13 Cents !

[SeaKingTacco]

Calls for New Refineries
House Speaker Dennis Hastert, R-Ill., has urged U.S. oil companies to invest in building more refineries and better communicate their efforts at bringing down oil and natural gas costs. It has been 30 years, he noted, since a new refinery has been built in the United States, and extra refining capacity could prevent the shortages and price spikes that follow natural disasters.

But analyst Parry said that, although new refineries had not opened, many companies had made improvements and expansions to their existing infrastructure and refining capacity.

"Total refining capacity has been increased by 10 percent in the past decade -- that's the equivalent of adding seven to eight new refineries," he said.

Eye-

Did you read this paragraph for that 2006 article?  It proves my point exactly.  There is not really a shortage of crude in North America.  What there is, is (oh- tortured sentence structure!) a shortage of refining capacity.  In economics, when you have a situation where supply and demand are very finely balanced, any upset in supply can quickly drive prices to eye-popping levels because there is no slack in the system.  Buyers will bid the price out of sight.  And I have absolutely no doubt that speculators are buying contracts for the delivery of gasoline and short selling for huge profit.  Mind you, they are taking a huge risk, because they could also end up holding the bag and losing their shirts.

Seriously- don't buy gas and the price will fall.

 

[SeaKingTacco]

When Canada purchased the fore-runners of Petrocan several years ago the government at that time stated that the purchase was to ensure that the government had some influence into gas prices

And when the Gov't owned PETRO-CAN, the prices at their pumps were precisely the same as every other pump in every market.  There was no bargain.

As a former Albertan, I remember the last Govt attempt to regulate Oil Prices in Canada in the early 1980s- the industry collapsed overnight.  Exploration and drilling ceased.  Not like that won't hurt supply and raise the price, eventually, huh?

 

[Eye In The Sky]

Tell that to the old lady I saw on the news last winter, who was freezing and not able to afford to heat her home.  I could give two f**ks less for shareholders and their profits when I know am aware of people freezing in the winter for 'profits' to pay for someone's trip down south.

Oil/gas=energy, something our society is COMPLETE dependant on, thanks to many reasons.  Shareholders of places like Gap, sure, I have an option to buy their product OR go to Walmart, etc etc.

There is no MONOPOLY on the market, and not everyone is charging the same prices and Gap doesn't suddenly say "oh there is a hurricane coming...those $90 pants are now $99...they may go down next week.

I am glad to see your selfish desire to make money, and happiness for those that are...now, go to Yarmouth, find that old lady who was on the news, and explain it to her this winter when she is freezing again.

This is somthing that affects EVERYONE.  They have what is effectively a monopoly;  there are 6 different gas stations, but all charge the same.

AND they are making record profits while claiming prices are going up for 'XYZ reasons'.

Your selfishness and lack of concern for those who can NOT afford the prices of todays oil and gas companies only partially surprises me.  

Again, you are making enough money from your pay and mutual funds, this does hurt you.  What about the ones who aren't as fortunate as you??  You will be 'visited by 3 spirits', with that attitude.

Plain and simple, the oil companies are bullies; no one can do anything to them, or they just take their marbles and go home, like they did when PEI said 'enough'.  Only PEI has 3 MPs and no pull.  It wasn't a united approach, and it failed.

 

[tango22a]

SeaKing Tacco:

I am NOT advocating government price controls! Don't you think it's kind of funny when oil companies cut back production way before a natural catastrophe or other major event to rationalize reasons for their price increases? Some major oil patch analysts have reported this as a fact. When you have a MONOPOLY you can charge whatever the market will or won't  bear.

tango22a

 

[SeaKingTacco]

Eye-

Where are you willing to draw the line to help little old ladies?  Do you have the Gov't regulate food prices? Then what is the incentive for farmers?  How about the price of houses? Who is going to lose money building renting houses? What about clothes? These are all necessities. Where, in a capitalist economy, do you stop before it is no longer a capitalist, but rather command, economy?  I mean- there were no shortages of anything in the old Soviet Union or in the current North Korea, right?

I'm not being glib or sarcastic.  Too many people in this country and others make dumb policy decisions based on the emotion of that "little old lady in Yarmouth" that hurt (and hurt badly) hundreds or thousands of others because they do not consider (or don't care about) second or third order effects.

I am not going to convince you otherwise, but in the long run, high prices do indeed solve shortages of a commodity (in this case oil/gasoline).  When Governments intervene, they almost always make things worse.  As a NS resident, you must have seen your fair share of that...

 

[Rodahn]

Seaking;

While I am all for a free market, and fully understand the points that you are presenting. I wonder what you think about this older story?

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20080612/quebec_gasfixing_080611/20080612

How does one explain the fact that all of the different brands just happen to raise their prices at the same time?

 

[kratz]

...*clip*...
Plain and simple, the oil companies are bullies; no one can do anything to them, or they just take their marbles and go home, like they did when PEI said 'enough'.  Only PEI has 3 MPs and no pull.  It wasn't a united approach, and it failed.

PEI has four MPs and three Senators for their population. Even with all that political clout, as EITS mentioned, they have little clout to influence gas prices.

 

[tango22a]

Once the hurricane season is over,and after all the screaming and shouting finally dies down I wonder what the gas companies will do to explain their sky-rocketing profits for the last quarter of this year?

tango22a

 

[tango22a]

What people don't seem to realise is that gas companies WILL cut production to create gas shortages to keep prices up artificially. If you don't believe this check out how diamond and gold producers control their markets to keep prices up!

tango22a

 

[armyvern]

What people don't seem to realise is that gas companies WILL cut production to create gas shortages to keep prices up artificially. If you don't believe this check out how diamond and gold producers control their markets to keep prices up!

tango22a

Right they do. And, they get away with it by using the same arguement that I use with my kids:

"Turn off the light when you're not in your room; you're wasting energy because you don't need it on". (But, that saves me money).

Oil's argument is "when demand is down, why waste the energy producing when we don't need it on." (But, that costs us money).

That's why we have issues with it. Life sucks when it costs us money, but not when we're saving money.

 

[SeaKingTacco]

How does one explain the fact that all of the different brands just happen to raise their prices at the same time?

Rodahn-

There was indeed evidence found of a cartel in parts of the Quebec market.  Several companies pleaded guilty rather than go to court.

The reason that all gas stations, regardless of brand, raise their prices at the same time has more to do with the fact that there is usually only one refinery for that market.  For example, in Nova Scotia, with the exception of the Ultramar stations, everyone buys fuel from the Esso Refinery- doesn't matter if you run a Petro-Can, Irving or independent station- it all comes from Esso.
http://www.imperialoil.ca/Canada-English/Products/Fuels/PS_F_IndustrialWholesale.asp

Click on the "Rack price" icon on the above link.  That tells you what it would cost you to buy a truckload of Esso product (before tax) from any terminal in Canada.  It is updated daily.

Despite literally hundreds of investigations into accusations of price collusion in the Canadian market, little evidence has ever been found that it is going on.  Does that mean it isn't happening?  No, but you would think that disgruntled industry insider would have gone to the press years ago if there was a conspiracy.  Remember- for a price conspiracy to work, literally thousands (if not hundreds of thousands) of refinery workers, front office types and gas station owners would have to keep a secret.  Yeah, right...  

Now, are individual gas station owners making the decision to raise prices before they get their next shipment of more expensive fuel?  Probably- the way they see it, is probably an easy way to make some extra profit on slim margins.  Did you know that the margin on retail gas is only around 1-1.8 cents/litre, or just enough money to keep the lights on at the station?  The real money is in selling chips, pop and lottery tickets.  And they are hedging against when prices will (inevitably) fall in week (?) or month (?) and they get caught with full tanks of expensive fuel that they cannot unload in the market at the price they paid for it.  Try working at a gas station for a year or two (I did)- you learn a bunch about the industry in a hurry.

It is my assertion that the current price spike is because 1/4 of North America's refining capacity has been already idled for a week because of Gustav and Ike and will remain so for at least another week, assuming no major refinery damage occurred in the Houston/Galveston area.  If prices do not rise to curb demand, or some boneheaded politician regulates the price to gain a few short term votes, then I contend that there will be no fuel to be bought at any price in many markets.

You do not have to like what I have just written- but it is true as far as I know.  I am not some shill for an Oil Company. If you are more comfortable believing in conspiracy theories- well, I won't convince you otherwise.  

Cheers.

 

[SeaKingTacco]

And Vern raised a good point- many refineries did indeed ramp down production in late August.  I read this website weekly:
http://www.eia.doe.gov/oil_gas/petroleum/info_glance/petroleum.html

Because of the recession in the US, gasoline consumption was way down (like 5%, which is a lot for the US market), but the refineries produced all summer as if demand was normal.  By one point in mid August, there was almost literally no place to store all of the refined product, so production was ramped down.

Now, are Oil companies trying to balance supply and demand to maximize their profits? Yes- and they had better, because they are legally required to do so on behalf of their share holders.  Do they guess wrong and get things out of wack?  Yes, frequently- sometimes it benefits the consumer; sometimes the company.

 

[armyvern]

Well, you know ... we all keep talking about the gas in the stations already when the price goes up. People get torqued because they see the price of that 'already there" fuel go up.

I'm of the mindset that they do have to raise the prices on the "already-there" fuel else what are they going to pay for their next delivery with? When the next tanker full arrives at 1.48 a litre --- they have to pay that 1.48 a litre 'up front' to get it into their station. Else the tanks are empty and you aren't getting any gas at "anything per litre".

You don't like the high prices ... look at the taxes because that's where the high prices come from. And you know darn well that if the government ever cut the fuel taxes, they'd just get them back via some other sort of means.

I don't expect THAT to happen anytime in the near or even distant future because government is quite content to gain their "money" (no deficit!!) the way they currently are; Seeing the Canadian Consumer blame the gas staion owner, operator, attendant, supplier - rather than those who are taxing the shit out of it and holding them accountable.

 

[geo]

I'll tell you who- the shareholders.  And there are literally millions of them- Exxon, Mobil, Shell are all publicly traded companies.  They get the profits through Mutual Funds or by directly owning shares.  But hey- why should an investor expect to make money on a risk he/she took?  As long as you get your gas cheap..

Umm.... would you believe that I once owned oil company shares.... including our own PETROCAN.  While the companies do make a ton of money - they truly do not distribute much of anything as "dividends".  The companies expect the investor to make his $$$ by the increase in share prices on the stock market.  Dividends as paid then wouldn't even buy me a tank of gas today

Big oil, big salaries & dividends...

 

[tango22a]

Well one nice thing about the whole shebang is that I'll never be bothered by constipation again....just wander in and commune with the old porcelain God and ..IT will fall out!!

tango22a

 

[armyvern]

Well one nice thing about the whole shebang is that I'll never be bothered by constipation again....just wander in and commune with the old porcelain God and ..IT will fall out!!

tango22a

Are you even really sure about that!!??  >

 

[Rodahn]

Now, are individual gas station owners making the decision to raise prices before they get their next shipment of more expensive fuel?  Probably- the way they see it, is probably an easy way to make some extra profit on slim margins.  Did you know that the margin on retail gas is only around 1-1.8 cents/litre, or just enough money to keep the lights on at the station?  The real money is in selling chips, pop and lottery tickets.  And they are hedging against when prices will (inevitably) fall in week (?) or month (?) and they get caught with full tanks of expensive fuel that they cannot unload in the market at the price they paid for it.  Try working at a gas station for a year or two (I did)- you learn a bunch about the industry in a hurry.

I realize how small the profit margin is for the individual owners on each litre, I also worked in a station many moons ago. The thing that really irks me is the GST applied on the excise taxes already built into each litre of gas....

 

[armyvern]

I realize how small the profit margin is for the individual owners on each litre, I also worked in a station many moons ago. The thing that really irks me is the GST applied on the excise taxes already built into each litre of gas....

Ooops ... there's that "taxes" word again.

You know, we can't do anything about Big Oil ... but we can do something about "politicians". Perhaps it's time Canadians really started giving a shit about high fuel prices and began bitching about and going after the actual culprits in the Government for some explanation and correction of the situation and actually turned it into a bonified election issue.

 

[tango22a]

Army Vern:

YUP!!!

tango22a

 

[armyvern]

Army Vern:

YUP!!!

tango22a

Well then, next time you're constipated (and I guarantee it WILL happen [I'm using my special ESP/witchly abilities right now to 'hex' you]), let us know how you make out.

Toss it up in the "What are you doing right now" thread - it'll make a great complimentary post to CDN Aviator's fart notifications.  >