High Oil Prices

[pvwowk]

This is the real reason oil prices are high..

(peak oil)
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People investing in oil read articles like this (of which there are a zillion).

The tough pill to swallow is nothing can solve the high oil price problem except a decrease in demand. It's pure econ101. Low supply, high demand = high prices. We all know that isn't going to happen anytime soon, even with a perfect alternative today.

Get used to high prices. They aren't going away.

[IGM 462]

Thats exactly why the big oil companies have not really put up a fight to build new refineries. More product on the market = lower prices.

[Ronnocomot]

You two are joking right?

[pvwowk]

Originally Posted by Ronnocomot

You two are joking right?

How so?

"Oil is a plentiful and never ending resource."

Is that one of your beliefs?

[pathfinder]

The problem I have with any of these "we are doomed" type of arguements is that they have been wrong my whole life! Thomas Erlicher(sp) stated in the 70's that we were going to starve to death in his infamous book "the population bomb". Never happened. When I was in the 4th grade it was the 2nd ice age. Barely 30 years later its global warming. Now its "peak oil". What about the old wells that now have oil in them? Did the oil companies lie, and move from existing wells to go spend money drilling new ones? Doesn't jive with generating "obscene" profits does it? I'm not saying the oil co.'s are innocent, or that we shouldn't look for alt. fuels. Im all for it. If its done smart! right now we have pumped billions into Ethanol, and are only now listening to those who warned that it would lead to higher food prices. I'm just saying that we need to THINK it through, not run off half cocked!

[Ronnocomot]

Originally Posted by pvwowk

How so?

"Oil is a plentiful and never ending resource."

Is that one of your beliefs?

First of all, no one I know who follows the Crude Oil market relies on "The Oil Drum" for more than bathroom reading.

Secondly, yes oil is plentiful and for all intents and purposes never ending.

1.7 trillion barrels in Athabasca
1.2 to 1.8 trillion barrels in Green River

at 20 million barrels a day used in the U.S. thats about 400 years worth.

[GasHauler]

Originally Posted by IGM 462

Thats exactly why the big oil companies have not really put up a fight to build new refineries. More product on the market = lower prices.

That's not true. I know some of the majors and they would love to have more refineries. Do you know what it cost to build a new refinery? More refined product = more money. Oil companies take alot of hits from the public when they have no idea how the system works. Most think the oil companies set the price for gasoline. Most think a refinery can run any crude. Watch and see the profits fall since they have to buy the higher cost of crude. It will take awhile but it will drop.

[Roadmedic]

Originally Posted by GasHauler

That's not true. I know some of the majors and they would love to have more refineries. Do you know what it cost to build a new refinery? More refined product = more money. Oil companies take alot of hits from the public when they have no idea how the system works. Most think the oil companies set the price for gasoline. Most think a refinery can run any crude. Watch and see the profits fall since they have to buy the higher cost of crude. It will take awhile but it will drop.

I have a hard time with alot of the defense on the big oil. If they truly wished to build refineries, they have the cash flow to do it. After all, look at the outrageous amounts in bonuses that have been paid out. It is a good reason to return to the windfall profits tax. It would create the motivation to spend the money on the oil industry such as refineries.

[Baack]

Originally Posted by Roadmedic

I have a hard time with alot of the defense on the big oil. If they truly wished to build refineries, they have the cash flow to do it. After all, look at the outrageous amounts in bonuses that have been paid out. It is a good reason to return to the windfall profits tax. It would create the motivation to spend the money on the oil industry such as refineries.

Its not that they wont build the refineries its that they cant get the permits
You are right if they try the windfall tax scam, they will find a way of dispersing the money. I just hope the stock holders don't get screwed.
Sure will be a mess, and anti American.

[pvwowk]

I have a hard time believing the high prices today are caused by strained refining capacity... there are two main reasons.

1. Oil refineries are running on the margin (at $125/bbl it costs $2.97/gallon of crude) . If there was a shortage of refineries, refineries would make a huge profit (they did a few years ago).

2. It's not extremely difficult to build a refinery elsewhere and shipping the products into the states. It only adds a few cents on every gallon.

Building more refineries won't solve the price problem. In fact, it will probably make it worse because companies will be spending their profits on refineries instead of exploration or drilling.