Posts Tagged ‘oil’

Flat-earthers vs. Obama’s pipe dreams …

March 19, 2012

OK, so anybody who wants to keep using fossil fuels, to drill for oil and gas in the U.S., and to buy gas for a couple of bucks per gallon is a member of the flat earth society, lacking the the President’s vision.

Why Obama wants to insult the vast majority of Americans is beyond me, but that’s his tactical choice.

So far, the GOP has simply thrown back softballs: Solyndra, the Volt and the many other alternative energy busts.

Given my lack of tact, if I were a Romney adviser, here’s the line I’d offer up to Mitt:

“President Obama and I both have pipe dreams … mine in the Keystone Pipeline bringing oil from Canada … his goes back to his college days, I guess.”

Two for the price of one.

Keeps focus on the money wasted and lack of results from the President’s alternative energy gambles … and dregs up some old stuff re: Obama’s drug use that got wiped under the carpet in 2008.

Not rumors… straight from the horse’s mouth.

Obama first told of his early drug use in his 1995 memoir, “Dreams from My Father: A Story of Race and Inheritance” … published audaciously just after he became president of the Harvard Law Review.

He wrote re: his personal experience:

“Pot had helped, and booze; maybe a little blow when you could afford it.”


Picture source:  Coed Magazine,
“10 Most Influential Pot Smokers”


I guess that I hadn’t thought of the full range of hardships inflicted by the bad economy …

>> Latest Posts

Flashback: Thinking about $4 per gallon gas …

March 6, 2012

Since gas prices are on many people’s minds these days, I pulled the following post out of the archives.  Originally posted August 22, 2008, it’s strikingly current today.

* * * * *.

Most folks wonder why the pump price of gas is surging this year.

I ask a different question: why didn’t the oil companies — branded by most folks as evil profit grubbers — push the price up into the $4 /gallon range a year or two ago?

In my pricing course, I harp on a basic point: marketers should be respectful of costs (i.e. never sell stuff below “fully-loaded cost” plus an acceptable profit), but they MUST price to the market. That is, they should determine the price that the market will bear, and then adjust accordingly to maximize profits — taking into account downward sloping demand curves and volume-related cost functions.

It’s starting to look like $4 per gallon gasoline is about what the market will bear. That’s the price point where folks started to cutback in gas consumption the past couple of months.

* * * * *

Question: Why did the oil companies wait for the cost of crude to push up gas prices? To me, it seems that the oil companies have actually showed restraint over the past couple of years.

* * * * *

Here’s a crude analysis (pun intended):

Simply divide the price of a barrel of crude over the past couple of years by 42 (since the are 42 gallons per barrel), and compare the result to the retail price of gasoline (which is usually expressed per gallon).

The difference — gasoline’s “back of the envelope” mark-up over crude prices — is plotted below.

Note that for the past 9 months, or so, the crude mark-up been about $1 per gallon — at the low end of the historical range.


* * * * *

Since the cost of a barrel of crude has skyrocketed over the past couple of years, the percentage mark-up has trended down. Hmmm.


* * * * *
Bottom Line:

It certainly looks like the oil companies price gasoline using some sort of “cost plus” formula.

I think the oil companies left a lot of profits on the table during the past couple of years — the retail gas market would probably have borne higher prices.

Now, I’m betting that retail gases will be “sticky” — there will be a “ratchet effect” and gas prices will come down proportionately slower than crude oil prices.

And, I predict that if the oil companies get hit with a windfall profits tax, they’ll just pass the tax along into retail gas prices. Just watch.

* * * * *

Analytical note:

The “real” calculations re: the economics of converting crude oil into gasoline are way more complicated than the above simple analysis (e.g. only about 1/2 of a barrel of crude is made into gasoline, there are refining and distribution costs, the 1/2 barrel that doesn’t go into gas earns other profits).

My bet: the conclusions drawn from a more precise analysis would be directionally the same, and probably pretty close to the $1 per gallon — which has a certain memorable ring to it.

>> Latest Posts

For jobs … drill, baby, drill.

October 4, 2011

Punch line: Part of the formula for getting the economy moving is to have a new industry emerge – or have a latent one take-off.

Obama tried with his failed green energy initiatives.

Now, there’s increasing support for for turning the domestic oil, gas and coal industries loose.

Makes sense to me.

And, makes sense to Senators Webb & Warner who have introduced a bill that would expand oil drilling off the shores of Virginia … and split the royalty fees between the Feds and the state.

Their argument: raises revenues without raising individuals’ taxes, reduces dependency on foreign oil, potentially reduces – or at least contains – gas prices, and – oh yeah – adds jobs.

Keep reading …

* * * * *
Excerpted from Forbes: Gassing Up: Why America’s Future Job Growth Lies In Traditional Energy Industries

The  Praxis Strategy Group looked over data for the period after the economy started to weaken in 2006.

Not surprisingly “recession-proof” fields such as health care and education expanded some 11% over the past five years.

But the biggest growth in jobs by far has taken place in the mining, oil and natural gas industries, where jobs expanded by 60%, creating a total of 500,000 new jobs.

The average job in conventional energy pays about $100,000 annually — more than twice as high as those in either health or education.

Overall U.S. oil production has grown by 10% since 2008; the import share of U.S. oil consumption has dropped to 47% from 60% in 2005.

Over the next year, according to one recent industry-funded study, oil and gas could create an additional 1.5 million new jobs.

The relative strength of the energy sector can be seen in changes in income by region over the past decade. For the most part, the largest gains have been heavily concentrated in the energy belt between the Dakotas and the Gulf of Mexico.

Energy-oriented metropolitan economies such as Houston, Dallas, Bismarck and Oklahoma City have also fared relatively well.

In energy-rich North Dakota there’s actually a huge labor shortage, reaching over 17,000 — one likely to get worse if production expands, as now proposed, from 6000 to over 30,000 wells over the next decade.

With the proper environmental controls, these industries could provide a major jolt to the economy while cutting down on energy imports, reducing debts and bringing jobs back home.

As long as Americans consume oil and gas, why not produce close to the market and with reasonable environmental controls?

>> Latest Posts