Rita

oreca · Post by **oreca** » Thu Sep 22, 2005 12:34 pm

Actually Peter, good news for us, I heard that it was all a big misunderstandment, the prices of gasoline in Moncton haven't changed yet...

But everyone filled their cars and there were some big line ups everywhere... From what an Esso owner said they don't have much gas left in their tank since everyone went out and filled their car(s)!

Good to know it's not $2!

I haven't mentionned it but hopefully this hurricane doesn't harm too many people.

aceonbass · Post by **aceonbass** » Thu Sep 22, 2005 1:13 pm

Keep in mind that the oil companies are making record profits right now. Do you think they'll use some of that to offset the price of gas to help out affected Americans in this time of crisis? Don't bet on it.

brammy · Post by **brammy** » Thu Sep 22, 2005 1:32 pm

Howard touched on an important aspect. Its not just the oil refineries but also the petrochemical plants and storage in the Galveston Bay area. This could have a broader effect than just oil/gas.

winston · Post by **winston** » Thu Sep 22, 2005 1:52 pm

I hate to break that myth Dane but here are some quick facts for you.

Refinery margins have finally increased from a high of 11 -12% to around 15 or 15.5% after decades of low returns. Some of the smaller refiners have been operating on margins of 7% or less for many many years. Also the vast majority of small refineries were decommissioned, sold and moved overseas because of this unfortunate economic reality.

The integrated refiner/marketers are doing alright in this supply demand type situation now but the retail side of the equation are not making any real headway at all.

The refining business has not seen any growth in North America in terms of new refineries coming on stream for approximately 25 years. The reason. High capital cost and low returns. The only real additional capacity that has come on stream is due to technology advances and what is called refinery creep. That is where you undertake projects designed to optimize your product slate. It is a balancing act at the end of the day.

Loosely translated, profits for refiners have been in a vice for many years because of the high cost of crude the high cost of production and the high cost of capital expansion. Your local gas retailers have been and are continuing to be squeezed also.

aceonbass · Post by **aceonbass** » Thu Sep 22, 2005 2:31 pm

Not to disput any of your facts but why am I hearing about "record profits" for oil companies? Do you work for an oil company Brian?

winston · Post by **winston** » Thu Sep 22, 2005 3:50 pm

Dane,

Yes I agree you are hearing about record profits but not certainly they are not obscene profits when you take all things in context. Of course the media spin that follows in the wake of higher prices at the pump, leads one to believe that the "oil companies" are price gouging.

Commodity pricing is a bit of a mystery to many and not too many chart the lean years, months etc. Everyone charts and comments on the extreme spikes. No one in the media or the public cares when refiners who wish to re-invest in their refinery and plan for capital expansion find that they cannot make the numbers work. One of the contributing reasons is the high cost of natural gas. It along with high cost of crude oil has made margins so lean in the past that new investment did not make sense.

My small consulting firm has from time to time worked in that sector of the energy market. We are currently working on a project in that sector. Last year we commissioned a senior market analyst to complete a short study on refining capacity in North America for one of our clients as a component of a strategic plan that we developed.

So as you can see this is a very long answer to your question. The answer is no I don't work for an oil company.

atomic_punk · Post by **atomic_punk** » Thu Sep 22, 2005 4:17 pm

Brian, not to contradict what you had to say, but to pose another question....why is it, when the station has gas in the tanks in the ground, do they raise the price on gas they have already bought and paid a certain price for?

winston · Post by **winston** » Thu Sep 22, 2005 4:49 pm

Steve that is a great question. I am glad you asked it.

There are two types of service station owner. The integrated gas station. The one that has an oil company sign outside and the independent.

We did the math on both scenarios as part of the same study. Typically the small margin realised from the sale of gasoline and diesel barely covers expenses. This is a very typical situation repeated right across Canada and the U.S.

You may have noticed that many gas stations have diversified and have integrated Taco Bell or Wendys or here in B.C. White Spot and A&W etc., into their facilities. They also sell a whole lot of snacks, candies and pop. If not for this diversification many of the proprietors/owners would not make a comfortable living.

We did the math on the typical service station owner, who incidentally does not even own the premises if it is a franchise operation. And after transportation, operating costs, insurance and taxes are deducted the margin is typically less than 10%

Compare that to the profit scenario at your friendly Wal Mart and you will be astounded. So back to your question why do they raise the price. In response to supply and demand market conditions. Again the opposite side of that analysis: why do they lower prices when the gas is in already their storage tanks. The same reason. They respond to supply and demand in the market.

My apologies to any one who is bored by this information, It was not my intention to hi-jack this thread as I seemingly have.

I will now turn my attention back to praying for a miracle to occur in the Texas Gulf coast. I pray that all of the residents of Texas and the Gulf States are kept safe and sound.

brammy · Post by **brammy** » Thu Sep 22, 2005 5:53 pm

Not at all Brian... interesting stuff (well, sort of). As usual, there is a lot more to the issue than first meets the eye.

I heard a small depate on this issue on TV. A woman was saying that the "gas company execs are gouging". The guy on the other side of the issue really had a deeper insight into the issue (as you do) and started talking about commodities markets etc and how it is a very false impression that some gas company CEO will come in one day and says "I think I'll gouge those suckers a little more today".

His opponent in the debate seemed to know that she was in over her head and wisely kept her comments from then on to a minimum.

winston · Post by **winston** » Fri Sep 23, 2005 6:28 am

Thanks Kent that business is a bit of a dry subject and it does not interest most people in the least until it effects their household budget. But but back to the approaching storm.

According to our news reports Hurricane Rita is now a Cat 4 instead of a Cat 5. Water temperature is reportedly 87F degrees and is expected to feed that monster again. I have friends and ex co-workers who reside in Texas. I have visited Dallas and Houston a couple of times, so as one might expect I am keeping a close eye on the weather as many of you are.

I also hope our Ric friends in the area have found a safe haven to wait this out.

iamthebassman · Post by **iamthebassman** » Fri Sep 23, 2005 6:36 am

It seems to be moving away from us, looks like now the only problems we're looking at are the huge influx of people from the coast, and all the people in town for ACL Fest. It's getting hard to drive around town and gas is scarce.

Ronn
Austin,Texas

wmthor · Post by **wmthor** » Fri Sep 23, 2005 6:44 am

Good morning everyone. Right now, it's just sit and wait. I've done most everything that I can think of to prepare for this storm. I just finished putting all of my guitars into their cases and stored them in an interior closet. The amps are well away from any windows. There's one acoustic sitting on my bed.

If the storm stays on it's projected path (east of me), I presume that I'll be okay. I'm going to stay online as long as possible.

Are there any other Houston/South Texas members of the Rickenbacker Forum hunkering down like I am?

iamthebassman · Post by **iamthebassman** » Fri Sep 23, 2005 6:57 am

My advice to everyone: If you haven't already, get photos and serial numbers of all your stuff for insurance purposes.

wayang · Post by **wayang** » Fri Sep 23, 2005 7:06 am

Deep in the Heart of Texas...I worked my first three years after leaving home in the Oil & Gas 'sector'...in Alaska, but working for (and with) a lot of Texans and Oklahomans. I had a lot of great friends from Houston during that time; watched a lot of Oilers games at house parties in Anchorage. I met excellent people in all aspects of that industry...

Except for Upper Management...they were all MoFo's...

iamthebassman · Post by **iamthebassman** » Fri Sep 23, 2005 7:08 am

I miss the Oilers, they were my team, always hated the Cow-boys. I don't like the Texans, bad name,, bad logo.