Gas/Oil

Discussion in 'Current Events' started by Killer Joe, Apr 29, 2008.

  1. BigBlue Magic Jones

    Typically, maybe just in MT, Agricultural land receives a huge tax break - but you have to grow crops on it to earn it.
  2. Spiderman CPA Man in Tights, Dopey Administrative Assistant

    In some places, and I think Maryland is one of them, farmers get paid NOT to grow crops :)

    With some big bill that just passed Congress, subsidizes were raised for some crops like corn, but the "catch" is that it's a fixed price and doesn't fall (or rise) with market prices. So if corn is $7 a bushel now, if the price ever falls below that, farmers still get the $7.

    Hmm, maybe subsidy isn't the right word. Minimum guaranteed price? Something like that...
  3. DarthFerret Evil Sith Weasel

    The government has 2 different types of subsidies for farmers. The first is one that keeps the ground fallow. (That means that they are paid to not plant anything in that field that year). The second is what you have been mentioning. Until this ethanol deal, corn was worth more a bushel, it is true, however the cost of growing corn is much higher than that of soybeans, wheat, milo, etc.... Also, corn sucks the most nutrients out of the ground over any other crop (go figure, it is also one of the tallest crops grown commercially). A farmer would have to go over his field with anhydrous amonia several times a year if all he planted was corn. Soybeans are usually interspersed in crop rotation to help supply nitrogen back into the ground. Our crop rotation went something like this: Fallow, wheat/soybeans(usually in the same year), popcorn, field corn, fallow, etc....

    Sometimes we would skip a fallow year, or mess with that rotation in a few fields to see what would happen, but it is hard to want to experiment with your source of income.
  4. Killer Joe Active Member

    Gas: Dropping to $122.xx/barrel as of right now.

    At the pump: Going higher.

    Why?
  5. Spiderman CPA Man in Tights, Dopey Administrative Assistant

    As I said in another thread, the "experts" can't figure it out either.
  6. Mooseman Isengar Tussle

    Find some new "Experts" to listen to.......

    Chevron still pumped out plenty of oil to cash in on prices that recently approached $120 per barrel before retreating slightly. In the United States, the San Ramon-based company pocketed an average of nearly $90 per barrel for crude oil sold in the first quarter, more than doubling the $38.03 per barrel at the same time last year.
    May2, 2008

    Profit per barrel is triple what it was last year..... this is not a function of pumping out more volume, but making more profit on what is already being sold.....
  7. Spiderman CPA Man in Tights, Dopey Administrative Assistant

    The "experts" run the gamut... each of their own theory of why the prices keep rising when they shouldn't. There's no general consensus. You're not gonna find any either if you look, that's my point.
  8. Mooseman Isengar Tussle

    Maybe I'm being to obvious..... :eek:

    Profits per unit are triple over last year...... that's a big factor in the cost.....

    But, I'm sure some "expert" will say that has no effect on the price............. :(
  9. EricBess Active Member

    Killer Joe - The "supply/demand" on this one is actually quite interesting. I took an econimics class where they made a point that most people don't understand what the law of supply and demand are, nor do most people realize that they are two different laws that work together.

    The law of supply states that the more something costs, the more people you will have that are willing to sell that good.

    The law of demand states that the less something costs, the more people you have that are willing to buy that good.

    These laws form the basis of an economy where the free market system creates a balance where the number of people who want a good matches the number of people who provide that good.

    Consider - The "acceptible" price of pizza in a town is $10 per pie. 100 people decide that at this price, they can make a living selling pizza. But, at this price, only 5,000 want to buy pizza. Each shop can make enough pizza to feed 1,000 people so there is enough pizza supply to feed 10,000 people.

    Pizza shops realize they aren't working at capacity, so in order to gain an advantage, a few of them drop their prices. Now, the "acceptable price of pizza is $9 and 6,000 people are willing to pay that price. However, 10 suppliers decide that they don't want to sell for $9, so they go out of business and find something else to do.

    This continues until 70 stores are prividing pizza for $7,000 at a price of $7.50 per pie. The desired demand now matches the number of people who are willing to supply. and the free market system has worked.

    Two problem:
    1. The law of demand breaks down with gas. It is effectively very difficult for people to change jobs. Technically, the law of supply works, but there are too many outside influences for people to decide they won't pay anymore. Eventually, it becomes too expensive for people to afford it, but that requires lifestyle and/or employment changes.

    2. The law of supply breaks down with gas. As the price of gas increases, the theory is that more and more people should be willing to supply it. Unfortunately, it is not as easy to start producing gas as it is to open up a pizza shop. Effectively, this is a monopoly situation because breaking into the oil industry for a new company simply isn't practical.
  10. Spiderman CPA Man in Tights, Dopey Administrative Assistant

    Mooseman: The question is WHY are barrels so much now as opposed to last year (using your example)? Is it because China wants more? Is it because speculators are artificially driving up the price? That's what I'm saying that the "experts" can't agree on a single reason or even a combination of reasons, because none of them really make sense when they put them together.
  11. Killer Joe Active Member

    Thank-You. However, I was wanting to point out this: Profit percentage at $122/barrel vs. profit percentage at $1.00/barrel are way off,....

    Supply and demand fail to figure in this point, however, greed plays a big part.
  12. EricBess Active Member

    Yes, I was actually debating whether I should make a facecious comment about the "law of greed". Everyone claims that they are barely hitting their margins, but I think someone is lying. I think that someone in the chain has figured out that the market will be forced to bear whatever they throw at it and is making a killing.
  13. Killer Joe Active Member

    Honestly, Capitalism IS a very American thing to do. Why be in a business if you're not in it for the money, right?

    If folks are willing (or need to) by widgets at $X price, then why not see if they're willing to pay $X+ price? And keep increasing it until the demand slows down then ease off just enough for widgets to become in demand again.

    "Cha-Ching!"
    ~CEO's motto
  14. DarthFerret Evil Sith Weasel

    I charge $151/ widget....heh heh.

    Oil is one of the wierdest things in which the competition does not seem to drive down the price. In my business, I have one of the most expensive products on the market. When it comes to a price war, I will pretty much always lose. I have to prove to each of my customers that my product holds better value than the competition. That being said, we still have to keep our price somewhat competitive, or companies would go with another brand. We have been #1 in the market since 2001, yet I still lose out to the lowest bidder quite a few times. If gasoline had that type of competition, I bet you would see the prices go down. The big difference (and I think this was stated earlier) is that it is extreemly difficult and costly to start a new refining company.

    Compare this to something simple like Coca~Cola. The pretty much are the highest in price, yet the outsell most of thier competition. Why? (depends on where you live, some places Pepsi is the high end of the market share) Since the Walmart brand is so much cheaper (almost half the price) and the taste is somewhat similar (a totally different debate there), why do people by so much Coke? I am sure there are other factors (advertising, brand recognition, conditioning by peers/family, etc...) but plain and simple, Coke is simply put, a better product than the off-brands. However, if Coke decided to charge twice as much per can/bottle, then you would see a rapid decline in thier sales. Especially since the other brands would see this as an opportunity to run a series of ad-campaigns, price specials, and other promotions to drive Coke out of the market alltogether. Until an oil company decides to do just that, we are stuck with the current pricing.

    If you were to put government control on oil companies (such as Hillary was claiming she wanted to do) then you would never reach that point of competition. At least at this point there is still somewhat of a chance to do just that (albiet a small one).

    What will it take to do that? I have no idea, but government control is definately not one of those. Personally, I think that American companies should be allowed to drill in certain places that they are not allowed to now. If we can get a bit further away from foreign oil, then China's newfound demand would not be affecting our prices nearly as bad. Plus, more of the revenue from the higher oil costs would be shuffled back into our economy rather than being sent overseas.
  15. EricBess Active Member

    Woot woot!

    There are a few things that can break-down supply/demand. Industries with a high-point of entry are tough and there are certain "monpoly laws" that are designed to protect when they are enforced properly. Unfotunately, one of the problems with a monopoly is that they tend to have a lot of money to start with and politicians now days seem to be more interested in greasing their own pockets than in protecting the American public.

    I know that some environmentalists don't want American oil drilling, but I'll bet its the current oil companies and their money that is keeping it from happening.
  16. Mooseman Isengar Tussle

    Have to agree with DF that drilling here would help, but I wouldn't want to see the oil companies pay pennies to drill on public land.... It has happened before.

    I don't like the idea that our (US) energy consumption is funding those that want to bring us down (along with everyone else)......


    I have another question(s)...... if the price of crude oil is so high, where is all that money from Iraq sales going to.... Didn't Bush promise that the Iraq nation would pay for us freeing them? Why are we paying for it and who is pocketing the money from the Iraq oil sales?
  17. DarthFerret Evil Sith Weasel

    I think that is a pretty simple question mooseman. The Iraqi's are keeping it. More specifically, the Iragi oil companies and the Iraqi government.

    Yes, they are supposed to help pay for this military deal, but who is going to enforce that? Are we supposed to let the troops starve? Have defective equipment? Until someone with some authority does something to make the Iraqi's pay, we will have to foot the bill. I do agree with finishing the war with an outcome of victory, but I also think that some type of ulitimatum should be brought up to Iraq (and others...not real sure who all is involved in this..Afganistan? Iran? Kuwait? Saudi Arabia?) It will take someone a lot smarter than myself to figure out this solution and impliment it. I can say with some degree of confidence that pulling out and running with our tails between our legs is not an acceptable answer. I just do not know what is.
  18. Spiderman CPA Man in Tights, Dopey Administrative Assistant

    I don't think drilling for oil in current American soil/territory will help. First off, it takes about 5 years to drill a well and get it productive. Who knows what the world outlook will be in five years? Better? Worse?

    Second, it's probably useful to know who exactly China imports their oil from. For the US, I think Canada is the #2 importer, followed by either Mexico and/or South America (Brazil?) #1 might be Saudi Arabia, but they're already friendly to us.

    So if any of those countries match up with China also, then yes, I agree there's some fighting over resources. But if not, then drilling more oil isn't going to help - any drop in imports will probably just be taken up by China or India or whatever and prices will remain high anyways.
  19. Mooseman Isengar Tussle

    Just because it takes time to do something is a poor reason to not do it.... you have to plan for the future now.... that is one of the reasons we are in this swituation is that our leaders have failed to look towards the future and do what is needed......
    This energy crisis has been showing signs for many years.....

    This may surprise you Spidey...
    Crude Oil Imports (Thousand Barrels per Day)
    Country YTD 2007
    CANADA 1,825
    SAUDI ARABIA 1,325
    MEXICO 1,475
    NIGERIA 1,156
    VENEZUELA 1,033
    IRAQ 464
    ANGOLA 570
    ALGERIA 484
    ECUADOR 214
    KUWAIT 208
    BRAZIL 174
    COLOMBIA 107
    RUSSIA 92
    CONGO 58
    CHAD 74
  20. Spiderman CPA Man in Tights, Dopey Administrative Assistant

    I'm not saying it shouldn't be done, I am just skeptical that it will help. I mean, no one foresaw gas going to $4 a gallon five years ago, right? So what would it be in 5 years? Or how much demand will oil be in five years? It could be that we've drilled all we could yet the thirst for oil kept increasing and prices will be the same or still go higher.

    Thanks for the data, I'm not too surprised except I forgot Nigeria as one of the top 5 exporters to the US. Venezuela was the South American country I was thinking of; everyone else I had mentioned already. :)

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