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Item: Why higher prices are here to stay.

General discussions of the systemic, societal and civilisational effects of depletion.

Item: Why higher prices are here to stay.

Unread postby NoWorries » Thu 12 Jun 2008, 08:28:24

http://finance.sympatico.msn.ca/investi ... id=7976993

"When oil prices start to fall, you can bet that refiners will do everything they can to restore their profit margins. And that's one more reason that gasoline prices aren't likely to go down nearly as fast as oil prices and why the pain at the pump isn't going away anytime soon."
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Re: Item: Why higher prices are here to stay.

Unread postby joeltrout » Thu 12 Jun 2008, 09:54:47

They have to make some profits and right now they are barely getting by compared to other industries like tech companies.

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Re: Item: Why higher prices are here to stay.

Unread postby Serial_Worrier » Thu 12 Jun 2008, 12:16:39

*Yawn* let me know when MicroSHAFT starts charging only $90 for an stinking operating system.
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Re: Item: Why higher prices are here to stay.

Unread postby joelcolorado » Thu 12 Jun 2008, 13:58:56

When you sell half the oil at twice the price, you make more money as there is less shipping etc.
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Re: Item: Why higher prices are here to stay.

Unread postby AdamB » Wed 26 Apr 2017, 10:07:32

NoWorries wrote:http://finance.sympatico.msn.ca/investing/jimjubak/article.aspx?cp-documentid=7976993

"When oil prices start to fall, you can bet that refiners will do everything they can to restore their profit margins. And that's one more reason that gasoline prices aren't likely to go down nearly as fast as oil prices and why the pain at the pump isn't going away anytime soon."


I mean, just GOD do I love these oldies but goodies. For the record, the pain at the pump had about vanished by the end of the year this was written, and it had nothing to do with refiners.
Plant Thu 27 Jul 2023 "Personally I think the IEA is exactly right when they predict peak oil in the 2020s, especially because it matches my own predictions."

Plant Wed 11 Apr 2007 "I think Deffeyes might have nailed it, and we are just past the overall peak in oil production. (Thanksgiving 2005)"
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Re: Item: Why higher prices are here to stay.

Unread postby ROCKMAN » Wed 26 Apr 2017, 10:57:01

OK, don't have much time so apologies for being blunt: you folks need to get your heads out of your asses and do some Internet research instead of listening to the bullshit here about the refinery industry losing $billions.

First, a general rule that seldom fails: the lower the price of oil the better margins refineries make. For instance the full throughput margin for Valero (one of the country's largest is $8+/bbl. And that's actual down some from a year ago. Some more derails from:

http://marketrealist.com/2017/04/valero ... n-expands/

Valero's 1Q17 Earnings Beat Estimates, Refining Margin Expands

1Q17, VLO’s revenue surpassed Wall Street analysts’ consensus estimate by ~17%. Additionally, VLO reported EPS (earnings per share) of $0.68, 13% higher than its estimated EPS of $0.60. The company’s 1Q17 EPS were also 13% higher than its 1Q16 adjusted EPS. VLO’s refining margins rose YoY (year-over-year) in 1Q17.g

Want more details go find my post from yesterday. See how Warren Buffet has taken a big position in Phillips, the largest US refiner. Read how US refineries (which export more refinery products then any country) is beating the crap out of foreign competition. Read how the refining business is looking so good that within just a 15 mile radius from where I'm typing there has been $50+ BILLION worth of refining expansion started within the last 2 years. And yes: some US consumption of refinery products have not recovered. Which is why output has stayed high and profitable since US refineries are exporting products made from 4.8 million bopd. Got that: more then 25% of US oil "consumption" includes the oil products we export. And why? Because US refineries are making a sh*tload of money doing so.
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Re: Item: Why higher prices are here to stay.

Unread postby KaiserJeep » Wed 26 Apr 2017, 11:40:07

The price at the corner station is $3.25/gallon regular grade. Within the recent past it has been $5.67/gallon. It will probably approach $3.50/gallon for the Summer months. What high prices?

Yes, I do remember when gas was $0.18/gallon in 1967 when I started driving. So it has escalated in price about 1806% in 50 years, which is slow enough for politicians to avoid lynch mobs. That is an average of 36% annual increase for each year.

Sounds like a good business to be in and a sound place to park your money.
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Re: Item: Why higher prices are here to stay.

Unread postby ROCKMAN » Wed 26 Apr 2017, 14:43:48

T - Interesting perspectives. Thanks. Even adjusting for inflation doesn't fully capture all the dynamics. Consider the current focus on gasoline prices. The price of oil is not the sole determinant for the price of gasoline. There's a close correlation but not a perfect one. The price is a function of the oil price, the refining cost and the retail profit margin.

Which is the basic reason why refinery profit margins tend to be higher the lower oil prices fall. The decrease in gasoline price increases consumption. That leads to less competition amongst retailer so they can keep prices higher. Conversely when oil prices top out folks will buy less $5+/gal fuel. And refineries need big volume sales to cover overhead regardless of lower prices. Thus more competition amongst retailers. Those sellers don't have to collude amongst each other to set prices: the market place provides enough signals to push sellers in one direction or the other.

And think about upward price pressure from foreign buyers of US refinery products. Imagine if the govt either banned those exports or at least put a high tax on them. What would US consumers be paying today if the following FACTS weren't true. From just 4 months ago 26 Dec 2016:

"We have never exported more gasoline and distillates than we did last week. The total amount of exports is huge. The 1.1 million barrels of gasoline exported per day, rose from 795,000 barrels a day the week earlier and 472,000 barrels a day at the same time last year, according to the EIA. Distillate exports totaled 1.4 million barrels a day last week, up from a four week average of about 1.2 million barrels a day.

"The export markets are taking what the domestic demand doesn't need, and it's good for refiners on the Gulf Coast…from that stand point it's helping refining margins," said Andrew Lipow, president of Lipow Oil Associates. Kloza said Mexico has increasingly become a destination for U.S. gasoline exports, as refineries there are far less efficient and run at about 50 percent capacity compared to closer to 90 percent in the U.S."

Of course (despite the absurd rantings of some that refineries are losing tens of $billions selling gasoline) there is a minimum price for refinery products: companies won't produce them if the cost of the oil and the processing doesn't leave them at least a minimum profit. Historically you can see the result as refining margins fall: refinery utilization falls. Simple economics: reduce the amount of any commodity going to market (and all else being equal) its price increases. In the last 30 years the utilization rate of US refinery capacity has ranged from 76% to 96%.
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Re: Item: Why higher prices are here to stay.

Unread postby Cog » Wed 26 Apr 2017, 18:16:17

Its $49.62 not $40. Surely you can at least get that number right.

We will see $60/bbl oil before the end of the year. I'd bet you on that but you would require to lock my wager up in a vault at Goldman Sachs.
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Re: Item: Why higher prices are here to stay.

Unread postby kublikhan » Wed 26 Apr 2017, 19:28:38

pstarr wrote:Now oil struggles to close above the $40 range. In spite of OPEC promise last year to maintain a $70 price support point. Something is wrong here. Wonder what?

oilprice.com from Dec 12, 2016:"Can OPEC Send Oil To $70?"
OPEC managed to convince almost a dozen non-OPEC producers to take part in oil production cuts over the weekend, and the news immediately sent international benchmarks higher, prompting a fresh wave of bullish forecasts.

The latest, by hedge fund manager Pierre Andurand, is that crude will reach US$70 by June 2017. Andurand made this call before the weekend deal between OPEC and external producers was announced, noting that the Vienna agreement reached among the members of the organization was a “major turning point”.
What is wrong is your reading comprehension. The $70 price point in that article was a prediction from a hedge fund manager. Not a promise by OPEC to maintain a $70 price level.
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Re: Item: Why higher prices are here to stay.

Unread postby AdamB » Wed 26 Apr 2017, 21:06:50

KaiserJeep wrote:The price at the corner station is $3.25/gallon regular grade. Within the recent past it has been $5.67/gallon. It will probably approach $3.50/gallon for the Summer months. What high prices?


Where do you live, Hawaii? Europe? I plan on driving 3500 miles over the next 10 days or so, and if I have to pay more than $2.30/gal at any point in that distance I am going to be PISSED!!

You must be in one of those states encouraging EVs by having really cheap electricity then? Some progressive, forward thinking, land where they honor gun rights, allow folks to defend themselves under all sorts of circumstances in a lethal manner, 100 round magazines, the works! There must be some trade off if you are getting ripped off at the pump.
Plant Thu 27 Jul 2023 "Personally I think the IEA is exactly right when they predict peak oil in the 2020s, especially because it matches my own predictions."

Plant Wed 11 Apr 2007 "I think Deffeyes might have nailed it, and we are just past the overall peak in oil production. (Thanksgiving 2005)"
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Re: Item: Why higher prices are here to stay.

Unread postby AdamB » Wed 26 Apr 2017, 21:12:13

pstarr wrote: And I sure don't place bets with trolls.


Bets you know you'll lose...calling the other party a troll is just a feeble attempt to distract from the obvious. You don't believe what rolls off your keyboard. You can admit it, the rest of us are your friends, and we already knew it.
Plant Thu 27 Jul 2023 "Personally I think the IEA is exactly right when they predict peak oil in the 2020s, especially because it matches my own predictions."

Plant Wed 11 Apr 2007 "I think Deffeyes might have nailed it, and we are just past the overall peak in oil production. (Thanksgiving 2005)"
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Re: Item: Why higher prices are here to stay.

Unread postby ROCKMAN » Thu 27 Apr 2017, 01:18:00

Current US gasoline prices by state:

Lowest: S Carolina $2.10
Highest: Hawaii $3.05

From http://www.gasbuddy.com/USA
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Re: Item: Why higher prices are here to stay.

Unread postby KaiserJeep » Thu 27 Apr 2017, 05:48:35

San Francisco average price $3.62/gallon, actual price range from $2.69 to $3.99 in the last 24 hours.
San Jose average price $3.01/gallon, the regular price actually jumped from $3.25 at the corner station a half mile away to $3.29 in the last 10 hours.

These prices are also GasBuddy (http://www.sanfrangasprices.com/GasPriceSearch.aspx).

Both soon to rise by $0.18/gallon additional state taxes on November 1. Somebody has to pay for all those EV's. Also on November 1, a flat $100/year fee for EV's in lieu of a fuel tax. New taxes nominally for road repairs but actually the state constitution has to be modified to earmark funds, so the monies will go into the General Fund for the state, where they will actually be dispersed to fulfill public employee pension obligations.
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