Mailing List flyrotary@lancaironline.net Message #42867
From: MICHAEL D PARKER <mdparker9a@msn.com>
Subject: Re: Oil Thoughts
Date: Fri, 16 May 2008 10:38:10 -0600
To: Rotary motors in aircraft <flyrotary@lancaironline.net>
I might add a few items:
1.  People complain about the size of oil company profits- remember the current companies are each a combination of several large corporations that existed independently a few years ago.  The profits are not as large as they seem in comparison.
2.  To reduce foreign dependency, we need to
      a.  use non-oil fuel sources to generate electricity- nuclear, hydroelectric, wind, etc.
      b. we need to use more natural gas for automotive and heating use- domestically supplied, huge reserves, and clean burning.
3.  Alternative Biofuels and oil tars/oil sand sources are nice, but they have a big cost.  The open market will provide these sources when oil prices become high enough to make them profitable.  Subsidizing them makes no sense.
4.  Oil is a world market- world demand sets the prices.  We still have cheap gas prices compared to most other parts of the world.  Oil is expensive in the US because of our weak dollar; when the price is adjusted to inflation, it is historically close to normal.
5.  World supply is declining (5-10% year, including the new large discoveries in S. America), world demand is increasing rapidly (20-30%/year).  Prices will rise much faster in the future.
----- Original Message -----
From: M Roberts
Sent: Thursday, May 15, 2008 6:32 PM
Subject: Oil Thoughts

Tracy and Timothy,
 
I agree.
 
Somebody somewhere decided to make things more expensive in a gradual manner. Although there are several factors for the recent run-up (which I don't think was planned especially before the election):
 
1.) Dollar depreciation (thanks allot Greenspasm!)
 
2.)China-crappy electric grid. Lots of factories for Wal-Mart junk use diesel gen sets.
    
    The Chinese gov. tried to do something incredibly stupid.
        a.) Cash in depreciating dollars for oil (not so stupid)
        b.) Fix the price of diesel (pretty dumb)
 
Result is many of the small refiners in China stopped making diesel because the input went up and the profit went away DUH!
 
So then they started to buy up diesel on the open market. We actually export a lot of diesel because our older refineries only make high sulfur distillates. Which the EPA outlawed. Nobody else makes this low sulfur diesel. So we don't have enough refining capacity to make it, and we can't import it.
 
The refiners are not making much money as Timothy mentioned. The Crack Spread is at historic lows. Last summer the oil companies were making about $40 per barrel of oil. Now they are making about $4 or less. Remember how cooperative the oil companies were before the last election when crack spreads went to nothing! Then they got their reward during the $40/barrel moment......but then CHINA!!!!  Maybe they DO know what they are doing......happy thoughts, happy thoughts....
 
Check Microsoft's operating margin VS. oil companies, or any other company for that matter. They do not make excessive margins especially considering the capital at risk. The scale is huge however, so the numbers are mind blowing. Especially if the only balance sheet you ever see is your credit card bill..
 
I expect the crack spread to resolve itself in two ways
 
1.) $5/gallon gas
2.) Oil price decline
 
Unless we do something stupid in the middle east, and then all bets are off.
 
We have been filling the strategic petroleum reserve. It's full now. Plus Goldman Sachs just said oil is going to $200/barrel. Got to get the rubes worked up to buy out their contracts.......
 
I also agree.....we can't handle the truth, most of us.
 
Maybe they just assume those who can will find the truth and make money from it.
 
Still I think calling Politicians smart is giving them way too much credit. The smart ones aren't the grandstanding brain dead variety you see on TV.
 
The Scary thing is....politicians ARE playing to the masses. Giving them what they want to hear.
 
Happy thoughts, Happy thoughts......
 
Monty
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