Whos to blame for high gas prices?

[Beavis68]

I dont know how they got that picture of my grandma.

[bigwheell]

What really makes me mad is that the big oil companies are just sitting on their known reserves.

All of the small independant oil companies are having double digit production increases and Exxon and friends productions are declining. They are just riding out the good times and saving their oil...

There isn't a lot of profit in refining and the gas stations have razor thin margins.

This isn't a democrat thing or a republican thing...

Our dollar is weak and Oil is a good buy for the rest of the world, which has helped push the price up. I guess that part of it is a Bush administration thing...

There is lots of Oil in the US that is becoming available as technology advances make the oil recoverable...

Check out or google "Bakken Formation" in North Dakota...I have a friend who is a driller out there and they are punching holes that are pumping anywhere between 2000-6000 barrels a day. This oil was unrecoverable 10 years ago and now it is booming in North Dakota and Eastern Montana..

Continental Resources is a big player in the Bakken in ND...CLR would be a good buy in my opinion if you are looking for a good longer term energy stock...


Everyone says that drive you car less, don't be a energy hog, blah, blah, blah...

Energy prices affect everyone and everything. My brother married a farmers daughter, who's dad used to pay $700 to fill up his John Deere tractor, now he spends, $1500.
Who do you think pays for the extra cost, Consumers(thats you) do...

Trucks, Trains, Boats, air freight all pass the higher costs of fuel on to consumers by charging Fuel surcharges and in higher prices.


This got longer than I intended, but what the hell...I used to work in the oil field, and I have many friends still work out there..

I can chat about the oilfield for hours, so bring it on!!!

[TexasKowboy]

This is reality!

Every petroleum plant in the US is running at 110% capacity. If there was a new plant to refine more petroleum then the majors would produce more. The rigs are running and the service companies are selling production equipment so more is being produced from the field I am just not sure where it is going.

So you think the answer is to just build more gas plants. I agree that is the answer but if you were one of the majors would you? I am going to throw some numbers at you. They are not exact but damn close.

6” pipe 2 years ago sold for $6 a foot. Now it sells for $18 a foot. Rebar sold for less then $2 a hundred pounds. Now it sells for $6 a hundred. When you receive pricing it is only good for 15 days. If you order 2000 feet of pipe the pipe dealer might get 1000 feet deliver from the factory there is no back order. You have to start calling around trying to find the other 1000 feet. If you call for pricing on stainless steel, aluminum or other exotic metal you better have your PO ready because the price is only good for that day. Why is metal so expensive? Because China is buying it faster then we can make it.

Now let’s talk about labor cost. 2 years ago labor cost was $30 a man hour. Today it is $55 in my area and $70 in Houston. When building a plant you work 7 - 12 hour days. 70 hours a week. So 30 hours of your cost is going to be at time and a half $105 an hour in Houston and $85 an hour in Corpus.

For the sake of argument I will use an example of manpower and cost using Corpus rate and no overtime rate.

$55 an hour times 70 = $3650 X 52 = $189,800 a year. What are you going to need to build a plant? 1000 men? 1000 men is a low number. $189,800,000 X 5 years = 949,000,000 rule of thump material = close to man power cost. So 2 billion dollars just to build the plant. This is not does not include any government fees, dredging, supervision, lawyers ect. which could easily run another billion.

So if you could get the material which would probably take you 2 years procure. So you have 1 billion tied up for 2 years in material. Labor cost is increasing an average of 14% a year. So By the time you start labor is going to be 1.5 billion now it is going to cost you a minimum of 4 billion to build the plant over 7 years. 1.5 Labor 1.5 material and 1 for legal.

These numbers are all best case. I bet it is going to cost 5 billion over 10 years in reality. If I own a business and I am making record profits today then why would I want to invest 5 billion dollars in building a new refinery? One refinery is not going make a change. So if we decided to build 10 refineries? Where are we going to get the skilled labor? There is no surplus of man power. Everyone is working.

Oil Companies are businesses not charity organizations.

[TexasKowboy]

One other thing. There is not a shortage of fuel in America. There might be someday but there is not one right now.

[iceman5]

[Beavis68]

[bigwheell]

[bigwheell]

[NVG]

[iceman5]

[BKAZ]

Some thoughts....

The free market economy will fix all this if left alone. My biggest fear is that the crooked politicians will use this to roust up their class warfare and conspiracy theory fan base and screw it all up with additional regulation.

As supply holds steady and the world demand for oil continues to skyrocket (not here in the US so much but in places like China and India) prices will climb. As it continues to rise it will discourage continued use and drive technology to other energy technologies. Historically these alternatives have been so much more expensive that cheap oil there was no economic reason to pursue them. Governments can try to manipulate this with tax policy but they almost always screw it up.

The price of gas / oil to US consumers has been significantly lower than other industrial nations in the world and though the drop in relative value of the dollar is bringing that more in line we still have "cheap gas" compared to many places.

If our govt. policies perpetuate the constraints on supply (restrictions on drilling, confiscation of profits for those producing / proifits, etc) they will insure the supply stays stable or starts to drop.

From an economic standpoint the oil companies are trying to sell every gallon they can get to market, wouldn't you at these prices.

[Beavis68]

[bigwheell]

http://www.foxnews.com/story/0,2933,364267,00.html


From Foxnews.com today.

I really didn't read this before I responded...

[Beavis68]

you need to realize though that the big oil companies have little influence on this. Most of the oil in the world is controlled by nationalized oil companies. Many of the contract with the oil companies, but the oil companies don't control how much is pumped out.

[TexasKowboy]

I was gone this weekend. Sorry for the slow response.

Ice this is not union wages. A journeyman gets paid anywhere from $18 to $30 an hour plus $50 to $100 Per Diem.

The contractor then tacks on K3nt’s insurance (medical, workman’s comp, liability) adds small tools fees, training, overhead ect. then marks the total up $30% and that is what the labor cost to the customer is. So the employee is not making $55 to $70 but the contractor is. With the shortage of labor in Tx and La if you need workers you have to steal them from other sites. The only way to steal them is to offer them more money then they are making already. So I see labor cost going up. 5 years ago a journeyman is this area was making $16.50 to $18 now $18 it is $18 to $21. On top of this you hav eto pay your Craft Foremen and General Foremen and your Superintendent. Then you have Project Managers, Engineers, Planners and Schedulers, Buyers, Office Managers, Clecks, Accountants. Plus you have equipment cost that you pass along.

On a side note even if Ice was a member of FOP, FOP is not a union but an association. Big difference is an association can not strike. I recommend TMPA over FOP.