Big Oil's greed by the numbers

[KS Toronado]

Did a www search on "how many barrels of oil does the United States use per day" and
"how many barrels of oil does the United States import per day"

United States consumed an average of about 18.19 million barrels of petroleum per day,

The United States imported roughly 6.1 million barrels a day last year. The biggest share of imports came from
Canada (61%) followed by Mexico (10%), Saudi Arabia (6%) and Russia (3%), according to the trade association.

So .03% of 6,100,000 (multiply by .03) is a total from Russia of 183,000 barrels per day

What % of Russian oil is going in your tank everyday? Divide 183,000 by 18,190,000 and we get 0.0100604

How can Big Oil justify raising their prices? Locally last gas I purchased 2 weeks ago was $3.15, today $3.56-$3.84
A gallon of gas in San Francisco is already averaging about $5 a gallon, with other major cities racing past the $4 mark.

Big Oil losing 1% of their supply does not equate into the price increases we're seeing at the pumps, especially
considering the fact that all the Russian oil purchased has not even arrived on our shores yet. Fear of what the
future might bring is more like it.

Oligarchs never waste a good crisis to make money, some of these ill gotten gains will be showing up on the campaign
trail. Big Oil prefers Rs over Ds, while they'll blame Biden for their gas prices.

Love to see the Biden administration get out in front of this greed and show the voting public that Biden & Democrats
are on the side of the average family.

Since we export more oil than we get from Russia, Could Joe sign an executive order stating no more overseas sales
for 90 days. Then they'll have a surplus of supply which should bring the price down. Why can't they put America First?

[ForgedCrank]

1. It's a little more

complicated than that.
Oil is a global market, US borders don't much matter from that perspective.
If part of the supply is disrupted, everyone begins competing for what is left, globally. It doesn't matter what we think.
So if we want that oil, we have to pay as much or more than the other people who also want it. Highest bidder wins.
The alternative is a massive shortage.

[KS Toronado]

3. Sorry it's not complicated at all, IMO

It's corporate greed, losing 1% of supply should not equal the higher prices we're seeing. We're the world's largest
oil producer I read tonight while searching for this article. Stopping overseas sales would give us a huge surplus.
Gov. Schwarzenegger years ago made oil companies freeze their gas pump price because of a similar situation.
Would you go for that?

Oil companies are using your reasoning and fear this time, we shouldn't allow them.

[ForgedCrank]

10. Ok

[ProfessorGAC]

14. Sorry, You're Wrong

Refined product prices are not set by the refiners.
There is a baseline crude cost plus that sets the starting price on the commodities market.
Yes, it's a bit rigged in that the refiners can barely ever lose money, but the rising prices are causex by marketeers & speculation.
You want to be mad at someone, be mad at the commodities traders.
A major mistake made decades ago was to make fungible gasoline a market commodity. This eliminated any incentive for a refining company to compete on price. A serious lapse in judgment.
But, that ship sailed long ago.
Do the refiners make more money when this happens? Yes. But, it's not as much extra as you might think & it's not within their control.
It doesn't work like you seem to believe it works.

[orwell]

2. Oil prices are set...

...by commodity traders everyday.

Prices ae set by demand and supply in these markets. Right now demand is outstripping supply. There are lots of reasons for this but the Ukraine situation is surely one of them. Russia produces around 8 to 10 million bbl of oil per day and much of that supply is sitting on the water in tankers or trying to find tankers to carry it. (Many won't) At one point Russian oil was trading over $15 per barrel lower than the spot price because NOBODY WANTS TO BUY IT!

Before things got really crazy prices were around $80 per barrel. So there is a war premium right now of over $30 per barrel. The only ones who could lower this are the big producers, like the Saudis. If they significantly increased production prices would fall.

The oil companies got shellacked during Covid, losing billions of dollars on exploration and production, so they stopped the marginal drilling projects. (Nobody was complaining about the oil companies then when some were facing bankruptcy.) They have not restarted many of these wells in fear that the price rise may be temporary. If the prices stay up for a long time they will start up these drilling and exploration projects to profit from the high prices. This will increase supply and prices will fall.

Are all the majors making a windfall right now. Of course. But they were also losing their shirts in 2020.

[KS Toronado]

4. Supply would outstrip demand

if we put a temporary freeze on overseas sales. Would that lower the price at the pump?

[orwell]

11. Probably not...

...This is a misconception.

The only thing that would lower prices at the pump would be a gas tax moratorium. Gas taxes represent a significant percentage of the pump price. That is why they are debating the idea in Washington.

But gas taxes also help pay for the transportation infrastructure (roads) so any moratorium would have to be temporary.

Oil is a fungible commodity. We export oil mainly because we can't use that oil here or someone is willing to pay more for it than we will. For example the tar sands oil that was going to flow through the Keystone pipeline was not going to be used in the US. From what I understand it is similar to Venezuelan oil which is very sour, heavy and expensive to transport and refine. Our refineries by and large do not need that oil. We are more set up to refine light sweet like the oil we produce in Texas.

In the end all the oil worldwide is ""graded"' and each grade is thrown into a big global tank for that grade. That grade is what is bid on in the spot market. The market doesn't really care where it comes from, (other than the transportation cost to get it where it is going.) So it really doesn't matter if we export it or not. What matters is whether we have the production, refining, and transportation capacity to use what we demand. The US has been a net exporter for some years because we produce more than we use. That is primarily due to the advent of fracking. We are the Saudi Arabia of fracking.

Fracking sucks but it did significantly increase our production capacity. The reason production fell wasn't because of anything Biden did, it was because of the dramatic collapse in oil prices from the Covid pandemic. The price fell far below the fracking cost of production so many of those projects were shut down. That is why our production fell. It has nothing to do with the Keystone pipeline or any other such bullshit Con talking point.

The Con talking points about Biden and US oil production are 100% bullshit. As soon as I hear someone spouting this shit I stop listening. I've learned everything I know by researching on the internet because I am interested in understanding reality. There are a lot of holes in my understanding but I think I have the general concepts right.

Also it doesn't hurt that I learned about markets the hard way, from trading the stock market for a small hedge fund in the 80's. That experience taught me 2 things...that even smart moral titans of finance are operating in a good old boys information space that you and I are not privy to and that markets are often irrational.

That is why I got out and got into fixing people's computers.

Computers were at least logical...

[live love laugh]

5. Are prices "set" or "bet" daily? Speculation/greed plays a part.

[KS Toronado]

7. "set" by the "bet" seems about right

[orwell]

9. It is both speculation...

...and also real demand.

It is impossible to determine how much speculation is driving the spot. That would require the ability to determine instantaneous intrinsic value. I would guess the intrinsic value to be closer to $60 to $80 dollars at this time but what do I know. The average cost of production (from 2019 statistics) was less than $10 for Saudi oil to almost $45 for British Oil. The mideast production cost is very low but oil from projects like US fracking can be around $50 the last time I looked (a couple of years ago.) Non-fracking US cost was around $21. Once again this was in 2019.

But in the end it doesn't matter.

For example, are the current insane real estate prices based on speculation...yes.
Are they based on real demand....yes.

Those people that own a home in a hot market "benefit" from the price no matter why it is happening.
Those that don't own a home pay higher rents or are even homeless because of it.
The only thing that will drive down home prices is a lack of demand. Then the speculators would panic and prices would overshoot on the downside. This is what happened in the economic crisis in 2009.

To be very simplistic, the only thing we can do to affect this is to collectively use a lot less oil. This is what happened during Covid.

The spot price of oil during the initial phase of the Covid outbreak actually went negative at one point. In other words, you would have been paid to take a barrel of oil. I have never seen that in any market in my life.

I don't know about you, but I am driving as little as I have to and turning down my thermostat even more. That is the only thing I can do tp lower my energy demand.

If people think that the energy companies are gouging them, they should buy oil stocks. I don't but I should have in 2020 when many of them were 10 times lower than they are now...

[live love laugh]

15. Very thoughtful and thorough response.

[duforsure]

6. Maybe time for Biden to start promoting new energy solutions,

Reducing energy consumption, increasing renewable energy, and self reliance to decrease demand and prices , and oil and gas being used for higher profits, and as a weapon, and stop giving terrorist countries money funding terrorism from it.

Americans also have to recognize we went from covid to a return to using oil at higher rates in a very short time driving demand much higher, and oil companies haven't caught up yet with production. Our economy and jobs returned very quickly driving consumption sky high. Higher prices will make them restore producing more.

Americans need to realize a bipartisan support to eliminate russian oil import in Congress is growing, and could soon be enacted driving prices up a small amount, but big oil will use it to increase profits from raising it more . You don't increase jobs at record rates like Biden has done without dramatically surging consumption.

[mahina]

12. That's in the build back better bill

That we have to start working on one piece at a time. Because the Republicans freaking won’t help this country. Mansion just said the other day he would except money for climate work No details

[live love laugh]

16. Obama, Clinton, Carter addressed it RW successors undid it.

[Emile]

8. Predatory Capitalism creating a shortage and jacking up prices!

[Chainfire]

13. I have always appreciated that when the price per barrel goes up, it is instantly reflected

at the pump. When it comes down, there is a lag.

One thing that the OP did not address was the amount of oil that the US exports...In 2021 the US exported slightly more oil than it imported. The oil goes to the entity that is willing to pay the highest price.

We have become so used to being fleeced that we have accepted it as the natural course of life.

https://www.eia.gov/todayinenergy/detail.php?id=49596

[KS Toronado]

17. Yep, there's no lag when pump prices go up at "warp speed"

It was this frustration with oil companies "greed" that lead me to research how much we relied on Russian oil (1%)
Was a little confusing for me last night looking at imports vs exports because of how articles divided them into
different categories, but we do export more "oil products" than we do import "crude oil" from Russia. Found this
on Wikipedia this morning, hope it helps.....5 minute read

US...Energy independence is espoused by those who want to leave the US unaffected by global energy supply disruptions,
and to restrict reliance upon politically unstable states for its energy security. Energy independence is highly concerned
with oil, the source of the country's principal transport fuels.

.....the US...... In May 2011, the country became a net exporter of refined petroleum products.[2] By 2014, the United
States was world's third largest producer of crude oil, after Saudi Arabia and Russia,[3] and second-largest exporter of
refined products, after Russia.[4] In November 2019, the United States became a net exporter of all oil products,
including both refined petroleum products and crude oil.[5] By 2021 the US was the world's largest producer.[6]

https://en.wikipedia.org/wiki/United_States_energy_independence

[crickets]

18. K&R for the post and the discussion.

[KS Toronado]

19. Thank you

Some responded with good arguments about how capitalism's supply & demand feature works on the world stage.
Since the U.S. is currently oil self-sufficient, we don't need any oil imports from Russia. Stopping or restricting oil
exports would lead to more supply than demand in this country and would keep gasoline at a reasonable price
while it skyrockets overseas, but big oil wants it to skyrocket here also although we don't need any Russian oil.

Wish some Democratic congressman would find a way to reign in oil companies greed, we know no republican
congressman would do it.

[Mr.Bill]

20. I'm no expert here,

but I've known several people who owned gas stations going back to the 70s.

Regarding the prices going up rapidly at individual gas stations, there are two ways they decide on what price to charge. They can charge a price that reflects what they paid for the gas in their underground tanks, or some charge a price that reflects what they anticipate they will be paying for their next delivery.

You can almost watch the price at any individual gas station and tell which way they are setting their prices. Of course, they can change how they are deciding on price anytime they want. And of course what their competitors are charging comes into play also.

[KS Toronado]

21. My dad had a Skelly service station in the '60's

Then it was competition with your competitors, today it's all the competitors joining forces against the American
public to make more money.

Biggest employer in my county is Big Oil, people here know how little effort it takes to ramp up production to make
up for losing the 1% we won't be getting from Russia. We talked about this at the VFW last night, half were happy about
all the addition money it will bring into the county, other half not so much on account of gas pump prices.

[Mr.Bill]

22. Yes, I remember the gas wars back in the 60s.

The joke is, remember the gas wars? They're over. The gas stations won.