[paul cowley]

Igrowgrass...[I feel like I want to call you chief ]...I do remember and this glitch is not as tough by any means.

For example , I had to buy a new 2 ton truck in '81 at a 21% interest rate ...we're not there yet.

[James Bennett]

My recollection of the last oil price rise was that suddenly Honda Civics became fashionable.  They were/are a good car, but a completely different size to the other cars in use.  And, I mean 'fashionable'.  I don't think Kia's are quite in the same league.  Prius's (with a fashion makeover) could do it.

James B

[Peter Galea]

Environmental problems and local opposition make it a permiting nightmare. There was a report on the radio today  that mentioned it would be about 5 years before one could be built if they wanted to start the process today.

It takes longer than that to permit a golf course in California.  

[Mike Benham]

Now 50 million dollars isnt exactly chump change, but it pales in comparison to the billions you guys are telling me it costs to build a new refinery.   Something like 150 refineries have been closed in the last three decades.   That more werent updated and made more efficient makes me wonder if the big oil companies were all that interested in keeping a ready supply of refined fuel.  

David - Do you think it was easier to get approval to upgrade, for $ 50 million, a Bakersfield refinery or a refinery along SF Bay?  Or El Segundo?  Or Long Beach?  

[Tim Taylor]

Even more reason to WALK whenever possible. Even if the carts are electric, they're still using power generating capacity that is likely generated by fossil fuels.

TimT

[Steve Lang]

 

DMoriarty.. you do have a good point there on big oil promoting regs they could pay for, in effect forcing the small guys out that can't make the enviro investments, but it's also a larger issue..  

15 years ago there was a big regulatory push to eliminate leaking underground storage tanks .. many seminars and meetings on the topic began with the typical LUST acronymn jokes.. but in the end it didn't keep the MTBE problem from occuring in CA from same leaking tanks of majors..  that initiative was greatly pushed by big oil to eliminate the small company competition..  

most environmental controls imposed on refining in the last 20 years has been long overdue, so I can't feel sorry for a small refiner emitting benzene or other carcinogens etc.. and giving them a free pass because of size..

i can't see transportion demand ever getting out of the liquid fuels mode, its too convenient.. it will transition to alcohols, bio-liquids and probably different "engine/motor" types, but as long as folks want to get in their car and experience the freedom of the road, be it mad max type or SUVs to the regional soccer tourney there has to be some assurance that you can get the fuel you need.  

So the more local your needs, the more innovative you can get..  bio-fuel cells anyone?

p.s. no way was bakersfield refinery the most profitable in shell's system!

[Tiger_Bernhardt]

I find it hard to believe that oil prices will dramtically impact the maintenance budgets of courses. I do understand the economics of Oil and Gas Exploration and to a lesser extent refinery economics. Additional capacity can be added with plant expansions as well as new facilities. The economics of lower 48 states exploration are different than most places in the world. However there is political stability here which is significant comfort in a world that does not think twice about nationalizing discovered oil in the ground as well as the equipment which is in place to explore transport and produce as well as refine. The world is full of places like Russia where you do not know who you are contacting with, whether they have the authority to contract and if you can get money out of country if contract stays in force. The west coast of Africa has serious issues with removing assets whether cash or capital. I mention these for both have tremendous potential from a reserve perspective to address world supply needs.We are all aware of how the US Government destabilized the middle east thereby allowing us to control the assets but making business and world supply issues fragile to say the least. The business like most appears easy when prices are high but like any business there are real hills to climb.

[Guy Corcoran, Jr]

"we're halfway through the hydrocarbon era" T. Boone Pickens

[Jamie_Duffner]

The main problem with alternative sources for power production is that since electricity is not a storable commodity, you cannot simply ask for sunshine or high winds to ramp up a peaker plant at a moments notice.  Many power sources are from hydro, solar and wind, but when a heat wave hits California or the Northeast, the only solution to meet the demand spike is to run the peaker plants using oil or gas.  If that doesn't work, you get brown outs.  I'd like to see the reaction of someone in NYC when they can't run their a/c in a 100 degrees because the wind isn't blowing.

On refining, capacity has increased by about 2mm barrels a day over the past 10 years simply due to expansion at existing refineries and improvements in refining technology.  The quality of gas has also dramatically improved over the past 10 years.  Building new refineries is almost impossible for a variety of reasons; environmental issues and capital outlay are the two main issues.

Simply put, big oil/refining is the most capital intensive industry on the planet with massive commodity price risk and generally razor thin margins.  Over the past 20 years the ROI is a lot less than most industries.  When oil was at $18 only seven years ago, no one seemed to care about the profitability of big oil.  They are price takers, not makers.  THe recent volatility has worked well for them, extremely well, but this is a blip in an otherwise average 20 year investment horizon.

[W.H. Cosgrove]

At the risk of sounding old.....I paid 16.9 cents for a gallon of gas in must have been 1971.  

With all of this discussion concerning costs of oil, its supply and the environmental costs of refining the stuff, I don't see much discussion of reducing use.  What do each of you drive? how many miles a gallon does it get? And what plans do you have to adjust your personal budgets to afford the ever increasing costs?

Will you go as far as driving a moped?  Maybe retrofitting it with a rack for your clubs?  Is it time to join a club that sits next to the tracks like so many courses did in the early 20th century?  Is it time to begin to scream loudly that present mass transit schemes (particularly in the west) don't work very well?

I hear a lot of whining on the media, but I don't hear many solutions.  And I don't hear too many people who are ready to make real change to their lifestyles.  What price of oil will result in a hard look at our national priorities to secure our future?  Will environmentalists be willing to give up their vehicles in exchange for fewer refineries?  And will conservatives give up their 4x4's preventing them from getting into the woods to hunt?  (OK I know those are cliches)

[Steve Okula]

On refining, capacity has increased by about 2mm barrels a day over the past 10 years simply due to expansion at existing refineries and improvements in refining technology.  


Simply put, big oil/refining is the most capital intensive industry on the planet with massive commodity price risk and generally razor thin margins.  

Jamie,

I have to question the math. 2 million barrels/day increase over 10 years equates to over 7 billion barrels per day. I thought US consumtion was about 100 million barrels per day.

Am I to understand that despite "razor thin margins" ExxonMobil managed to eke out a $23 billion profit in 2004?

[astavrides]

I'll chime in...a prius...about 45mph.
I don't want to give up my vehicle.  I want to make them more efficient and develop more renewable and clean sources of energy.

At the risk of sounding old.....I paid 16.9 cents for a gallon of gas in must have been 1971.  

With all of this discussion concerning costs of oil, its supply and the environmental costs of refining the stuff, I don't see much discussion of reducing use.  What do each of you drive? how many miles a gallon does it get? And what plans do you have to adjust your personal budgets to afford the ever increasing costs?

Will you go as far as driving a moped?  Maybe retrofitting it with a rack for your clubs?  Is it time to join a club that sits next to the tracks like so many courses did in the early 20th century?  Is it time to begin to scream loudly that present mass transit schemes (particularly in the west) don't work very well?

I hear a lot of whining on the media, but I don't hear many solutions.  And I don't hear too many people who are ready to make real change to their lifestyles.  What price of oil will result in a hard look at our national priorities to secure our future?  Will environmentalists be willing to give up their vehicles in exchange for fewer refineries?  And will conservatives give up their 4x4's preventing them from getting into the woods to hunt?  (OK I know those are cliches)

[astavrides]

The main problem with alternative sources for power production is that since electricity is not a storable commodity, you cannot simply ask for sunshine or high winds to ramp up a peaker plant at a moments notice.  Many power sources are from hydro, solar and wind, but when a heat wave hits California or the Northeast, the only solution to meet the demand spike is to run the peaker plants using oil or gas.  If that doesn't work, you get brown outs.  I'd like to see the reaction of someone in NYC when they can't run their a/c in a 100 degrees because the wind isn't blowing.

The solar resource does match up fairly well with the hottest part of the day, and, therefore, can mitigate the problem of peak power demand.

I think we need to invest and research more into energy storage technologies as well.

[Brent Hutto]

On refining, capacity has increased by about 2mm barrels a day over the past 10 years simply due to expansion at existing refineries and improvements in refining technology.  

Simply put, big oil/refining is the most capital intensive industry on the planet with massive commodity price risk and generally razor thin margins.  

Jamie,

I have to question the math. 2 million barrels/day increase over 10 years equates to over 7 billion barrels per day. I thought US consumtion was about 100 million barrels per day.

Am I to understand that despite "razor thin margins" ExxonMobil managed to eke out a $23 billion profit in 2004?

I read that to mean the increase was 2 million barrels/day and that the increase took place over 10 years. I'm sure that was the original poster's intent.

As for the second point, the margin on refinery operations hardly defines the entire profit available to a diversified multinational corporation. Do you happen to know how much of that $23 billion was earned from refining crude oil? With that information as well as the volume of crude oil refined we could get a good idea of the margin realized by Exxon Mobil, no?

[Mike Benham]

I'll take a wild guess and say that converting the Bakersfield plant would have cost less than converting the plants in the coastal towns.    Another wild guess-- converting almost anywhere is cheaper than building from scratch.

The only reason why Bakersfield has a refinery is because of the source of the oil nearby.  Most all of the other refineries in California are in coastal areas, to be near a receiving and delivery point for crude and byproducts.

Perhaps the new eminent domain law will allow a state agency or municipality to seize coastal land and build a state or local municipality owned refinery.  Some municipalities already own the natural gas and electric business in their towns, why not gasoline.

And with the CCC, I would be shocked to see any new refinery built

[James Bennett]

The solar resource does match up fairly well with the hottest part of the day, and, therefore, can mitigate the problem of peak power demand.

Stavros

I work for an electricity distribution utility in Adelaide, Australia.  (We distribute, we don't retail).  Our climate and location is similar to LA (different hemisphere of course).  

Solar works well, but
- output falls dramatically with any cloud cover.  So, for fine sunny days, you get a good match.  If you get a humid, overcast day, it fails dismally.
- the orientation of the solar array needs to be aligned to match the time period for required demand.  Typically, these solar arrays are aligned to the north at an angle of 30 degrees or so (it varies, depending on the latitude of the location, to maximise the surface coverge exposure to the sun throughout the year and across the day).  In late afternoon in extreme summer, the output can have dropped significantly on a sunny day because of the location of the sun.

So, solar is very good if you want to use it on a sunny day, and at times when the array is directed at the sun.  It isn't as good when its cloudy (but still hot) or late in the afternoon/evening (but still hot).

The inability to efficiently store electricity is a real bugger.  If we could, the cost of generation and elctricity distribution systems would be so much lower, because we could probably reduce the installed capacity by 20% (we have very few hours per year that use this part of the system capacity, but we have to have it because when it is hot, it is really hot!)

James B

[Tim_Weiman]

Steve,

There is a proposed refinery in Arizona. The project team has been working on the permit process for about ten years......and is still years away from approval, if they can ever get it.

So, yes, major oil companies have the money to build new refineries. But, it is highly unlikely they have the political clout in this country to ever get approval to do so.

Other points:

U.S. gasoline demand is about 9 million bbls/day, growing at an annual rate of about two percent.

Some commentators have described the current market as the "golden age" of refining. The gasoline crack spread (the price of spot gasoline over spot crude) is running around $8-10/bbl on an annual basis. This is far higher than the $3-6 per bbls prevalent during the 1980's.

As for Exxon's earning by segment (2004), the exploration and production business earned about $16 billion: the downstream (refining and marketing) $5-6 billion.

As for margins in Exxon's downstream business, the company has reported the following:

2000 - 12.3%
2001 - 16.1%
2002 -  5.0 %
2003 - 13.0%
2004 - 21.0%

[Michael Moore]

What do each of you drive? how many miles a gallon does it get?

Nissan 200SX 1998

42 MPG

I think Sweeney was banging his head against the ceiling.

[John Kirk]

Go back to your Econ books, supply and demand ... why increase refinery output when you can control the price through production.  

Why increase refinery output if there's only 40-50 years of the good stuff left.  We're living in the temporary Utopia.

[John Kirk]

We're so very lucky.

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