Congress presses oil execs on high prices (1 Viewer)

[ArmoredNOSaint]

dog and pony show. goverment makes just as much money off the taxes of gasoline as the oil companies make in profits.

I've heard that for every dollar the oil companies make, the government makes up to $2.50. You're right -- it's just more BS posturing in an election year.

 

[ArmoredNOSaint]

Let me get this straight...the foxes who were put in charge of the hen house are now questioning the chickens for charging too much for the eggs?

lus-un2:

Can I use that, DD?

 

[HoustonSaint68]

I don't understand why this is a hard decision for congress. The industry is making big profits so why continue to subsidize it???? Why pay them 18 billion??

Well, it's hard to explain without a ton of discussion, but the short version is that the competition for the oil companies' investment dollar is a worldwide competition that requires governments to take a long view.

Generally speaking, the only "elephant" fields left in the US are in deeper and deeper waters offshore. These fields are very expensive to find and produce. For example, a deepwater exploration well can easily cost $100 million with no guarantee of success. Even in a success case, the cost to produce is skyrocketing; a facility that cost my company about $300 million to build six years ago, now costs about $2 billion due to inflation in the oilfield construction and services sector -- even that number does not include the cost of the producing wells, some of which can cost up to $200 million each. When you add in the detrimental net present value effect of having to pay for all of that equipment many years before you ever sell a drop of oil, the economics can be pretty daunting. That said, oil companies can still make money even in this cost environment because the price of oil is now so high.

However, just making money is not enough. Each investment dollar that an oil company has to spend is competed for by all of the other project opportunities that the company has around the world. Therefore, it is not enough for a project in the Gulf of Mexico to just make money -- it has to make more money than competing projects in Africa or Russia or Indonesia (or, alternatively, provide other less tangible benefits such as lower political risk, quality feedstock to a nearby equity refinery, etc.). Thus, if the US wants to have production based in the US, it needs to be competitive with other opportunities around the world.

Mind you, it is much more complicated than that, and I'm not suggesting that the oil companies need all of those tax incentives to continue to persuade them to keep investing in the US. The problem is, there is no US government entity dedicated to figuring out just what the right margin is and, if the politicians overreact (for example, by imposing a windfall profits tax without due consideration), then one of the main competitive advantages that the US has to offer to oil companies (a stable fiscal regime) comes more into question and makes it that much more likely that oil companies will redirect more of its investment dollars overseas.

That's about the shortest answer I can muster at this late hour, but I am happy to supplement with as much detail as you would like (so long as it's not confidential!).

 

[SaintMeaux]

At least I don't have to look at the smugness on their faces .
This will all be swept under the rug fairly soon , and you will all forget about it .

Does anyone remember the congressional hearing on (3+) Trillion dollars missing from the DOD ?
Here are the Cliff notes :
Con. mem.'s : fiscal year 1999 , fiscal year 2000 , 3 trillion missing , where is the money ?
Rumsfeld : It's gone , we are unable to track it .
Con. mem.'s : Well , we are not happy about this . Try to not let it happen again .
Rumsfeld : Yes mam' . We can reconvene in a bit , I have to go have lunch now .
Con. mem.'s : Let the record show that Mr. Rumsfeld is going to have his lunch now .

Why would Rumsfeld know what happened in 99-00?

 

[Webmeistro]

Supply, demand, the horrible US economy influencing the value of the dollar, and OPEC come to mind. The companies are making record profits but their profits as a percentage of their revenue remains generally the same.

The politicians are just angry because people are consuming less gas as the price of gas continues to increase, which lowers the government's revenue through gas taxes. Energy conservation is not in the long term best interests of a government who receives a ton of revenue via energy taxes.

 

[DadsDream]

lus-un2:

Can I use that, DD?

Be my guest.

 

[Goatman Saint]

It's all part of a bigger plan by the Bush administration to get people to conserve and to take us into the future. Americans are too lazy and like big vehicles. The only way to get their attention is to hit them in the pocket book. Plus, all the big profits are being used to create new industries in alternative energy sources. The President and big oil are having to look out for America because Americans won't do it themselves. I personally say thank you Mr. President and big oil.

I agree with the thought, but do you really think thats the reason?

 

[threexcharm]

Election year political demagogery.

Vote em all out.

Can't do any worse.

Joe

 

[JimEverett]

I've heard that for every dollar the oil companies make, the government makes up to $2.50. You're right -- it's just more BS posturing in an election year.

Where did you hear that? That seems hard to believe.
Anyway - I always thought the federal gas tax was a tax levied on each gallon of gas - not a tax on money spent on gas (like a sales tax). Thus, taxes do not go up because the price of gas goes up.

 

[cruize]

I agree with the thought, but do you really think thats the reason?

I wish their motives were pure and sometimes I just like to think happy thoughts. LOL. But, I was honestly posting the complete opposite of my true beliefs. LOL.

 

[varanook]

Election year political demagogery.

Vote em all out.

Can't do any worse.

Joe

:17:

 

[Superfan]

I wonder if congress can decrease some of the taxes at the pump? Anyone know the taxes on the dollar are at the pump?

California
As of March 10, the California Energy Commission provided this breakdown for a gallon of gas priced at $3.53 at the pump: About $2.57 is for the crude oil; 9 cents is for distribution and marketing costs and profits; 24 cents is for refinery cost and profits and 1 cent for state underground storage tank fees. The remaining 62 cents is all taxes: 26 cents for state and local sales tax; 18 cents for state excise tax; and 18 cents for federal excise tax.

The problem with government is they don't understand business. People think the oil companies make 2.57 every gallon. There is overhead, payroll taxes leases, shipping etc... I don't justify the oil CEO's but that is only a select few who make insane amounts of money in a global business. Peanuts to bill gates. I do however think these ceo's of oil companies need to take a little less in this so called crisis.

 

[Jeff Miller]

i don't know if any of you guys caught this, but the chairman of the committee when out of his way to not allow any of the oil executives to actually be sworn in.

 

[HoustonSaint68]

Hard as this may be to believe, a long-term solution will require prices to go higher, not lower. We need to start thinking about this as a national security issue and not just an economic issue.

Here is my five point national security energy plan for when I become dictator of the United States:

1) Mandate severe and increasing minimum MPG standards over the next 10 years. Cars that do not meet the standard will be subject to a very severe luxury tax on the purchaser, and 100% of the tax proceeds will go to fund alternative energy research. So, you can still buy a Hummer -- it will just cost about 10 times what it costs right now.

2) Gradually but significantly increase the taxes on the price of gasoline to make it more and more painful to continue to drive fuel-inefficient vehicles. This country will continue to remain dependent on unstable regimes around the world so long as petroleum-based products remain too affordable. And, it will continue to cost American lives and treasure to protect those unstable regimes.

3) In addition to the tax revenue generated above, federally fund an alternative energy research program to rival the Manhattan Project. Stop and think about it -- we spend $12 billion a MONTH in Iraq now, and that doesn't even include the additional defense and other costs related to our support of so-called "friendly" oil states.

4) Immediately start the process for construction of many nuclear power plants, subject to compliance with a set of severe safety standards. We are the most technologically advanced nation in the world and we're hysterically afraid of a technology that France is comfortable enough with to use for generation of over 75% of its power.

5) In the near-term, and to ease the blow to the average American, allow extremely generous tax credits for people who use energy efficient technologies in their homes and cars.

See, it's that easy. Problem is, it will take a dictator to do it, because it is political suicide for a congressman to vote for even one of these proposals, much less all five.

 

[1yearOlder]

Problem is, it will take a dictator to do it,

Already got one ..... no problem .