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michel88

Gas prices, a new idea

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This makes more sence that the "don't buy gas on a certain day" campaign. This isn't my idea but came from an engineer who retired from Halliburton. This could really work. The only way we are going to see the price of gas come down is if we hit someone in the pocketbook by not purchasing their gas. Since we all rely on our cars, we can't just stop buying gas. But we CAN have an impact on gas prices if we all act together to force a price war. Here's the idea: For the rest of the year (2006) don't purchase any gas from the two biggest companies (which are now one), EXXON and MOBIL. Exxon posted the largest profit last year in history! If they aren't selling any gas, they will be inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit. But to have an impact we need to reach literally millions of people. We all need to email our friends and have them do the same. If this makes sense to you, please pass this message on.

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Woody, I haven't bought gas from EXXON or MOBIL in 15 years. I guess I've done my part. cool.gif

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Skyking,

My wife hasn't bought Exxon gas ever since the Exxon Valdez incident. She says she never will buy Exxon!

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This is not a new idea. Last year when prices were going up there was an email circulating that advocated the same strategy. It didn't make sense then and it doesn't make sense now. Here's why: Let's say the boycott of Exxon Mobil works and their sales at the pump drop by 25%. Unless actual consumption drops by 25%, it simply means that the gas that would have been purchsed at E-M will be bought from Gulf, BP, Shell, Marathon, and the rest. What will happen then? Since all the refineries that are running are at or near capacity, Gulf, for instance will have to go out to the market to buy gasoline to meet the shifted demand. All the other oil companies are and will be at capacity except for Exxon Mobil. So if Gulf can't meet demand with its own resources and can't buy product from any other producer except E-M, where will they get it? They'll buy it from Exxon-Mobil and so will all the others who are covering the 25% of sales Exxon Mobil lost. Exxon Mobil won't have to lower their wholesale prices because they'll simply sell it to other retailers. The retailers will likely raise their prices knowing that Exxon Mobil is boycotted and the demand has shifted to their outlets. The plan will actually backfire.

Like any commodity, it's a function of supply and demand. Not just demand at one suppllier, but throughout the market; aggregate demand. Unless aggregate demand lessens or aggregate supplies increase, the price will not go down, no matter what happens to one seller because of a boycott. Then throw in the added variable of market psychology, i.e. worries over interruptions of supplies due to political unrest or natural disaster, and it can overshadow the fundamentals of supply and demand.

The other email proposal that suggested no one buy gas on a given day, let's say Wednesday, won't work for the same reason. Aggregate demand and aggregate supply do not change. All that is accomplished a shifting of demand. What will happen in this case? Everyone will buy gas on Tuesday or Thursday. And if that were the case, my guess is that local gas stations would jack the price UP on those days to capitalize on the anticipated shift in demand. That plan would backfire, also.

I hate to be the guy that just shoots down ideas, but any discussion about what to do to lower prices tend to degenerate into a political debate and I just wanted to comment on the economic aspects of your idea. When any commodity is being produced at or near capacity such as gasoline is now, simply shifting demand around won't do anything productive.

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Good idea, except for one flaw.

I've talked with two oilfield engineers who work for major oil companies in the last year, and they both have told me the same thing.

The common factor is this: oil companies have been so restricted from doing exploration and building new refineries in this country for so long, they have billions and billions of dollars in reserve. Most new refineries and exploration in Middle East countries are paid for in part by the nation inwhich the activity takes place. So, they are making money on the process of passing through crude oil to the retail sale. Their costs haven't gone up as fast as their profits, so they can bank tons of money they would normally have to invest in research for new fields and building new refineries.

So, anyone thinking you can boycott Exxon or any other oil company and force them to lower profits in just a few months doesn't understand how long they can wait out this or any similar process. Our great great grandkids would have to be carrying on any boycott in order to hurt any of these companies in the wallet.

Basically, if you could cut down 20% of their sales, they just temporarily close down 20% of their retail outlets and fire 20% of their workers at the retail level. Their net profit probably wouldn't be affected beyond a penny or two per gallon.

I would love to drive down prices and profits, but cutting back on our purchases of 20-50 gallons per week at a time when airlines, companies, fleets and government agencies are buying hundreds of thousands of gallons per HOUR isnt the answer.

Joe

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What I have done is left the SUV sitting in the drive (limited use) and carpool with a little 4cyl engine. I also limit the number of long drives for car shows. Its simple economics for me personally, not looking to make a statement. Keep thinking there is always a way to build a better "mouse trap".

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<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">By the way, Exxon and Mobil are the same company. </div></div>

Remarkably the exact same email is being circualted right now which calls for boycotts of Amoco and BP (calling <span style="font-style: italic">them</span> the world's largest oil producers). They're the same company as well. Kinda makes you wonder, don't it?

This same silly idea crops up every year or so. Do a search on "boycott" and you'll see threads on this topic as far back as five years ago. It'll come up again.

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It seems that ExxonMobil has been the center of attention on this round of corporate profit AND retired CEO compensation only AFTER Exxon and Mobil merged--not before. Same with Amoco and BP. This is how you know when a merger really works, when the profits of the combined entity are at least as much as the sum of their prior totals. USA capitalism at its best?

These "don't buy . . ." things have been around since gas prices started toward the $2.00/gallon range, probably prior to that too. The ONLY way it could work is if everybody bought fuel on the same day, not in a somewhat staggered schedule. So what if the boycott day happens when you have enough fuel already to last you a few days after the designated boycott day?

If we can presume that there will always be a certain volume of fuel purchased on any given day, if it is not bought from some specified companies, it'll be bought from somewhere else. THEN what happens if the other companies suddenly start showing greater corporate profits, which then becomes newsworthy?

Basically, a one-day boycott is worthless. It will not cause a backup in the supply chain between the refinery, the local distributors, and the local retailers! It might make things a little easier on the tanker drivers the day after the one-day boycott, but they'll make up for it in a few days anyway. Having a slack day or two in the supply chain will not be enough to impact refinery production/inventories to a significant degree.

What might work is for everybody to try to extend their not buying fuel from one day to more like three more days per fillup--consistently. Conservation and planned trips rather than just going around harrum-scarrum, plus not driving above the posted speed limit in the appropriate lane of the roadway. Nothing magical about these things, they've been around much longer than the "boycott______" issues have.

In the scope of the no-more-MTBE situation, it's been known for quite a while that MTBE would be replaced by ethanol in the fuels' blends. Yet the ethanol producers (by press reports) just seemed to get their programs cranked up a few weeks ago, if then, for the coming greater demand for their products. Nor were enough tank trucks contracted to haul the ethanol to DFW or Houston! It has been reported in a manner that makes it seem that the ethanol industry suddenly openned its eyes and went "WHOOOPSSSS!!!!" we'd better get busy. I'm not sure what it takes to get the refineries ready to use ethanol instead of MTBE, but I would not think it would take weeks to make those changes (just my gut suspicion). Initial predictions were that our TX fuel prices would be spiked for about 60 days, but with shortages now happening on the east coast, it might be longer than that.

In the modern "oil" world, there are exploration companies, production companies, refinery operations, distribution operations, and retail operations. At each step of the process, there can be a multitude of operating partnerships comprised of any number of major oil company groups. In order to know WHICH companies are doing business where and with whom, you almost have to have a scorecard as some companies are NOT in the Arab lands, but are in other places and vice versa. Some of the lower level oil companies (at the retail level) are and have been deeper into exploration and drilling than some of their larger associates--and vice versa.

I concur that refinery expansions and new refineries being built in the North American region have been somewhat hobbled for the past 30 years. IF the oil companies have such huge amounts of money in the bank, why hasn't somebody tried to "unlock shareholder value" in the company as they've tried to do in other situations???? Or are these same people active players in the wholesale gasoline futures market?

In reality, the fuel price situation is supply/demand pricing at its classic best. Just as a low production or 35+mpg automobile that is sold for MSRP+ rather than discounted. Some transportation industries just pass the additional fuel costs on to their customers, but when transporation costs result in an item costing more, will those prices come back down when the fuel price issues stop being issues? Probably not, many might suspect. End result, the consumer feels the triple-whammy affect on a weekly basis. Other global economies have recently increased their crude oil requirements too, which can have some variable affects on the price of fuel in the USA regions.

I remember in the early 1980s, when fuel and gas prices were spiking somewhat. Many people traded their larger vehicles for smaller ones, thermostats were set at 78 in the summer and 65 in the winter. People bought sweaters and such to wear at home in the winter, typically. Yes, they were doing their part to conserve energy (which should have also correlated to saving money!), but the fuel prices just kept going up to (then) astronomical levels. Putting more expensive gas in their smaller vehicles had no real impact on total dollars spent on gasoline--total amount saved on fuel use was not that different than before, which meant that all of the changes that many people made were not cost effective, but were done for the greater good of the society. Seems there was a "danged if you do, danged if you don't" attitude back then?

Everybody's looking for some way to get some relief from the higher fuel costs, which is understandable, but when you consider all of the side issues (not listed in the flyer) that are not mentioned in the boycott email/communication, just one day or a few days/week will not have a significant effect.

In the middle 1970s, when there was a fuel "shortage", there were many news reports floating around that tankers were anchored just off the coast waiting for orders to come in and unload. It was also reported that the fuel inventory shortfall (then) was about 5%--this was when things were transitioning toward unleaded fuels AND it was known to take about 5% more crude oil to make unleaded fuel than it did to make the previously-normal regular, low-lead fuels.

Now, we're transitioning from MTBE as a fuel oxygenate additive to ethanol (a renewable energy source). It seems that any change in refinery operations seems to cause a major hiccup in an already stressed supply situation, whether it's the seasonal change or similar. New refineries don't just suddenly appear (as Samantha wiggles her nose!), so the "new refinery" orientation is still several years in the future. Got to have basic supporting infrastructure too!

Just some thoughts,

NTX5467

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Ethanol and MTBE are fuel additives - blended in after the gasoline is refined - the actual refining is unchanged. The oil execs have to be laughing their butts off with this buy your gas a different day, or from a different station stuff. Do you think they run their businesses by checking their franchisees daily till?

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<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Ethanol and MTBE are fuel additives - blended in after the gasoline is refined - the actual refining is unchanged. </div></div>

More than 1/2 of the new cars in Brazil today are flex-fuel vehicles which can run on 100% ethanol (or our E85, for that matter), which is available there for so much less than gasoline that oil would need to drop to $40/barrel for gasoline to be competitive. It'll likely be a primary fuel here within 10-15 years as well (but it won't be cheap, however).

Hydrogen (Bush's favorite alternative) is really only economically feasible when generated from oil stocks. It may have a future, but only if alternatives get so expensive most people won't have access anyway.

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Remember that the fuel value of a gallon of ethanol is much less than that of a gallon of gasoline, then add back any subsidies. Correct for both of those to get an appropriate comparison of costs. $/mile

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Ethanol as an oxygenate additive in gasoline and ethanol as a primarly fuel are two different things. In E85, it's gasoline that's the additive (for cold starting. None of these are "good" or "bad" fuels - but there is a lot of bad math in the comparisons

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<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Remember that the fuel value of a gallon of ethanol is much less than that of a gallon of gasoline, then add back any subsidies. Correct for both of those to get an appropriate comparison of costs. $/mile </div></div>

The $40 quote came from a CNN article quoting a fleet manager. I would expect those concerns are factored in.

Brazil and Ethanol (on carlist.com's web page) gives a brief history of ethanol's development there. Cheap labor allows ethanol to out-compete petroleum there. Here it will take a few more years of shortage pricing to get to a position where ethanol's manufacturing costs and heat content are overcome.

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I concur that there are probably several instances of fuzzy math in proving what's more viable to produce and use.

Brazil and other South American regions have been using "high aromatic" fuels for about 20 years now. They are better able to deliver those fuels than we are, as it's been in place for that long.

One issue with E85 is that it's not going to work very well in non-fuel injection vehicles, I suspect, as carburetor calibrations were designed for "gasoline" of prior times rather than any sort of alcohol-based fuel. There are some race-only racing classes that use alcohol-based fuels and run carburetors, but it takes specific calibrations and carburetors to do that. Be that as it may. The more normal 15% ethanol blends are more tolerable in carbureted vehicles.

On just what is better, consider that ethanol MUST be trucked from producer to user, not pipelines as normal gasoline can use. Diesel engines power the trucks to haul ethanol. So, we refine diesel to haul the ethanol across the country--at least until more ethanol plants might be built out of the existing regions of the nations they are generally in. Ethanol does come from a renewable energy source, but it seems that total fuel use to move the ethanol might outweigh any crude oil savings that might exist from its use? Shortages of the basic gasoline fuel stocks due to refinery capacity being maxed out -- shortages of trucks to move the ethanol to the refineries -- more use of diesel fuel to move the ethanol . . . sounds like a setup for even more shortages.

Looking for more places to buy less expensive, quality fuel . . . again.

NTX546

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Quote; "The common factor is this: oil companies have been so restricted from doing exploration and building new refineries in this country for so long, they have billions and billions of dollars in reserve."

Many studies and estimates have determined that approximately 80% of our oil has already been pumped from the ground. That could be one of the reasons they aren't pursuing new drilling as much as many may think they should. With the billions of dollars these oil companies have laying around if there was a huge oil field waiting to be tapped they would surely have a lobbyist buy the right government officials off so the drilling could begin.

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This is refreshing. This is a much more informed discussion than those that have previously appeared here; there are many more informed consumers out there.

The federal politicians have so skewered the oil industry; it has to be obvious that they are simply deflecting blame from themselves. The industry is ultra efficient and a good investment vehicle for all of us. The politicians produce nothing and only interfere with the free market discovery, production, refining and distribution of finished fuels.

To wit, the boobs in the federal government could quickly fix the following:

- cost of ethanol additive by lifting tariffs on imported ethanol

- requiring the use only of difficult to transport ethanol as an additive

- the failure in the last energy bill to provide liability protection to MTBE producers

- the proliferation of mandated specialized gasoline blends for different areas

- reduction in federal gasoline taxes (last raised under the Clinton administration)

In the longer term, the feds could do the following fixes:

- encourage construction of refineries by tax policy and elimination of excessive permitting hurdles

- encourage rather than restrict the drilling for the resource in America and off the coasts, regardless of environmental activist complaints

- end subsidization of ethanol production; make it be competitive in the market

- encourage through tax incentives, fuel standards, etc. the production/consumption of diesel automobiles to the level of use in Europe

As a note, our local refinery is expanding capacity, primarily to meet upcoming lower sulphur diesel content mandates.

Those five cylinder Mercedes diesels running all around Europe look quite appealing to me now. I rode in one for four days in Germany earlier this month; the car was remarkably refined for a diesel - fast and quiet.

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Quote; " encourage rather than restrict the drilling for the resource in America and off the coasts, regardless of environmental activist complaints"

With supposedly 80% of all the oil already pumped out of the ground in the USA in their eyes it may not be feasible to invest in new refineries?

Quote; "- end subsidization of ethanol production; make it be competitive in the market"

AMEN!!!! With our government subsidizing something like .52 cents for each gallon and costing us taxpayers over 9 billion dollars a year this program is a joke. Ethanol would disappear quickly if not for that but what the hey its only 9 billion, chump change when your constantly running 400 billion in the hole each year, and that doesn't even count the war, etc.

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<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> - encourage rather than restrict the drilling for the resource in America and off the coasts, regardless of environmental activist complaints </div></div>

And apparently regardless of whether there's any there or not. Not to mention how much it'll cost to extract.

Peak_oil_aspo.jpg

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">- requiring the use only of difficult to transport ethanol as an additive

- the failure in the last energy bill to provide liability protection to MTBE producers </div></div>

So Mom died. So what! I need to know Cheney's family is going to do O.K. for generations to come!

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> - the proliferation of mandated specialized gasoline blends for different areas </div></div>

Hey, we've probably dropped unnecessary lung disease death's in Los Angeles below five figures annually by now. What's the big deal, anyway?

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> - reduction in federal gasoline taxes (last raised under the Clinton administration) </div></div>

And then we can cut them again. And then we can cut them again. And then we can cut them again. And then... Oh what's the point. Let's just end democracy and get it over with.

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<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> - end subsidization of ethanol production; make it be competitive in the market </div></div>

And now the big one.

Duh! Do you really think that ethanol is being subsidized only for <span style="font-style: italic">today's</span> needs? Yes, there is the component of the farm lobby and the need to win the Iowa caucuses every four years, but this infrastructure is in place because $3 a gallon will be dirt cheap <span style="font-style: italic">real soon!</span> Having <span style="font-style: italic">some</span> cushion provided for the oil shock by the existence of the ethanol infrastructure will undoubtedly help in the transition to a post-oil economy. (We're there by now, in case you haven't noticed oil output for next year (2007) will actually be <span style="font-style: italic">less</span> than this year. Short of war-related actions that's never happened before.)

This country is run by oil companies. They contributed almost 1/2 of the President's last 2 campaign budgets. If they wanted ethanol gone, it'd be gone. If they wanted refineries, they'd have 'em.

Twenty-five years ago I watched a bunch of union guys rail at the closing of the Pittsburgh steel mills, whining like babies not understanding that world market conditions changed and that they were victims of more than the easy targets they were blaming. Some of the "more informed discussion" here sounds remarkably familiar. crazy.gif

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Nice chart, Dave!

Although the "known" reserves within the USA boundaries seem to be ever-growing as time goes on, there is still enough (by informed estimates) of crude oil under the ground in Canada and under the northern polar ice cap to keep the internal combustion engine going for quite some time into the distant future.

Much of the permitting processes (which were mentioned) are the result of environmental concerns that have been in place for many years. Existing refineries can possibly be "grandfathered", but upgraded with "best current technology" if they expand or if requested to do so by the Federal operatives (environmental protection) OR they can buy "emissions credits" to delay any capital investments in the "upgrade" area. Not to mention a possibly lengthy process of "environmental impact studies" being researched and presented. Many issues at play here!

Even IF new refineries were broken ground for tomorrow, it'd still be a few years before they could be online, provided they were near a pipeline network. This is more of a long-term fix, unfortunately, but possibly a necessary infrastructure investment.

Until the world demand for oil softens, there will be little we can do to control the pricing of crude oil or wholesale gasoline base stocks on the futures market. It CAN be related to the basic price of crude oil/barrel, but not always so. If the USA is allegedly "addicted to oil", what about the expanding economies and vehicle populations of China, India, and other countries--with all due respect?

Suddenly, the USA is not quite such a key player in the whole oil market as it once might have been . . . so WE are basically along for the ride, where ever it might take us. WE might be able to have a semblance of control of certain aspects of this whole deal within our borders, but that's about all.

Just some thoughts and observations,

NTX546

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<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> ...there is still enough (by informed estimates) of crude oil under the ground in Canada and under the northern polar ice cap to keep the internal combustion engine going for quite some time into the distant future.

</div></div>

Those are almost <span style="font-style: italic">all</span> oil shales and tar sands. Both require more calories in energy expenditure to extract than there is calories in oil content present in the reserve.

The <span style="font-style: italic">real</span> future is of declining production indefinitely, with overall yield 50% of today's by 2030. The price structures resultant from that situation will reduce demand and encourage biofuel alternatives, otherwise the decline would be even steeper.

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Dave, do you have any facts or do you just make these things up? Your own graph shows world production rising out to 2010, and shows nothing of oil reserves that could be tapped. And the Canadian tar sands projects are expanding rapidly. Why would they do this if they weren't making money at it? They are not government projects. Why is Chavez talking about nationalizing or more heavily taxing his heavy oil extraction plants if Venezuela isn't the source for profitable future oil production?

Most fuels take energy to make them into more useful forms. But check out how much energy it takes to make the biofuels relative to how much energy they contain, and then decide whether the energy expended was really in a less useful form to begin with. I think you might be surprised by how much more efficient it is to rely on the vast sunlight that fell on the earth many thousands of years ago (resulting in petroleum, gas and coal) than what falls on it today. How much fertilizer pollution are you willing to tolerate down the Mississippi and other rivers for the sake of renewable fuels?

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Got any <span style="font-style: italic">more</span> questions? smirk.gif

Try:

http://www.lifeaftertheoilcrash.net/

http://en.wikipedia.org/wiki/Peak_oil

http://www.peakoil.net/

http://www.peakoil.org/

http://www.energybulletin.net/primer.php

http://www.hubbertpeak.com/summary.htm

http://www.peakoil.com/

http://www.oildecline.com/

Or any of the other <span style="font-style: italic">2 million</span> web sites that can be found on the topic on Yahoo or Google. You can use those sites to pick and choose bits of information to support what you want to be true (and attempt to discredit those who are not like minded by ignoring everything else), or you can read them (noting especially the qualifications of those doing the writing) and get the jist of what reality really is.

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