Faced with a choice between OPEC and America, who does W support?

[cre8tiff]

Is anyone else reminded of Flowers for Algernon: The early years here?

[wiegie]

Is anyone else reminded of Flowers for Algernon: The early years here?

 

not really

 

(as I see no hope for a dramatic improvement in the future)

[bushwacked]

hypothesis: if your neighbors are as bright as you, those refineries are definitely not running at full capacity.

 

 

That still doesn't explain why other communities throughout the state who are supplied by the same refineries pay significantly lower prices although the product must be transported at significantly further distances.

 

Please tell me how many refineries we need in our county to get cheaper prices, Dimwitard.

[Ursa Majoris]

We need the referee in here to stop this. It's a bloodbath. Poor old DMarc is hopelessly overmatched.

[cre8tiff]

We need the referee in here to stop this. It's a bloodbath. Poor old DMarc is hopelessly overmatched.

 

 

dmarc?

[yo mama]

We need the referee in here to stop this. It's a bloodbath. Poor old DMarc is hopelessly overmatched.

 

This isn't a battle of wits. This an an example of how some creatures prefer negative attention over none at all.

[dmarc117]

We need the referee in here to stop this. It's a bloodbath. Poor old DMarc is hopelessly overmatched.

 

 

 

i feel like im in a street fight with 10y olds.....everytime one of you come throwin, i simply put you in your place.

 

who's next?

[dmarc117]

the lib contingency

 

me

Edited May 25, 2007 by dmarc117

[Dr. Love]

We need the referee in here to stop this. It's a bloodbath. Poor old DMarc is hopelessly overmatched.

 

Dmarc may be overmatched, but this issue isn't the one proving it. Everyone seems to agree that refining capacity is strained and that refining profits are thin. Dmarc seems to be arguing this is basically due to liberals being evil, while others seem to be arguing it's because oil companies are evil. Sorry, but that's a dumb arguement on both sides.

 

My only argument was that It is the oil companies decisions to not build, repair, or upgrade refineries that is a major contributor to higher gas prices.

 

You've already agreed that gasoline refining is a low-profit endeavour, so why would you hold it against any company for not investing further in capital-intensive infrastructure? And by the way, you're way off on the "repair" aspect of huge chemical assets. In a commodity business like gasoline refining, a business can't afford to have a $150+ million dollar asset not running. That's real money out of that business's pocket. They may not be able to justify building new capacity, but they sure as hell are going to keep their plants cranking out every drop of gasoline possible.

 

So... in a country like ours, we can choose to elect people who make legislation that somehow motivates oil companies to upgrade/build/repair refineries.

 

Or, if that doesn't work, we could just decide that oil is a necessary commodity to the security of our nation, and nationalize it. I only suggest this to scare the crap out of oil companies, though. I don't think it'll happen unless their motivation for profit starts to severely hurt the economy.

 

This is dumb. How would passing new laws or nationalizing gasoline production change the baseline economics of the operation? It wouldn't. The system could be manipulated so that the price of gas is lower at the pump, but that's because the costs would be spread to taxpayers who don't use the most gasoline.

 

Define refinery "problems", please. This isn't unexpected that gas prices are rising again right before summer begins. This happens every single year. However, if you mean to say that the refinery problems are actually the oil companies doing "routine maintenance" for the summer, which is why the deeply routed oil demand continues to rise, then you are right. The demand for oil is rising primarily because the oil companies are choosing not to produce as much of it, but, probably also due partly to the fact that more people drive during the summer -- which is "ironically" the perfect time to produce less oil.

 

Gas prices go up in the summer because people drive more in the summer. Demand goes up, supply stays the same, prices go up. It's pretty simple.

 

By the way, the assertion that refiners shut down their own operations as a way to boost prices is retarded. If there was only one refiner, that may make a little bit of sense, depending on the situation. But with many refiners, the math just doesn't work. Let's use this example. Let's say for simplicity's sake that there are only three companies refining gaasoline: ExxonMobile, Royal Dutch Shell, and BP-Amaco. Let's also say that they have about the same capacity, 3MM barrels per day (2005 gas consumption was ~9MM bbl/day) Let's also say that ExxonMobile, the evilest of the bunch, decides to take a full third of their capacity (~11% of the entire refining capacity) offline, just to gouge the innocent American public and make Dick Cheney smile. Let's also say that results in a $0.50 jump in gas prices (both 10% and $0.50 per gallon are similar to Katrina numbers).

 

Normal OperatingCompany			Refining Capacity		  Gas Price		Revenue--------		   -----------------		  ----------	   --------Exxon Mobile	   3MM bbl/day				$3.00			$9MM/dayRoyal Dutch Shell  3MM bbl/day				$3.00			$9MM/dayBP-Amaco		   3MM bbl/day				$3.00			$9MM/dayExxon Losing 10% Capacity ScenarioCompany			Refining Capacity		  Gas Price		Revenue--------		   -----------------		  ----------	   --------Exxon Mobile	   2MM bbl/day				$3.50			$7MM/dayRoyal Dutch Shell  3MM bbl/day				$3.50			$10.5MM/dayBP-Amaco		   3MM bbl/day				$3.50			$10.5MM/day

 

 

As you can see, while Exxon would get its jollies by screwing Mr. and Mrs. middle class with the $0.50 gas price hike, it may have to explain the strategy of losing $2MM/day in revenue to its board.

 

What's that? You don't think that's realistic? You say that they'd all split the capacity shorting equally and make $9.31MM/day in revenue? Okay, if we're going to make that assumption, let's make our model a little more realistic.

 

Let's say that there are 50 refining companies. The big three split 60% of the refining capacity, seven "medium players" (ConocoPhillips, Marathon, Valero, etc.) comprise 20% of the capacity, and 40 small guys comprise the remaining 20%. I'm pulling these numbers out of my ass, but they seem like they'd be close to reality. The situation then looks like this:

 

More Realistic Normal Operating ScenarioCompany			Refining Capacity	   Gas Price		Revenue--------		   -----------------	   ----------	   --------Exxon Mobile	   1.8MM bbl/day		   $3.00			$5.4MM/dayRoyal Dutch Shell  1.8MM bbl/day		   $3.00			$5.4MM/dayBP-Amaco		   1.8MM bbl/day		   $3.00			$5.4MM/dayMedium Player 1	0.257MM bbl/day		 $3.00			$0.771MM/dayMedium Player 2	0.257MM bbl/day		 $3.00			$0.771MM/dayMedium Player 3	0.257MM bbl/day		 $3.00			$0.771MM/dayMedium Player 4	0.257MM bbl/day		 $3.00			$0.771MM/dayMedium Player 5	0.257MM bbl/day		 $3.00			$0.771MM/dayMedium Player 6	0.257MM bbl/day		 $3.00			$0.771MM/dayMedium Player 7	0.257MM bbl/day		 $3.00			$0.771MM/day40 X Small guy	 40 x 0.045MM bbl/day	$3.00	   40 X $0.135MM/day			(total of 1.8MM bbl/day)			(total of $5.4MM/day)-------------------------------------------------------------------------Complete total	 9MM bbl/day			 $3.00			$27MM/day 

 

 

So, now to get that $0.50 reduction, you still need to lower the total output by 1MM bbl/day. However, the big three can't do it themselves. This would result in lower revenue (1.8MM bbl/day-0.33MM bbl/day)*$3.50 = $5.15MM/day... less than the "normal" conditions. So let's say they involve the medium guys, and they distribute all the lowering of capacity equally (the only way it would work). I think it's safe to say that you'd never get the small guys to go along with something like this. That would involve the scenario below:

 

More Realistic 10% Capacity Loss ScenarioCompany			Refining Capacity	   Gas Price		Revenue--------		   -----------------	   ----------	   --------Exxon Mobile	   1.55MM bbl/day		  $3.50			$5.42MM/dayRoyal Dutch Shell  1.55MM bbl/day		  $3.50			$5.42MM/dayBP-Amaco		   1.55MM bbl/day		  $3.50			$5.42MM/dayMedium Player 1	0.221MM bbl/day		 $3.50			$0.774MM/dayMedium Player 2	0.221MM bbl/day		 $3.50			$0.774MM/dayMedium Player 3	0.221MM bbl/day		 $3.50			$0.774MM/dayMedium Player 4	0.221MM bbl/day		 $3.50			$0.774MM/dayMedium Player 5	0.221MM bbl/day		 $3.50			$0.774MM/dayMedium Player 6	0.221MM bbl/day		 $3.50			$0.774MM/dayMedium Player 7	0.221MM bbl/day		 $3.50			$0.774MM/day40 X Small guy	 40 x 0.045MM bbl/day	$3.50	   40 X $0.158MM/day			(total of 1.8MM bbl/day)			(total of $6.3MM/day)-------------------------------------------------------------------------Complete total	 8MM bbl/day			 $3.50			$28MM/day 

 

 

Well, that works out you might say. The big guys are making an extra 0.37%, the medium guys are making an extra 0.39%, and the little guys are making an extra 17%. But how long can that really last? How long before the same greed that would cause a company to collude with others makes them say, "Hmmm... if I raised my capacity a bit, I would make a ton of money!"? Let's say that three of the medium guys had that thought and ratcheted up their production by half of what they dropped it by:

 

Greedy Medium Players ScenarioCompany			Refining Capacity	   Gas Price		Revenue--------		   -----------------	   ----------	   --------Exxon Mobile	   1.55MM bbl/day		  $3.475			$5.39MM/dayRoyal Dutch Shell  1.55MM bbl/day		  $3.475			$5.39MM/dayBP-Amaco		   1.55MM bbl/day		  $3.475			$5.39MM/dayMedium Player 1	0.221MM bbl/day		 $3.475			$0.768MM/dayGreedy Player 2	0.239MM bbl/day		 $3.475			$0.831MM/dayMedium Player 3	0.221MM bbl/day		 $3.475			$0.768MM/dayGreedy Player 4	0.239MM bbl/day		 $3.475			$0.831MM/dayGreedy Player 5	0.239MM bbl/day		 $3.475			$0.831MM/dayMedium Player 6	0.221MM bbl/day		 $3.475			$0.768MM/dayMedium Player 7	0.221MM bbl/day		 $3.475			$0.774MM/day40 X Small guy	 40 x 0.045MM bbl/day	$3.475	   40 X $0.156MM/day			 (total of 1.8MM bbl/day)			(total of $5.4MM/day)-------------------------------------------------------------------------Complete total	 8.05MM bbl/day		  $3.475			$28MM/day 

 

 

That makes the whole thing unravel... The only people making more money now are the ones not participating in the collusion.

 

My point is that there's no way that companies could sustain any kind of production lowering agreement. There would just be too much incentive for an individual company not to abide by the deal. The real reason that there are production outages is that the current refineries are old and therefore need more maintenance and break more often. It's not profitable for companies to build new ones, otherwise they would.

[Ursa Majoris]

Dmarc may be overmatched, but this issue isn't the one proving it. Everyone seems to agree that refining capacity is strained and that refining profits are thin. Dmarc seems to be arguing this is basically due to liberals being evil, while others seem to be arguing it's because oil companies are evil. Sorry, but that's a dumb arguement on both sides.

 

 

Well, that's not my argument at all. I have only replied to his "liberals are the only people with NIMBY attitudes" claim with strong evidence, in the shape of Georgie and Jeb, that his argument is BS. That's it for me.

[wiegie]

My point is that there's no way that companies could sustain any kind of production lowering agreement. There would just be too much incentive for an individual company not to abide by the deal. The real reason that there are production outages is that the current refineries are old and therefore need more maintenance and break more often. It's not profitable for companies to build new ones, otherwise they would.

 

Your analysis assumes that it is a one-shot game. In which case, you are correct, the Nash Equilibrium suggests that all players would cheat on their collusion agreements. But, if it is a repeated game, then cooperation could work as everyone has a gentleman's agreement that no new refineries will be built. This "no-build" equilibrium could hold if all players realize that if they expand refining capacity today for a quick buck, they will get hammered tomorrow as everyone else also expands their refining operations. The net-present value of not upsetting the apple-cart could easily outweigh the net-present value of trying to make the quick buck.

 

(this is the reason why, for example, that auto dealerships aren't open on Sunday--it is true that if one dealership started to open up on Sundays that it would end up getting more sales as people would have an extra day to buy cars from them. But, the dealerships all realize that if they open on Sunday, then all of the other dealerships will also open on Sunday. The total amount of cars the dealerships sell would be the same as if they were only open for six days out of the week, but now they would incur the extra expense (in terms of time and foregone leisure) of being open on Sundays.)

Edited May 26, 2007 by wiegie

[Big John]

 

(this is the reason why, for example, that auto dealerships aren't open on Sunday--it is true that if one dealership started to open up on Sundays that it would end up getting more sales as people would have an extra day to buy cars from them. But, the dealerships all realize that if they open on Sunday, then all of the other dealerships will also open on Sunday. The total amount of cars the dealerships sell would be the same as if they were only open for six days out of the week, but now they would incur the extra expense (in terms of time and foregone leisure) of being open on Sundays.)

 

In Wisconsin, state laws prohibit dealerships from opening on Sundays.

 

In Georgia, most dealerships are open on Sundays.

[wiegie]

In Wisconsin, state laws prohibit dealerships from opening on Sundays.

 

In Georgia, most dealerships are open on Sundays.

 

 

Consider the following:

 

Baltimore City car dealers won't open Sundays

Daily Record, The (Baltimore), Mar 9, 2007 by Louis Llovio

 

A state Senate bill that would have allowed Baltimore City auto dealers to sell cars on Sunday has died.

 

Prince George's, Montgomery and Howard are the only Maryland counties that allow car dealerships to be open on Sundays.

 

Sen. George W. Della Jr., D-Baltimore City, said the bill, S.B. 355, failed to get a majority within the Baltimore City Senate delegation and wouldn't move forward.

 

Della, who sponsored the bill, called the current law "outdated and provincial."

 

"It's ridiculous that you can buy anything you want on a Sundays except an automobile," he said. "Well, actually, you can. You can buy an automobile in Washington, D.C., in Prince George's County, in Montgomery County and in Howard County. But not in the rest of the state."

 

Surprisingly, support for keeping car dealerships closed on Sundays comes from an unexpected quarter: dealership owners.

 

"Car dealers like being closed on Sundays," said Peter Kitzmiller, president of the Maryland Auto Dealers Association.

 

The reason, Kitzmiller said, is because it is easier to recruit and maintain employees with the extra day off.

 

Dealers are open mostly from 8 a.m. to 10 p.m. he said. "From an employee standpoint," he said, "they work long hours anyway."

 

A second bill, S.B. 815, would allow Anne Arundel County auto dealers located on Route 198 to open on Sundays. A hearing before the Judicial Proceedings Committee is scheduled for March 20.

[detlef]

Consider the following:

 

I was sort of thinking the same thing. Hell, it's NC law that all wholesale alcohol purchases have to be C.O.D. Gee, I wonder who pushed for that. Of course, one distributor could certainly increase their business if they started offering terms but then everyone would do it and then all their cash-flow would suffer.

[TheGrunt]

My point is that there's no way that companies could sustain any kind of production lowering agreement. There would just be too much incentive for an individual company not to abide by the deal. The real reason that there are production outages is that the current refineries are old and therefore need more maintenance and break more often. It's not profitable for companies to build new ones, otherwise they would.

 

Well said, and no disagreements on my end.