Has the US gone communist yet? It's hard to tell.

[Copernicus]

[ QUOTE ]
pvn:

[ QUOTE ]
You're just in denial.

[/ QUOTE ]

This is your best post ever. [img]/images/graemlins/grin.gif[/img]



Copernicus:

After natedogg quoted your post, I must say I'm in shock. I simply didn't expect you to say that about grant funded research. AC'land and loyalty to oil seems to be the two primary motivations against AGW.

[/ QUOTE ]

Why does that surprise you? If there is any group in these boards that have theories that cant possibly work in the real world, its the ACers (and the ACers in denial), and Ive said similar things frequently.

I dont join in AC threads generally because the proponents respond "yeah, but it COULD work" when they are presented with specific reasons why something cannot work.

[natedogg]

Man, I"m falling in love with myself reading this list. Thanks for the excellent summary of my public policy views.

Let's review:


[ QUOTE ]
"All federal spending represents a loss of freedom"

taxes = theft....


[/ QUOTE ]

That's not what I said, nor did I say that no federal spending should occur, but you cannot argue that federal spending occurs without coercion. Every dollar spent represents an impingement on freedom. There is no way around this. Therefore, I prefer to minimize the coercion.

[ QUOTE ]
"Mao and Stalin also had that goal in mind do you see?"

taxes = communism.....


[/ QUOTE ]

No that's not what i said. I said that public policy driven by the goal of "society's maximum advantage" is not necessarily a good thing since "society's maximum advantage" is a normative view.

[ QUOTE ]
lets make a list of what else you believe in.....

[/ QUOTE ]


[ QUOTE ]



-against public schools



[/ QUOTE ]

yes, although I do not oppose subsidies to the poor for attending school if they wish. The plan is this: eliminate all govt involvement with public schooling and simply provide welfare checks to the poor who want to put their kids in schools. Kind of like how we do for other services we feel the poor should have access to.


[ QUOTE ]
you want to eliminate the FDA

[/ QUOTE ]

This one is a no-brainer. I'm surprised you can't see this. The FDA is part and parcel to the drug war as well. But you are also an authoritarian paternalist I guess.

[ QUOTE ]
-during oil spikes and animosity towards oil companies you make threads titled "gouge away, you can gouge away "

[/ QUOTE ]

There is no such thing as price gouging. Price gouging only refers to a third party's judgment of a transaction between two willing adults.


[ QUOTE ]
-against drug war

[/ QUOTE ]

You're for the drug war?


[ QUOTE ]
-against farm subsidies

[/ QUOTE ]

You're for farm subsidies?

[ QUOTE ]
-against many health care laws

[/ QUOTE ]

You like having your health insurance legally mandated to be tied to your employer?

[ QUOTE ]
you want to eliminate payroll tax

[/ QUOTE ]
You like a regressive tax on the poor?


[ QUOTE ]
-you want to eliminate minimum wage laws

[/ QUOTE ]

You like removing job opportunities for the poor?


[ QUOTE ]
-you are anti usury laws

[/ QUOTE ]

You like price controls?



[ QUOTE ]
-you want to eliminate the commerce clause

[/ QUOTE ]
You like the drug war?



[ QUOTE ]
You want to eliminate social security

[/ QUOTE ]
I"m sorry but i have to say this. Anyone who supports social security as it is implemented today is either a moron or has no true understanding of how it really works.

natedogg

[adios]

Big Oil: Booming Profits, Rising Costs

Trying to keep this in one thread. I'm sure most of you heard about Exxon-Mobil's (XOM) $10+ billion in profits for the previous quarter. Second most for a U.S. company in a quarter (topped by XOM's 2005 4th quarter only). First of all I'm not implying that making profits is bad in any. I'd point out that XOM's revenues increased as well. I thought some items in this article might be interesting and perhaps worth discussing:

A raft of companies trotted out stunning earnings in late July for the three-month period ended in June. Some increased their multibillion profits by more than 30% year over year; the Irving (Tex.) oil major Exxon Mobil (XOM), for example, announced on July 27 that it had a record net income of $10.36 billion during the second quarter, up from $7.64 billion during the same period of 2005. Advertisement

One day earlier, Houston's ConocoPhillips (COP) reported second-quarter net income of $5.19 billion during the same period, compared to $3.14 billion for the second quarter 2005. European oil giant BP (BP) on July 25 said it had net income of $7.27 billion in the second quarter, from $5.59 billion a year earlier.

Ok XOM isn't the only company making monster profits.

HARDER WORK. Profits are booming, but energy outfits have to work harder—and spend lots more—to keep pulling ever-pricier oil out of the ground. That has fueled a spending competition for services such as drilling equipment, driving up companies' business costs for the past couple years.

I know that this is actually the case but not sure how this has affected margins but apparently not much:

"If oil prices go down or stay the same and you still have cost inflation, then there's the risk that margins will get squeezed in that environment" says Craig Pennington, global-energy portfolio manager at Schroders in London. Although high prices continue helping oil companies so far, Pennington noted that in a weaker environment, high-cost operators experiencing the biggest cost inflation will be among the first to suffer.

Interesting that these higher costs have not affect margins. Perhaps they're not that high.

And developments in recent months—such as higher taxes and new investment projects—are not the kind that will go away if oil prices fall. Meanwhile, experts are debating whether the global economic demand that's been boosting prices this year can be sustained.

Perhaps it's the cynic in me but I interpret this as that world wide demand will absolutely be sustained.


Are oil companies using their windfall to grow their businesses—or merely wasting it on inefficient projects? Credit Suisse (CSR) found in a July 19 report that almost all of the global integrated oil companies had higher return on gross invested capital, or ROGIC (i.e., money earned as a percentage of that invested), in 2005 compared to 2004.

IT WON'T LAST FOREVER. To be sure, oil company executives aren't assuming they'll always rake in more than $70 per barrel, as they have been this month on West Texas Intermediate crude oil contracts for delivery in September.

I've seen this point made in quotes from oil company execs alot over the past year which basically states that prices are artificially high and that fundamentals don't justify the current price. I've read this from other sources as well. One thing that might indicate this is true is a metric that many have used for long time regarding the price of natural gas and oil. Without going into detail that metric shows that oil is off the scale out of kilter in being over priced. In fact when people refer to "bubbles" like in real estate and the stock market they've got nothing on the price of oil when using this long term metric. I'm not predicting a price drop anytime soon but it's something to consider when evaluating the situation IMO.

Wacki, I think this is part of what I was referring to in a message when I stated that oil company execs are scared of what the Saudi's can do to affect the price of oil and why they're reluctant to re-invest profits is exploration and production activities.

[Copernicus]

[ QUOTE ]
HARDER WORK. Profits are booming, but energy outfits have to work harder—and spend lots more—to keep pulling ever-pricier oil out of the ground. That has fueled a spending competition for services such as drilling equipment, driving up companies' business costs for the past couple years.

I know that this is actually the case but not sure how this has affected margins but apparently not much:



[/ QUOTE ]


Theres not enough information here to come to that conclusion. The costs of expanding search and drilling capacity arent reflected as they are spent, they are capitalized over varying periods of time. They could (Im not saying they are, just could be under accounting principles) be as high as the entire profit for the quarter, but will only show up on a spread basis.

[adios]

[ QUOTE ]
[ QUOTE ]
HARDER WORK. Profits are booming, but energy outfits have to work harder—and spend lots more—to keep pulling ever-pricier oil out of the ground. That has fueled a spending competition for services such as drilling equipment, driving up companies' business costs for the past couple years.

I know that this is actually the case but not sure how this has affected margins but apparently not much:



[/ QUOTE ]


Theres not enough information here to come to that conclusion. The costs of expanding search and drilling capacity arent reflected as they are spent, they are capitalized over varying periods of time. They could (Im not saying they are, just could be under accounting principles) be as high as the entire profit for the quarter, but will only show up on a spread basis.

[/ QUOTE ]

Yeah good point and as a result it may inhibit the expansion of exploration and production activities which if expanded would probably lead to lower prices at least in the short run. I think it would be interesting to analyze how the price of oil would be affected if the oil companies got more incentives to expand their activities by accelerating the depreciation of the costs or better yet let them charge it in full when the investment is made. Maybe this kind of analysis has been done already, don't know. What it amounts to is providing tax incentives to oil companies which I suppose is politically unpalatable at this point.

Edit: In fact when I think about it, the riskiness of maintaining the current price of oil combined with the U.S. tax code almost certainly leads to higher prices for oil. Changing the tax code to eliminate depreciation schedules for investment in exploration and production of oil would basically lessen the riskiness of maintaining the price a great deal. It should also lead to investment in alternative forms. My sense is that this would get politicised as some sort of evil tax break for oil companies. What a friggen shame.

[Cyrus]

Some brief points:

- The profits from exploration come from the rise in the price of crude combined with the fact that extraction costs have remained relatively steady. (But the variance is a killer, baby!)

- The profits from refining, for the main part, come from the increase in the price of inventories due to, again, the rising prices of oil products. You buy youre crude on April 1st at $60 per barrel and the products that come out of that barrel will net you $100 (I'm just saying). Then you refine that crude and by the time the refined products are ready, crude oil has gone up and so have its products: your basket now sells for $110.

- Don't ask abt retail margins. (I said, don't ask!)

- Important-but-not-by-any-means-secret-information-offered-on-a-poker-website: Some three gigantic refineries (the term is exact) are being built in the Middle East. More will be probably coming off the blueprints soon. (Yes, one more incentive for peace in the region!) The smaller of them I hear is gonna be going at some 500,000 barrels per day. These will come on stream after some 3-5 years. When that happens, our friendly oil producing countries are not just gonna be selling us westerners crude oil, they be selling us the gasoline! (The West is not too keen on refineries. Too dirty, too costly, too bothersome. We gonna pay up for that.) So look for some easing of prices near that time horizon -- earlier if the region's "political news" turn to the better.

Can't turn to the worse much...

[Cyrus]

I trust you spotted the opportunity implied in the last bullet. Maritimes are here again.

[Copernicus]

Perhaps the compromise on Lease Area 181 will also lead toward more refining capacity.

[Copernicus]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
HARDER WORK. Profits are booming, but energy outfits have to work harder—and spend lots more—to keep pulling ever-pricier oil out of the ground. That has fueled a spending competition for services such as drilling equipment, driving up companies' business costs for the past couple years.

I know that this is actually the case but not sure how this has affected margins but apparently not much:



[/ QUOTE ]


Theres not enough information here to come to that conclusion. The costs of expanding search and drilling capacity arent reflected as they are spent, they are capitalized over varying periods of time. They could (Im not saying they are, just could be under accounting principles) be as high as the entire profit for the quarter, but will only show up on a spread basis.

[/ QUOTE ]

Yeah good point and as a result it may inhibit the expansion of exploration and production activities which if expanded would probably lead to lower prices at least in the short run. I think it would be interesting to analyze how the price of oil would be affected if the oil companies got more incentives to expand their activities by accelerating the depreciation of the costs or better yet let them charge it in full when the investment is made. Maybe this kind of analysis has been done already, don't know. What it amounts to is providing tax incentives to oil companies which I suppose is politically unpalatable at this point.

Edit: In fact when I think about it, the riskiness of maintaining the current price of oil combined with the U.S. tax code almost certainly leads to higher prices for oil. Changing the tax code to eliminate depreciation schedules for investment in exploration and production of oil would basically lessen the riskiness of maintaining the price a great deal. It should also lead to investment in alternative forms. My sense is that this would get politicised as some sort of evil tax break for oil companies. What a friggen shame.

[/ QUOTE ]

It isnt just a tax problem its an accounting principles problem. The costs are capitalized because it is inappropriate to understate the profits from current activity with costs that are incurred for future activity (ie accrual vs cash accounting).

"Two sets of books" (or some would cyncically say a third set of books?) would at least lend some clarity to the current level of profits.

[Cyrus]

[ QUOTE ]
Perhaps the compromise on Lease Area 181 will also lead toward more refining capacity.

[/ QUOTE ]You need to integrate the environmental, safety and spec requirements of every state, first. Otherwise, it's not worth the oil companies' money to be investing in new refineries Stateside. In other words, get California to be more like New Mexico and Connecticut to be more like New Jersey.

Good luck.