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

[Flubber]

Originally posted by Kidicious

Do you know what it means to have monopolistic power? It means you can charge more than you would be able to in a more competitive situation. They are making more profit than the guy at quickit-mart. Their profit margins are much bigger.

Cite ??

Originally posted by Kidicious

You are associating monopolistic power with ROR, and they aren't associated that way. ROR is a long run concept, and monopoly power/competition is a static concept.

Huh-- You are the one saying they can charge "too much" due to being a monopoly. I just think if you can consistently charge too much that that might get reflected somewhere like PROFITS.

Originally posted by Kidicious

ROR is irrelevant to fairness according to neo-classical theory that states that a fair price is one that is the price under competitive situations only. Monopoly prices are not fair.

Since I don't accept that a monopoly situation exists, the statement is irrelevant.

Originally posted by Kidicious




Bull****. Capacity decisions are made with respect to future profitability, not present. Anyone who is basing their decision on current profitability is just as stupid as those people who over invested in the past.

Interesting. you are saying bull**** to me and then following it with a statement I agree with. OBVIOUSLY an investment decision is based on projected rather than historical profits. Thats kinda Business 101 doncha think? But in an industry that has average 5% over the last 15 years, I doubt you would find many projections that would be much higher. A new refinery would likely be more expensive and have a lower ROR than existing ones. I spoke with a guy here that worked in the refinery section of a supermajor and he put it bluntly that they couldn't find a business case to build a new North American refinery that broke even

[Kidlicious]

News Flash! Refining margins are at record highs.

[Flubber]

Originally posted by Kidicious


You have blinders on. Anyone can see that they have monopoly power by looking at the way they are able to price their product. Competitive prices don't act like that. You don't see profit margins and prices that stay high for long periods of time.

A few points

1. prices can stay high for a scarce resource for a long long time even if there are thousands of suppliers -- demand exceeds supply etc etc

2. If we are talking REFINING, you are out to lunch based on all the credible stuff I have seen. Most profits are upstream since the high price that caused oil that costs 40-50 bucks a barrell to be produced is also available for the barrell that was produced at a cost of $10.

3. Refining profit margins have been low compared to most industries and I'm still looking for a source from you that says otherwise

[Flubber]

Originally posted by Kidicious
News Flash! Refining margins are at record highs.

Newsflash-- If 5% is the average return, getting to a reasonable rate of return would probably involve "record high profits".

Again its supply and demand. The demand for refining is higher than the ability to meet it

[Kidlicious]

Originally posted by Flubber


A few points

1. prices can stay high for a scarce resource for a long long time even if there are thousands of suppliers -- demand exceeds supply etc etc

Not in a competitive environment. If competition is adequate the price well correct instantaneously (theoretically of course).


I'll comment on the rest in a minute or so.

[Flubber]

Originally posted by Kidicious

Not in a competitive environment. If competition is adequate the price well correct instantaneously (theoretically of course).

Did you miss the part about a scarce resource? The long lead time for much of the potential oil production out there means that there will never be an "instantaneous" anything.

You could offer $150 a barrell and there is still a limit to how much additional supply copuld come on stream in the short term


Edit -- oh and I like the "theoretically"--

[Kidlicious]

Originally posted by Flubber

Did you miss the part about a scarce resource? The long lead time for much of the potential oil production out there means that there will never be an "instantaneous" anything.

You could offer $150 a barrell and there is still a limit to how much additional supply copuld come on stream in the short term


Edit -- oh and I like the "theoretically"--

Scarcity is assumed as the normal situation. Resources are never unlimited. They are allocated efficiently under competitive environments (theoretically).

[Kidlicious]

Record Profit Margins

While in 1999, U.S. oil refiners earned 22.8 cents for every gallon of gasoline they refined, that profit margin increased 80 percent by 2004, to 40.8 cents per gallon.

I don't know about you, but I'm sure they earn much more than that today.

[Kidlicious]

The profitability of the U.S. refining/marketing operations of the FRS companies reached an FRS all-time high during 2004 (dating back to 1977). The new all-time high of 18-percent return on investment (ROI) exceeded the previous all-time high, registered in 1989, by more than 3 percentage points and essentially doubled the 9-percent ROI of 2003.

Energy Information Administration

[Flubber]

Originally posted by Kidicious
Record Profit Margins



I don't know about you, but I'm sure they earn much more than that today.

Hmm indiustry seems to differ with your numbers

Copyright 2004 Knight Ridder/Tribune News Service

Knight Ridder/Tribune News Service

Fort Worth Star-Telegram

May 27, 2004, Thursday


Exxon Mobil president says they make only nickel a gallon profit



By Dan Piller



DALLAS _ Exxon Mobil Corp. Chairman Lee Raymond said that no matter how high gasoline prices may be at the pump, oil companies like his take no more than 3 to 5 cents per gallon in profit.

"Most of the cost of the price of gasoline at the pump is for taxes and the purchase of crude oil, and we are by far the largest purchaser of crude oil in the world," Raymond said at a news conference after Exxon Mobil's annual meeting Wednesday at the Morton Meyerson Symphony Center in Dallas.

Raymond said that while Exxon Mobil produces about 1 million barrels of oil per day, it has to buy enough crude to meet the 6 million-barrel capacity of its refineries, which exposes the company daily to crude prices that have topped $40 per barrel this month.

"If we're doing everything right, we may make a nickel per gallon," said Raymond.

[Flubber]

Oh and on your quote above your graph -- GOOD

If 18% ROI is the "record-high" thats still not an amazing rate of return-- and if they can start projecting something in the 10%+ range maybe there will be some ability to build new refining capacity out there

[Kidlicious]

I bet he sings a different tune when he's speaking to the major shareholders. I looked at Exxon Mobils financial statements. I couldn't find refining margin details. But you can see that earnings are going through the roof and output is staying constant. What does that tell you?

[Kidlicious]

Originally posted by Flubber
Oh and on your quote above your graph -- GOOD

If 18% ROI is the "record-high" thats still not an amazing rate of return-- and if they can start projecting something in the 10%+ range maybe there will be some ability to build new refining capacity out there

That's completely besides the point. The question is whether or not they are producing the amount that they would if the market were competitive. They certainly are not.

[Flubber]

Oh kid -- from YOUR source

In 2001, U.S. refining/marketing had what was then the second highest year in terms of profitability in the history of the FRS at 14.5 percent. The following year was the worst year in the history of the FRS at -1.7 percent

Minus 1.7 %-- oh the monopolists !!! Clearly they control the price like a puppeteer!!

If it was as controlled as you claim, they would be heading for stable moderately high margins. That is the most profitable in the long run

[Flubber]

Originally posted by Kidicious
I bet he sings a different tune when he's speaking to the major shareholders. I looked at Exxon Mobils financial statements. I couldn't find refining margin details. But you can see that earnings are going through the roof and output is staying constant. What does that tell you?

Well they do produce at least a million barrells of crude a day-- leaving aside anthing but the upstream business that alone would give them 70 million a day in gross revenue today for the same production that might have netted 30 million just a few years ago