Down with the evil Gas lords II: Kaak's Revenge!

[Kidlicious]

Originally posted by Flubber


and exactly how quickly do you expect the new refineries to be built-- Remember your own link showed a NEGATIVE rate of return just 2 years ago. Didn't you read how the approvals and financing can take years before you ever get tobreak ground?


It sounds to me that your complaint boils down to the fact that the market hasn't reacted quickly enough.

New refineries haven't been STARTED. How is it relevent how long it takes to build if they haven't been started yet.

[Flubber]

Originally posted by Kidicious


New refineries haven't been STARTED. How is it relevent how long it takes to build if they haven't been started yet.

Didn't you read how the approvals and financing can take years before you ever get to break ground?

[Flubber]

Originally posted by Kidicious

Undersupplied market = monopoly power

If supply doesn't meet demand it's because the suppliers have pricing power.


I don't think that 18% is just a decent return. Why do you say that? 10% is normal I think.

Again you are going with your one year blinders-- Go back to your own article and calculate the 3 and 5 year rates. Multibillion dollar investments are based onn long term projected returns. After one year at 18 these folks do not assume this return into the future

[Kidlicious]

Originally posted by Flubber



Again you are going with your one year blinders-- Go back to your own article and calculate the 3 and 5 year rates. Multibillion dollar investments are based onn long term projected returns. After one year at 18 these folks do not assume this return into the future

Look at Imran's article. Future demand for gasoline is forecasted to increase quite a bit. 1990 doesn't matter. I don't buy it that Exxon can not get financing. That's bull.

[Lawrence of Arabia]

quote:
Originally posted by Lawrence of Arabia
why would they withhold production? it is very expensive to do so.

What do you mean?

when oil was at $20 a barrel, it cost them only $20 per barrel to withold production from the market
with oil at $60+, it costs them $60 per barrel to withhold production from the market.

their cost of keeping a barrel off the market has increased. if they were really witholding production, they would be selling it now because it is becoming more and more expensive to withold in - in the same way that as wages go up, leisure time becomes more expensive, and if leisure and work are normal goods, people work more the more they get paid more (up to a point of courrse. this differs from oil production since there is no limit to how much you can drill)

[Kidlicious]

Originally posted by Lawrence of Arabia

when oil was at $20 a barrel, it cost them only $20 per barrel to withold production from the market
with oil at $60+, it costs them $60 per barrel to withhold production from the market.

their cost of keeping a barrel off the market has increased. if they were really witholding production, they would be selling it now because it is becoming more and more expensive to withold in - in the same way that as wages go up, leisure time becomes more expensive, and if leisure and work are normal goods, people work more the more they get paid more (up to a point of courrse. this differs from oil production since there is no limit to how much you can drill)

If they have pricing power they can get more for their product by withholding it so their total profit increases.

[Flubber]

Originally posted by Kidicious


Look at Imran's article. Future demand for gasoline is forecasted to increase quite a bit. 1990 doesn't matter. I don't buy it that Exxon can not get financing. That's bull.

BUt why pray tell is it Exxon's job to be the one to build more refineries? Perhaps they have as many as they want in North America.

Are you saying that a private actor is somehow obligated to build refineries to meet a need because they are already in the industry? On what basis?

Since you apparently know that it has no risk, I don't see why you can't convince a bank (after all there is no risk) and start a refinery yourself

[Kidlicious]

Originally posted by Flubber
BUt why pray tell is it Exxon's job to be the one to build more refineries? Perhaps they have as many as they want in North America.

I'm sure they do have as many as they want. I'm just saying that if it were a competitive situation that they would want more, because they would get more profit that way.

[Flubber]

Originally posted by Kidicious


If they have pricing power they can get more for their product by withholding it so their total profit increases.

thats daft-- on any major project there is major financing involved and the operating costs and the time value of money mean that 50 a barrell today is worth more than 60 next year-- besides don't you think people would notice those shut-in platforms?


Hate to break it to you but I have met operational people and the mandate at large Exxon projects right now is to get as much out of the ground as it is safe to do. Maintenance is delayed, requests for regulatory approvals for flaring are made, etc etc -- all in an attempt to get as much revenue now as possible ( and not inconsistent with long term feasibility)

[Flubber]

Originally posted by Kidicious


I'm sure they do have as many as they want. I'm just saying that if it were a competitive situation that they would want more, because they would get more profit that way.

Do you not understand "risk" at all ??

ie The Calgary real estate and rental market is super-hot right now. All projections are positive. But the landlord with 3 million square feet might not want to build another 2 million square feet. Why ? Its profitable on all projections . . .. But dear sir, then calgary would make up too much of their portfolio. Even though it looks good, risk diversification says you don't want any more. ( a downturn though unlikely could damage the company)

Companies will NOT do many things that are profitable

1. if they have other more profitable things to do with people and resources or

2. it doesn't fit their risk plans. there's a reason that major offshore projects have multiple owners. Its the same reason why a refiner may not want to own more refineries in a given marketplace

[Flubber]

Originally posted by Kidicious


I'm sure they do have as many as they want. I'm just saying that if it were a competitive situation that they would want more, because they would get more profit that way.

That quote is crazy on another level too. The most competitive markets are precisely the ones that you don't usually want to enter because they are so darn competitive and your start-up issues may place you at a disadvantage

[Kidlicious]

Originally posted by Flubber


thats daft-- on any major project there is major financing involved and the operating costs and the time value of money mean that 50 a barrell today is worth more than 60 next year-- besides don't you think people would notice those shut-in platforms?


Hate to break it to you but I have met operational people and the mandate at large Exxon projects right now is to get as much out of the ground as it is safe to do. Maintenance is delayed, requests for regulatory approvals for flaring are made, etc etc -- all in an attempt to get as much revenue now as possible ( and not inconsistent with long term feasibility)

I don't think they have pricing power for those projects, but they do for refining.

[Flubber]

Originally posted by Kidicious


I don't think they have pricing power for those projects, but they do for refining.

Well since you think it, it must be so . Obviously they have used this "pricing power" to great advantage over the years-- I mean they are earning returns on billions that rival those of a Quickee Mart

[Kidlicious]

Originally posted by Flubber


Do you not understand "risk" at all ??

ie The Calgary real estate and rental market is super-hot right now. All projections are positive. But the landlord with 3 million square feet might not want to build another 2 million square feet. Why ? Its profitable on all projections . . .. But dear sir, then calgary would make up too much of their portfolio. Even though it looks good, risk diversification says you don't want any more. ( a downturn though unlikely could damage the company)

Companies will NOT do many things that are profitable

1. if they have other more profitable things to do with people and resources or

2. it doesn't fit their risk plans. there's a reason that major offshore projects have multiple owners. Its the same reason why a refiner may not want to own more refineries in a given marketplace

I don't know what their portfolio looks like, and either do you. Companies do actually expand regardless of the fact that they already have a portfolio allocation.

[Kidlicious]

Originally posted by Flubber
That quote is crazy on another level too. The most competitive markets are precisely the ones that you don't usually want to enter because they are so darn competitive and your start-up issues may place you at a disadvantage

Don't play dumb. A competitive market is one where new suppliers enter the market and current suppliers tend to expand when profits are high. You've taken econ 101 I'm sure.