May 20, 2008
Really, Michael? Really?
Texas Railroad Commission Chair Michael Williams isn't the sharpest knife in the drawer, nor is he the dullest. In fact, he's not a knife at all. He's a rusty bottle opener in a world full of twist offs and every bit as worthless.
There's been a lot of action regarding the RRC in the last couple of weeks. As always, TXSharon over at BlueDaze is keeping a watch on coverage around the 'sphere.
For my part, Williams' defense of big oil's record profits betrays a stunning naivete at best, willful ignorance (or a willingness to lie) at worst.
Who’s getting fat from higher crude oil and gasoline prices?The Saudi, Russian, Venezuelan, etc. nationalized oil companies. They own 75% of the world’s crude oil reserves. Exxon, the veritable villain for high gasoline prices, controls less than 3% of world reserves.
The pump price is comprised of four components. The main one is the cost of crude oil. As a share of the retail price we pay at the pump, the cost of crude oil has risen dramatically to historic levels since 2000.
Which means the Saudi royal family, Chavez and others are making money hand over fist as the recipients of the lion’s share of what we pay at the pump
For Mikey to be right, Exxon and the other integrated oils (that's the technically correct name for oil companies that control everything from production/sourcing all the way to consumer sales/marketing) would have to be buying oil at NYMEX spot prices. And we all know that's not happening. Why? BECAUSE THEY'RE STILL MAKING A PROFIT. You see, all these large oil companies have extensive long term contracts with suppliers like, for instance, Saudi Aramco. Not to mention the fields around the world they control where they pay royalties as low at 15% at a contracted price.
This brings their cost of crude to significantly less than $130/bbl. I'd put it closer to $58-65/bbl on average. There's probably a clause in the contract that puts it in a band based on spot, probably no more than 75% of spot and no less than 50% of spot.
You and I, however, don't get the benefit of this great deal. We get to pay spot prices because we're instant, on-demand (not contract) consumers. I'll even go Mikey one better and tell him that I don't expect Exxon to sell me gas based on their cost of crude. I know I'm a consumer and I have little or no bargaining power so I'm not gonna even whine about that.
I will scream at the top of my lungs about their tax breaks and credits. Oh yeah, that's pretty useless to us, especially since these companies are making billions PER QUARTER and can easily afford to prospect for more crude*. Mikey doesn't address that. He does go on to some really, really, funny stuff...
• Distribution and marketing costs and profits slid from a high of 13% in 2000 to about 8% today; and
• Refining costs and profits have remained at about 8% from 2000 through 2008.
He means as a percentage of the price at the pump. Refining costs have remained constant at about 8%. So, in 2000 it was roughly 9 cents/gallon and now it's more than 33 cents/ gallon. What changed? It's not like some super new and expensive refining process has been invented. It's not like they refiners are paying their employees much more.
It's profit. Pure and simple. Part of me wonders if even Mikey believes this crap. As for the distribution, lets keep in mind that the oils now own a much larger number of service stations than they did in 2000 and have shut down a large number as well. They control the retail channel and have squeezed margins to starve out independent convenience stores. Oh, and while the percentage may have changed, the dollar amount today is still higher... 13.9 cents in 2000 per gallon vs. 29.6 cents today. How's that for a nice inflation adjusted return?
Is this REALLY the best you Republicans can do? Really? Tina Fish, is this the man you want to be your standard bearer? Someone who's either too dumb to get how capitalism works or lies just for the hell of it?
My prediction? No one in the real world is dumb enough to believe Williams. And they're going to turn on him on November. And I'll laugh and laugh.
*On the subject of exploration, the integrated oils aren't doing a lot of prospecting because they know what Matt Simmons over in Houston has known for a while. We're running out of cheap, readily exploitable oil. These profits the oils are piling on are going to be used for something and I'm damn sure it won't be drilling a dry hole in West Texas. Which means their tax cuts need to be repealed. Bless Mikey's heart, I bet he hasn't even come to that conclusion. Poor dumb thing is probably waiting for the next strike near Humble.
Posted by mcblogger at May 20, 2008 01:49 PM
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Comments
Most excellent dressing down, McB.
Posted by: TXsharon ![[TypeKey Profile Page]](http://www.mcblogger.com/nav-commenters.gif)
at May 20, 2008 04:18 PM
I just have to link to this.
Posted by: Easter Lemming at May 20, 2008 07:29 PM
Thank you:)!
Posted by: mcblogger at May 21, 2008 09:05 AM
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