more to the price of gas will not push people here into public transportation or van pools. People work too varied of schedules and are not willing to modify their schedules to save a few dollars (even significant dollars).

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MSD

I wouldn't expect to pay more. Now that I've done more reading both on and off TFP about the subject, it seems that gas prices will not be afected by oil supply unless there is a severe shortage. Your analysis is right on target. I would never expect a company to "pass on savings to the consumer." I also agree with Lebell's point that refining capability has remained the same with increased demand.

Another comment that I heard is that the younger generation in China is beginning to drive, and with them getting cars, their demand for oil is now higher, increasing the worldwide demand. I'll look to see if I can dig up any more info on this.


It has not gone unnoticed that this thread has stayed so civil for so long.

onetime2

The proclivity of the young in China to drive is a minute factor if it's any at all. The fact that China (and other emerging nations) are beginning to grow their economies has a far greater impact on the demand for oil. Power demands for this growth will become more of a factor on into the future.

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skysooner

Give me a break on this collusion thing. The reason oil companies are shutting down their refineries in California are due to environmental regulations that force them to upgrade the plants to make them cleaner. In some cases, the profits of refining the oil there don't justify major overhauls of the refineries, so they are shut down. Oil prices in the 1970s were approaching $30/barrel back then. With inflation thrown in, the price of oil is way below what it was back then.

I have been working in this industry for 14 years, and the only time we have tried to "manipulate" prices is when the prices drop so low that it costs us more to produce than we can lift it out of the ground for. Oil companies (just like any other publicly traded company) are held accountable by the stock market, and if revenue were to suddenly dry up due to shutting wells in, the stock price would react accordingly.

The oil price is governed by simple supply and demand. It is also a very complex system since the oil reserves are reported differently by every country, and it is hard to get a consistent picture of what is on the market at any one time.

smooth

I agree that industrial demands are going to outstrip Asian consumer demand.

skysooner, at least one organization investigated the claim for lost profits as a reason for shutting down a California refinery. They found that the refinery was at least as profitable, if not moreso, than it has been in the past.

In this most recent case, at least, that argument isn't holding up. The organization is either seeking some type of injuction or requesting a government investigation--I don't remember. They are arguing the closure is against the agreement the oil company made when their merger was approved. Maybe you have some more information on this topic?

This story claims that, while upgrading costs are noted, Shell claimed "a big contributor to its decision to close the refinery is the decreasing supply of crude oil from the San Joaquin Valley."

--http://www.nacsonline.com/NR/exeres/00003342ushebobunnrzxpiv/NewsPosting.asp?NRMODE=Published&NRORIGINALURL=%2fNACS%2fNews%2fDaily_News_Archives%2fNovember2003%2fnd1117033%2ehtm&NRNODEGUID=%7b53D9DF75-C732-41A2-B9E4-BC58AD490FD5%7d&NRQUERYTERMINATOR=1&cookie%5Ftest=1

In an earlier piece on this topic, I read that this refinery is situated on or next to an oil field. The allegation was that these oil companies are shutting their refineries but retaining the rights to the oil reserves. So if someone chooses to re-open the refinery, they still won't have access to the oil next door.

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skysooner

You might be right about that. Shell operates differently than most domestic oil companies. I worked for them from 1990-1992, and the corporation is very much run with an iron fist from The Netherlands and what they say/do is not always indicative of what other companies are going to do. The vast majority of oil companies that produce in this country don't own refineries and have no control over that end of the game. Only the big boys (Exxon, Shell, Chevron-Texaco, etc.) have refineries. I'm pretty much limited on my information regarding their economics, so I'm actually not surprised by what you are saying.

Also, regarding the oil companies reserving rights to the reserves. This doesn't sound right to me. Most oil fields are not located next to refineries. Some oil fields are lucky enough to have pipelines next to them that ship the oil sometimes hundreds of miles to refineries. In many of the places I worked, the oil was actually picked up by tanker and taken to a pipeline facility where it was then shipped. It is very rare for an oil company to own mineral rights to oil. They instead lease the rights from the true owner (usually a private landowner or the federal/state government). The lease typically has a cessation clause that basically means that once production stops, the rights to produce that oil is lost and instead reverts to the real owner. All leases are different, but I can't imagine any landowner granting an oil company a lease in perpetuity. The only way for the landowner to derive revenue from produced oil or gas is for it to be produced and sold on the market. If the oil company was allowed to sit on it indefinitely, then the landowner would lose the use of their own minerals. I was involved in a case in the early 1990s where my company sued some of the major oil companies in southwest Kansas because the leases they had from the 1930-1950s basically gave them the right to not drill for deeper production underneath the shallow gas production they had going. They actually won the case (although it was close), but it was so close that they started giving us concessions to allow us to drill for oil underneath the shallow production.

I'm basically saying that the oil economy is so diverse and widespread with so many different players involved that without a very large group working together there is no way for prices to be affected for a long period of time. OPEC is an obvious exception. The companies in the US don't even supply enough for our own needs so saying we have the ability to adversely affect prices is ridiculous considering that we have a hard time just working together on small things.

smooth

ah yes, I think we're discussion two different things rather than differing on opinion or fact.

I was focusing on west coast production, primarily california's since that is where I live and where we are feeling part of the brunt of this price escalation. This Bakersfield refinery accounts for 2% of our gas and 6% of the west's diesel. That's huge I'm thinking. It's at least a big enough chunk to sent reverbrations through the industry and prices.

The information I read approximates the following:

-- http://www.freerepublic.com/focus/f-news/1114927/posts

and a statement from Senator Ron Wyden here:

http://wyden.senate.gov/media/2004/0...4_ftc_gas.html

I honestly don't know the extent of field ownership. I was speculating that large corporations retain ownership. Given what I've studied regrading corporate interconnectedness, oil refineries and oil fields are possibly more closely intertwined than one might think.

But I admit I don't know the extent of this for a fact and haven't taken the initiative to research it all out. I can't find the article I read last week but it either stated or implied that this thorny ownership web is prevelant throughout California.

Thanks for the discussion.

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"The theory of a free press is that truth will emerge from free discussion, not that it will be presented perfectly and instantly in any one account." -- Walter Lippmann

"You measure democracy by the freedom it gives its dissidents, not the freedom it gives its assimilated conformists." -- Abbie Hoffman

skysooner

Well they can interconnect for sure. When the Seven Sisters came out of Standard Oil, there was a definite connection between refineries and oil fields. The infrastructure just wasn't there to transfer oil for many miles and shipping by truck wasn't cost-effective. In the early boom days in Oklahoma, there were cases of oil wells being allowed to flow on the ground, into rivers and ultimately into large holding pits where it was pumped onto railroad cars. There is a huge Superfund site in northern Oklahoma where this happened. Today, the reality is quite different. Refineries and oilfields are generally widely separated. Bakersfield is a big exception for one reason. The oil pumped in that area is what we call heavy crude. It is like tar and won't flow easily so transshipment by pipeline just isn't that cost-effective. It can be done, but since that grade of crude oil doesn't fetch as high a price, they can't afford to ship it very far.