Dismiss Notice

Psst... Ready to join TalkBass and start posting, make new friends, sell your gear, and more?  Register your free account in 30 seconds.

For anyone who didn't belive gas price hikes were pure profit...

Discussion in 'Off Topic [BG]' started by Tash, Sep 9, 2005.


  1. Tash

    Tash

    Feb 13, 2005
    Bel Air Maryland
  2. bigbeefdog

    bigbeefdog Who let the dogs in?

    Jul 7, 2003
    Mandeville, LA
    Yes, they profit. They produce and sell a worldwide commodity which, for reasons completely beyond their control (increased demand, unplanned shut-ins, etc.), has gone up dramatically in price.

    And a large chunk of that "profit" will be rolled back in to a) repair extensive damage to facilities caused by Hurricane Katrina, and b) design, build and install new facilities to produce oil from new areas, in an effort to keep up with rising demand.

    My house, standing, dry, livable and 99% intact in an area pounded by Katrina, has gone up dramatically in "value" in the last three weeks; I've already been offered considerably more for it than I could have gotten a mere month ago. Other intact homes are the subjects of bidding wars. Again, reasons completely beyond the owner's control.

    It's the way the economy works.
     
  3. threshar

    threshar

    Jul 30, 2002
    The thing that gets me is when the prices go up and hte oil companies are saying "LOOK! WE'RE NOT MAKING MONEY! WE'RE HURTING LIKE YOU! JUST DON'T LOOK AT OUR RECORD PROFITS!!!" (this is more in reference to last year, not katrina. Amazingly, since the east coast pipeline got back online prices have inexplicably started going back down. That is very unlike the companies! heheh
     
  4. bigbeefdog

    bigbeefdog Who let the dogs in?

    Jul 7, 2003
    Mandeville, LA
    Nope. That's a jaded view of the way it works.

    What goes in the books as "net" profit in this quarter becomes the funding for AFE's (Appropriations For Expenditure) in the coming quarters. They don't show up on the books *yet*, since those projects have not yet been kicked off, but they will.

    Oh, sure, a portion will be used for fat dividends and bonuses for shareholders and officers. Not unlike any other industry.

    But in order to keep an oil company financially "healthy", proven reserves need to be substantial and increasing, and production needs to be the same - that requires *large* reinvestment.

    The bulk of what you're referring to as "profit" will eventually (and likely, very soon) be used to finance exploration and development of new fields and plays (many of them in deep water, where the costs are exponentially greater, and new production facilities regularly cost over a billion dollars US).

    EDIT: Oh, OK.... looks like you deleted your post..... so, never mind.....
     
  5. Tash

    Tash

    Feb 13, 2005
    Bel Air Maryland
    Repairs will be largely funded by the goverment in the form of additional tax breaks and bailout money, just wait and see.

    As for exploration and development of new resources, well much of that is also funded by the government, again through the use of massive tax breaks for "planned" development that often does not materialize or is far less extensive than promised.

    You, me and ever consumer in America is getting bent over by these companies. If you don't want to see that, that's your choice, but its obvious to me that something is wrong. High energy costs are hurting our economy, and at the same time as nearly every industry in America and beyond is being harmed by oil prices the industry that supplies that oil is a) banking record profits, and b) is getting to pocket huge amounts of it because the federal government is forcing taxpayers totake on much of the burden they claim to be shouldering.
     
  6. bigbeefdog

    bigbeefdog Who let the dogs in?

    Jul 7, 2003
    Mandeville, LA
    No, they won't. And I don't have to wait and see; I've spent a good portion of my billable time over the past year working on repairs to GOM facilities damaged by Hurricane Ivan in 2004, so I know where the funding comes from.

    In part, perhaps, but what you forget is that the "massive tax breaks" come back to the government in the form of *massive tax collections*. Here in the US. taxes are collected on the GOM leases, at the wellheads, at the refineries, at the gas pump, et al - and those tax rates far exceed any collected on any other product. The government is, in essence, a "partner in the business" - they make a large investment, this is true, but they profit handsomely from it.

    Heck, when gas was selling for under a dollar a gallon a few years ago, a good 35 - 40 cents of that dollar was taxes (in most states). That was approaching a 100% sales tax rate at the pump, and that's not even considering the taxes collected upstream - which are substantial.

    As I said, the government reaps far more than it sows. You harp about the dollars invested by the federal government, and somehow miss the far greater amounts returned in taxes when the product is produced and sold.

    If you want to believe this "greed" stuff, be my guest..... but as a long-term consultant to the production industry (not employed by a major), I can tell you - it just ain't so....
     
  7. bigbeefdog

    bigbeefdog Who let the dogs in?

    Jul 7, 2003
    Mandeville, LA
    No problem. :cool: