Monday, April 25, 2005

Bush petting session with Saudi prince

In 2000, Bush claimed he knew how to handle OPEC. He said Clinton had to "jawbone" OPEC members:

"What I think the president ought to do is he ought to get on the phone with the OPEC cartel and say we expect you to open your spigots. One reason why the price is so high is because the price of crude oil has been driven up. OPEC has gotten its supply act together, and it's driving the price, like it did in the past. And the president of the United States must jawbone OPEC members to lower the prices, he said.

Does this constitute "jawboning"? Sounds more like a petting session:

This is an important relationship," Mr. Bush said. "I've got a good personal relationship with the crown prince. I look forward to talking with him about a variety of subjects."

...a Saudi official emerged from the meeting between the leaders saying Saudi Arabia had not been asked to ship more oil to the United States...

Secretary of State Condoleezza Rice deflected a question about whether Mr. Bush had pressed the Saudis, and by extension other OPEC members, to lower prices.

Administration officials described the talks between Mr. Bush and the crown prince as wide-ranging, friendly and positive...

Could it be that Bush is talking to the wrong guy? Oil companies are reporting record profits:
1/27/05, ConocoPhillips Doubles Profit In 4th Quarter
"ConocoPhillips reported net income of $2.43 billion...for the period that ended in December, up from $1.02 billion...in the year-earlier."

2/1/05: Exxon Mobil Earnings Jumped 27% in Quarter
"...fourth-quarter profit rose...to record $8.42 billion...net income climbed...from $6.65 billion, year earlier."

2/4/05: Shell Makes Another Cut In Reserves; Profit Jumps
"Royal Dutch/Shell Group reduces its proven oil and gas reserves by additional 10 percent, [but] company reports net income of $4.48 billion in fourth quarter, more than double $1.9 billion it earned in quarter year earlier."

2/9/05: Occidental Revises Quarterly Profit Upward
"...fourth-quarter profit was 12 percent higher than previously reported...$742 million, rather than the $665 million...reported on Jan. 24....Profit almost doubled from $382 million a year earlier."

2/9/05: BP Says Earnings Jumped in Quarter and for Year
"BP reports better-than-expected profit for fourth quarter and full year, and says it might return $23 billion to shareholders in dividends and buybacks in next two years; net income rose 26 percent in quarter, to $3.6 billion; full-year net income also rose 26 percent, to $16.2 billion; BP says production volumes will increase in 2005 to 4.1 million to 4.2 million barrels per day, up from just under 4 million barrels per day in 2004."

4/5/05, ChevronTexaco Offers $16.8 Billion for Unocal
"...expands its global reach and could ignite wave of takeovers of midtier producers; transaction is industry's largest in three years."

Meanwhile, is anyone asking why refineries are shutting down at a time when demand is high? Didn't we see these production problems when Enron was sticking it to "Grandma Millie"?
A gasoline-making unit at a Lake Charles, Louisiana, refinery owned by ConocoPhillips, the largest U.S. refiner, yesterday failed to start after maintenance, Reuters reported, without naming its source. Conoco spokeswoman Laura Hopkins declined to comment.

San Antonio-based Valero, the third-largest U.S. refiner, on April 18 said a coker at its St. Charles, Louisiana, plant will be shut until at least April 26, halting 336,000 gallons of daily gasoline output and 1.05 million gallons of daily distillate production. Distillates include diesel and heating oil.

A Corpus Christi, Texas, refinery owned by Koch Industries Inc.'s Flint Hills unit slowed operations April 19 after a flange leaked, the company said in a report filed with the Texas Commission of Environmental Quality. The plant can process 300,000 barrels of crude a day.

Petroleos de Venezuela SA, South America's largest oil producer, last week stopped gasoline and diesel production at its Puerto La Cruz refinery after one of the plant's units was shut, El Nacional reported today, citing unidentified industry officials.

6 Comments:

At 4/26/2005 07:31:00 AM, Anonymous The Gnat's Trumpet said...

Are you suggesting that the President should order the oil companies to make less money? Sounds like you're advocating governmental management of the economy? Hasn't that been tried before? How did it work out?

What's next, nationalization of key industries? How about nationalization of everything? After all, individuals can't be trusted to manage their own affairs can they?

 
At 4/26/2005 08:58:00 AM, Blogger Schroeder said...

Dudesucker, I believe...

I appreciate your concern about socializing industry. I'm against it. But let's get something straight about government regulation of the economy.

This may come as news to you, but the whole economy is one great big system managed by, yep, the government!

The entire economy operates on a system of finance, investment rules, laws and regulations, and yes, consumer protections, to ensure that businesses don't cheat, and that the playing field remains fair and competitive.

I'm suggesting that the government should exercise its oversight authority, especially with regard to an industry that, let's face it, isn't selling something as mundane as iPods. I don't think charging too much for iPods is going to hurt anyone.

All I've attempted to do is raise some questions about why profits soar when consumers suffer. I know, I know, it's about demand and supply, but you have, elsewhere, contended that there's plenty of supply (with which I disagree).

In any event, why aren't oil companies investing in the infrastructure they need to make sure we have enough supply? Well, why should they? They're making record profits. Business is good when there's scarcity.

But scarce conditions really do require that the government step in to make sure consumers aren't being screwed, and to make sure that the market remains "free".

What you get when the government has no authority is a system of pillaging the "Grandma Millie's" of the world, lacking in morality, and which tends to lead to consolidation and less competition.

 
At 4/26/2005 09:02:00 AM, Blogger Schroeder said...

...and by the way, in saying oil companies should be investing in the infrastructure they need to make sure we have enough supply, I mean refining capacity. More oil won't get gas prices down if the oil can't be converted into gasoline.

Furthermore, a topic for another conversation, the government should be doing more to stimulate investment in energy conservation and alternatives to fossil fuels - not giving a gift of $12 billion to the oil industry, as the House recently did in their energy legislation.

 
At 4/26/2005 10:22:00 AM, Anonymous The Gnat's Trumpet said...

Yes, DudeSucker, that's me.

Thank you for the condescending lecture about governmental regulation of the economy. I said "management", by the way, which I intended to mean more than just regulation, but no matter.

I do believe you are right that the lack of new refineries (wasn't the last one built back in the 70s) is a large part of the problem as may be the number of blends required. I think it is appropriate to admit, and then you can take my comments for what they are worth, that none of my statements regarding oil and refineries comes from personal knowledge and that most of my information on this topic comes from boortz.com. He is of the opinion that the lack of new refineries is the fault of the environmentalists. What is your take on the reason for the lack of new refineries? I know what you have posted about the record profits for the oil companies and business is good for them when prices are high so no need to repeat that. I'm more interested to hear your take on the environmental regulation angle.

 
At 4/26/2005 02:07:00 PM, Blogger Schroeder said...

I'll work harder on minimizing the condescension when I'm competing with facts from somewhere other than boortz.com.

I failed to make the point that the oil industry is far from being a truly laissez faire industry. It is highly subsidized to stabilize prices and to keep demand high. What would oil cost were it not for U.S. interventions in the Middle East, highway bills, and publicly-financed airport construction (not to mention government bailing out of the airline industry), as well as direct tax breaks to the oil industry?

As for the argument that the lack of new refineries is the fault of the environmentalists...

Your friend Neal Boortz characterizes the problem of refinery construction on the "friendly neighborhood environmentalist who won't allow more refineries to be built."

Well boo hoo. Those bully environmentalists are the cause of all our problems. We can't be billionaires with them around.

Before you criticize the all-powerful environmentalists for keeping those poor little capitalist industrialists from doing their dirty business, note the following:

1) ExxonMobil reported the highest profit in history for a US corporation, $25.3 billion in 2004.

2) One Shell refinery in Norco, Louisiana earns $1.5 million in profits an hour, according to the Wall Street Journal.

3) Unless you're volunteering your backyard for a refinery, you can hardly criticize other people who don't want one either.

So, let's get this straight. The argument goes that because citizens complain about EXTREMELY toxic pollution being dumped into their water or their air (ever seen a kid suffering from leukemia?), and then win the right to protections requiring plants to install pollution control equipment, they get tagged as "environmentalists," and the refining industry says it can't afford to build any more refineries.

Why? Because they aren't allowed to focus on profit and efficiency at the expense of a community's health?

Sorry, that's just not an acceptable argument. We don't allow the military to practice shelling in suburban neighborhoods for the same reason. Some activities simply are not allowed, and dumping benzene, sulfur dioxide, and a brew of other toxic chemicals into the public's air, water, and soil is simply not acceptable.

Even from a strictly economic perspective, toxic pollution can't be justified. If you want to argue that all economic activities should be allowed based on their profitability, and then you start polluting, impairing the health, livelihood, and longevity of other people, well, they have ought to have a claim against you. The problem has always been however, that the market for lawsuits has historically benefitted those who had the money to defend themselves - the oil companies. Only recently have communities started to get the law to pay attention to their rights as well. The problem is not that citizen protections are too strict, it is that they have been too lax all along.

Why can't a refinery operate more cleanly?

The technology exists. It works in California. Exxonmobil boasts of it. The Arizona DEQ just approved the first refinery in the U.S. in 30 years, and it's a clean refinery. Research demonstrates that clean refineries can operate at a higher profitability than older, dirtier refineries.

So why don't the refineries do what they ought to when it makes economic sense, and when it's morally the right thing to do?

They're just cheap is all I can figure.

Look, I don't like refineries, but we need 'em. I live near them. They mean jobs for people I know. All I'm saying is that if refineries are going to operate, they have a responsibility to do it in the right way, and to report what they're doing so people can be informed and if need be, protect themselves.

Is that too much to ask?

And, by the way, in an upcoming post, I have more information about how the oil industry profits by not opening up the spigot all the way.

 
At 4/26/2005 02:26:00 PM, Anonymous The Gnat's Trumpet said...

Thank you!

 

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