a thread about the oil industry

[wiegie]

Picking up from here:

 

http://forums.thehuddle.com/index.php?s=&s...dpost&p=2046636

 

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. :shades

Apparently you missed my comments about repeated games.

[Dr. Love]

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.

 

Well, first of all, my examples were responding directly to the accusations that refiners were withholding capacity in order to drive up prices. I showed pretty conclusively that the financial aspect of that didn't hold water (assuming that greed is the driving force behind trying to drive up prices).

 

Secondly, I don't know where the Nash equilibrium fits in here. My somewhat limited understanding of it involves the assumption that an individual participant cannot change his individual outcome by changing his decision. Obviously, that doesn't apply here - any participant can increase his own earnings by raising capacity.

 

So let's look at how a "no new production" agreement would fare under similar scrutiny to the "let's hold down production" agreement. Let's assume (as we did before) that gas price is linearly proportional to demand (more capacity = lower prices, less capacity = higher prices). Let's also assume the "normal" operating mode from before where ExxonMobile was making $5.4MM/day producing 1.8MM bbl/day at $3.00 (with industry capacity at 9MM bbl/day). If they built a new, world-class refinery that produces 0.2MM bbl/day, that would increase their capacity to 2.0MM bbl/day and the industry capacity to 9.2MM bbl/day. This would push prices down to $2.90, but ExxonMobile's revenue would go up to $5.8MM/day. So the greed factor should still push ExxonMobile to build new refining capacity, as long as building the new capacity can generate sufficient NPV.

 

The last point is the key one. Refineries are huge capital investments, and commodities tend to have pretty thin margins. I can see where there are serious economic reasons not to build new refineries. Which has been my point all along, I guess. There's likely no Democratic conspiricy to drive capacity down, and there's likely no industry conspiricy to not produce gasoline. The reality is that we're getting gasoline cheaply enough compared to the price to produce it that it's not economical for any company to sink capital into more production.

 

(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.

 

 

<article that shows dealerships opposing the ability to be open on Sundays>

 

Uhh, I think that you're proving my basic premise here. The Georgia example shows that even if it's a net detraction to the whole, a dealership will open on Sunday if allowed to, because that may mean more business for them. The fact that dealerships are opposing the repeal of the law disallowing them to be open on Sunday proves my point that these "gentlemens agreements" within an industry don't work. They need an enforceable law in order to make it work, which is why they are supporting it.

[wiegie]

Well, first of all, my examples were responding directly to the accusations that refiners were withholding capacity in order to drive up prices. I showed pretty conclusively that the financial aspect of that didn't hold water (assuming that greed is the driving force behind trying to drive up prices).

 

Secondly, I don't know where the Nash equilibrium fits in here.

You'll have to trust me that it does fit in here. (If you want to look it up, search under "prisoner's dilemma" and "repeated game prisoner's dilemma").

My somewhat limited understanding of it involves the assumption that an individual participant cannot change his individual outcome by changing his decision. Obviously, that doesn't apply here - any participant can increase his own earnings by raising capacity.

Not really. Because if one firm opens a new refinery it is likely that other firms will also open other refineries. That is the problem.

 

So let's look at how a "no new production" agreement would fare under similar scrutiny to the "let's hold down production" agreement. Let's assume (as we did before) that gas price is linearly proportional to demand (more capacity = lower prices, less capacity = higher prices). Let's also assume the "normal" operating mode from before where ExxonMobile was making $5.4MM/day producing 1.8MM bbl/day at $3.00 (with industry capacity at 9MM bbl/day). If they built a new, world-class refinery that produces 0.2MM bbl/day, that would increase their capacity to 2.0MM bbl/day and the industry capacity to 9.2MM bbl/day. This would push prices down to $2.90, but ExxonMobile's revenue would go up to $5.8MM/day. So the greed factor should still push ExxonMobile to build new refining capacity, as long as building the new capacity can generate sufficient NPV.

All of this gain in revenue comes from assuming that Shell won't counter by opening a new refinery of its own. It almost certainly would. (and so would other firms)

 

Uhh, I think that you're proving my basic premise here. The Georgia example shows that even if it's a net detraction to the whole, a dealership will open on Sunday if allowed to, because that may mean more business for them.

It might help a dealership to be open on a Sunday on the very first Sunday that they opened up; but it wouldn't help them in the long run because the next weekend all dealerships would start being open on Sundays and each dealership would end up selling the same amount of cars as they had before, just now spread out over 7 days instead of 6.

 

The fact that dealerships are opposing the repeal of the law disallowing them to be open on Sunday proves my point that these "gentlemens agreements" within an industry don't work. They need an enforceable law in order to make it work, which is why they are supporting it.

 

Not quite, because there are plenty of places where dealerships stay closed on Sundays even if it isn't against the law. They likely stay closed because the dealerships in that area have an implicit agreement not to open up on Sundays because they know in the end it will only hurt themselves. However, once one person defects on the agreement (or a new dealer enters the market), then they will all be forced to open up on Sundays. This is likely what happened in Georgia. Since it is much easier to open up a new car dealership than it is to open up a new oil company and because there are more car dealerships in many markets than there are in the gasoline market, it would be expected that there would be more "defections" from the agreement in the case of dealerships than with oil companies. Edited May 26, 2007 by wiegie

[AtomicCEO]

Well, first of all, my examples were responding directly to the accusations that refiners were withholding capacity in order to drive up prices.

 

 

I'm pretty sure you misunderstood my point.

 

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?

 

You definitely misunderstood my point.

 

You seem to think I'm saying that there is some sort of conspiracy to keep refinery production low in order to drive prices up, and that I am holding this against oil companies.

 

What I'm actually saying is that it's not profitable to increase refinery production... and I said very clearly that that makes sense from a business perspective.

 

However, when the only solution dorkmart provided was "we need to remove all environmental regulations so that the oil companies can do whatever they want", I disagree with that concept. There are other ways to incent greater refinery capacity.

Edited May 26, 2007 by AtomicCEO

[detlef]

I'm pretty sure you misunderstood my point.

You definitely misunderstood my point.

 

You seem to think I'm saying that there is some sort of conspiracy to keep refinery production low in order to drive prices up, and that I am holding this against oil companies.

 

What I'm actually saying is that it's not profitable to increase refinery production... and I said very clearly that that makes sense from a business perspective.

 

However, when the only solution dorkmart provided was "we need to remove all environmental regulations so that the oil companies can do whatever they want", I disagree with that concept. There are other ways to incent greater refinery capacity.

 

Precisely, there really hasn't been an anti-big oil agenda to most of the arguments made against dmarcy marc, simply that there are plenty of reasons besides treehuggers that more refineries aren't being built. It's really quite simple.

 

As to the car dealerships not being open on Sundays, Dr. Love, you are really arguing semantics. Ouija claims that they certainly don't oppose any law saying they can't because they don't want to anyway. You're saying they likely wouldn't even if they could. Explain to me any significant difference in what you are saying. The simple point is, they realize that if one did it, they'd all have to, so it makes sense for all of them to close. The law simply makes it easier since some jerk-off can't come along and mess up their deal.

 

Can we simply agree to this?

 

It can't be assumed that building more refineries is in the best interest of the industry and they're basically the one who ultimately decide if they want to do so or not. This is not an evil thing, simply a choice that every business makes. When faced with the decision to pump money back into my business, I'm always going to avoid those that don't result in increased revenues as long as I can get away with it.

 

Enclose the patio to increase my possible seating during inclement weather? Absolutely.

 

Replace my grease-trap? As soon as the city upgrades the codes and requires me to do so and not a second earlier. That is, unless it could be shown that a new one would reduce my operating expenses enough to offset the cost of installation (which it won't).

 

Frankly, I feel the same way about other restaurants running drink specials on certain nights. I'm not into that. I charge what I need to charge to turn a profit. If everyone stopped trying to one-up each other with "Martini mondays", then we'd all make more money. I suppose these specials nights to lure marginal diners who would have otherwise stayed home. However, I think it has a much bigger impact on the decision made on where to go by those who've already decided to go out.

 

Great, so now they go to your place for cheap martinis on mondays and then they'll come to my place for "Tuesday Tapas". BFD, we both do basically as many people total, we just each make less on them. Why the f would I want that?

[wiegie]

As to the car dealerships not being open on Sundays, Dr. Love, you are really arguing semantics. Ouija claims that they certainly don't oppose any law saying they can't because they don't want to anyway. You're saying they likely wouldn't even if they could. Explain to me any significant difference in what you are saying. The simple point is, they realize that if one did it, they'd all have to, so it makes sense for all of them to close. The law simply makes it easier since some jerk-off can't come along and mess up their deal.

 

If I read his argument correctly, I think Dr. Love is saying that in the absence of Blue Laws the car dealerships would indeed all open on Sundays. (And this is certainly what would happen if we were only talking about a single sunday (such as would happen if all car dealerships would be closing permanently for some reason the following week).)

 

My argument is that since this game will be replayed Sunday after Sunday for an indefinite number of years to come, the dealerships could in fact reach an equilibrium in which they all stay closed on Sundays (because no dealership would think that a single Sunday's worth of profit would be worth having to stay open for every other Sunday for the rest of time--which is what would end up happening).

Edited May 26, 2007 by wiegie

[detlef]

If I read his argument correctly, I think Dr. Love is saying that in the absence of Blue Laws the car dealerships would indeed all open on Sundays. (And this is certainly what would happen if we were only talking about a single sunday (such as would happen if all car dealerships would be closing permanently for some reason the following week).)

 

My argument is that since this game will be replayed Sunday after Sunday for an indefinite number of years to come, the dealerships could in fact reach an equilibrium in which they all stay closed on Sundays (because no dealership would think that a single Sunday's worth of profit would be worth having to stay open for every other Sunday for the rest of time--which is what would end up happening).

 

I guess my point is that it comes down to the fact that it is not in the best interest of the dealers to be open (or even be allowed to be open) on Sunday. Both of you seem to agree on that. If I recall, that was precisely the premise of your argument. The fact that it is law in certain areas really is unimportant to the fundamental point.

[wiegie]

I guess my point is that it comes down to the fact that it is not in the best interest of the dealers to be open (or even be allowed to be open) on Sunday. Both of you seem to agree on that. If I recall, that was precisely the premise of your argument. The fact that it is law in certain areas really is unimportant to the fundamental point.

 

I didn't seem to me that Dr. Love was agreeing that it wouldn't be in their interests to be open.

 

However, even if he did agree with that, our disagreement is more that he feels that competition will force the dealerships to be open on Sunday whereas I think that it is possible to reach an equilibrium where the dealerships remain closed.

[Azazello1313]

i don't know what thread this discussion came from, i must not have been reading it...but the one question i have from reading this one: as far as the whole economic decision whether or not to open new refineries, don't y'all think that the regulatory environment is going to be a pretty strong factor in that decision? and wouldn't you have to say it has BEEN a pretty strong factor in the past? whatever other factors may or may not go into that decision, i think that factor stands regardless.

[Azazello1313]

I didn't seem to me that Dr. Love was agreeing that it wouldn't be in their interests to be open.

 

However, even if he did agree with that, our disagreement is more that he feels that competition will force the dealerships to be open on Sunday whereas I think that it is possible to reach an equilibrium where the dealerships remain closed.

 

 

eh, i don't know. i think if you take those laws away, EVERY dealership in the state will be open on sundays. same with liquor stores. it's too logical a day for them to do business. i think a lot of them don't push for a change to the law mostly because it's easier to preserve the status quo and they all operate on business models that have existed for years that center around having sundays off. so they'd rather not be forced to adapt. but if those laws changed i am totally convinced they WOULD adapt, and not just decide to keep being closed on sundays.

[wiegie]

eh, i don't know. i think if you take those laws away, EVERY dealership in the state will be open on sundays. same with liquor stores. it's too logical a day for them to do business. i think a lot of them don't push for a change to the law mostly because it's easier to preserve the status quo and they all operate on business models that have existed for years that center around having sundays off. so they'd rather not be forced to adapt. but if those laws changed i am totally convinced they WOULD adapt, and not just decide to keep being closed on sundays.

 

wrong

 

Buying New wheels? Never on Sunday

Why not? Because of a decades-old gentlemen's agreement to close

By Levi J. Long

ARIZONA DAILY STAR

Tucson, Arizona | Published: 09.24.2006

 

The Nuñez family set out across the dealership lot, looking for a brand new truck, and not a salesman was in sight.

 

They had already researched models and prices online and were heading out to closed Tucson dealerships to get a firsthand look at what they like — all without the help (or hassles) of sales staff. They could because it was Sunday.

 

"It's easy to look around with nobody hounding you," said Reuben Nuñez while looking at trucks with his family at the Jim Click Ford dealership at 6244 E. 22nd St. Earlier the family had browsed at the Tucson Auto Mall across town.

 

Like many Tucsonans, the Nuñezes have learned all the local new-car dealerships are closed on Sundays.

 

The practice goes back decades, dealers said, and there are two main reasons: A longstanding gentlemen's agreement exists among new-auto dealers in Tucson to close that day, and many say it wouldn't make financial sense to open anyway.

 

Jim Click found that to be the case after he opened his first local dealership in 1971.

 

"We tried Sundays for about four years and realized there were not more sales of vehicles than (at) those who were closed," said Click, who has 17 dealerships in Tucson and Green Valley. "Since then everybody has been closed Sundays."

 

Some dealers, as well as customers, say it's a good thing for shoppers that the dealerships are closed on Sundays.

 

"It's a remarkable thing with Tucson that we have dealers who can come to an agreement together," said Mike DiChristofano, co-owner of Broadway Volvo and vice president of the Tucson New Car Dealers Association, whose 20 or so members are all new-auto dealership owners and managers. "For consumers it's a day to shop freely."

 

But one of the area's top used-car dealers questioned that logic.

 

Dave Aufmuth, owner of Aufmuth Motors, said being open on Sundays is a smart business move. His dealership is open seven days a week — a fact Aufmuth points out in advertisements — operating a 50,000 square-foot warehouse at 3981 N. Business Center Drive.

 

"Weekends are the busiest time during the week," he said. "Buying a car, truck or SUV is usually the second major purchase next to a house. You need both decision makers to be there together."

 

But some car browsers find the Sunday closures convenient.

 

"We try to avoid car salesmen," said Stacy Jauarone, while looking with Brent McCraney at SUVs last weekend. "Here we get to look around and see everything we want without somebody coming out to give you a sales pitch."

 

The impact on sales

 

No state or local laws prohibit auto sales on Sundays. Indeed, in the Phoenix area, several dealers open.

The Tucson dealers' closing tradition might have broken down if it didn't make financial sense. In a given week, there are only so many sales, and one more day won't make a big impact for dealers, said Neb Yonas, general manager for Chapman Automotive Group's new Tucson operations.

 

"It's not hindering business. There's just not much business on Sunday," Yonas said.

 

In 2004, Chapman bought the Beaudry Group's Tucson dealerships — Acura, Audi, Honda, Mercedes Benz, Porsche, Saturn and Volkswagen.

 

"We agreed that Sunday should serve as a day off for employees. It's an agreement that was here before us and we have no intention of breaking it," Yonas said

 

When Chapman arrived, dealers wondered if the company would open on Sundays, said John Hornbeck, general manager at Mercedes Benz of Tucson, 6001 E. Speedway.

 

"That was one of the biggest concerns we heard," he said.

 

But Chapman decided to close on Sundays, even though its Phoenix properties are open.

 

Tucson isn't so unusual when it comes to closing auto dealerships on Sunday, said Bobbi Sparrow, president of the Arizona Auto Dealers Association. The Phoenix-based group represents about 250 new car and truck franchise dealers.

 

Around the state, dealerships that choose to close on Sundays aren't reporting any sales loss, Sparrow said

"You'll find that most (dealerships) in the state are closed on Sundays. That's just the way the market runs," she said. "A lot of people respect that dealers are at home with their families on Sundays. It's tough to run 24-7."

 

Said DiChristofano: "I would say that in the 34 years we've been operating, we've never had a customer say 'How come you're not open on Sundays?' "

 

Lower overhead costs

 

It may be illegal for a group of owners to decide to agree to close their doors as a collective, but it is not considered collusion if dealers decide independently to close their doors, said Nancy Bonnell, antitrust unit chief with the Arizona Attorney General's office.

 

"The whole key is the agreement. But if dealers independently agree to be closed, there is no violation of law," Bonnell said.

 

DiChristofano said any local dealer could open on Sundays.

 

"There's no way that we'd do anything illegal. It's all voluntary on everyone's part," he said.

 

And there's no recourse for dealers against anyone who chooses to open on Sundays, DiChristofano said.

In addition to assuring at least one weekend day off for sales and finance staffs, Sunday closing reduces overhead, he said.

 

"A lot of dealers know the benefits of it," DiChristofano said. "A lot of people see it as an advantage."

To drum up business locally, the Chapman dealerships will sometimes advertise, "silent sales on Sunday" in print ads, Yonas said.

 

Stores might be closed, but the dealership invites shoppers to take a look at cars that feature special rebates or discounts and offer as much information about vehicles as possible, Yonas said.

 

"Sundays are nice. People like to window-shop and look, and people take comfort and take a leisurely stroll through lots," Yonas said. "If something catches their eye, they're able to contact us on Monday."

Edited May 26, 2007 by wiegie

[Azazello1313]

that is interesting, one thing i didn't really consider is the whole 'silent shopping' thing. still, one or two dealerships trying it for a few years....they probably didn't sell a lot because people just assumed they were all closed. if it doesn't make economic sense to open on sundays, it's because of the status quo everyone is used to holding over from the blue laws.

[detlef]

It absolutely does not make sense for auto dealers to open as long as everyone agrees. Buying a car is not like grabbing a bottle of booze. If it's sunday, and you're out of booze, and you want more, then you'd buy it if you could. If you can't get any, then you blow it off and grab a six pack. You're not really any more likely to buy that bottle of booze on Monday or Tuesday because you couldn't get it on Sunday. You're not likely to think about it until next time you want some. Thus, it would make sense from a business standpoint to be open every day.

 

Buying a car is not quite as impulse. You're either shopping for a car or you're not. You're not going to blow off getting a car because you felt like having one on Sunday but couldn't buy it. You're going to come back on another day. Thus, as long as there are no options for buying a car on Sunday, all the dealers win.

 

Maybe that's what ouija's latest article said. I admit I didn't read it.

[H8tank]

It might help a dealership to be open on a Sunday on the very first Sunday that they opened up; but it wouldn't help them in the long run because the next weekend all dealerships would start being open on Sundays and each dealership would end up selling the same amount of cars as they had before, just now spread out over 7 days instead of 6.

 

 

Lie. Many dealers choose to close on sunday, many more are open. Some are open on Sunday for the impulse buyer, others close cause it's not worth it to them.

 

How is Chik Filet doing?

 

What I'm actually saying is that it's not profitable to increase refinery production... and I said very clearly that that makes sense from a business perspective.

 

Actually, that makes no sense, and it is obvious why you will make copies for someone else the rest of your life.

 

If everyone stopped trying to one-up each other with "Martini mondays", then we'd all make more money.

 

Hi Castro!

 

 

Great, so now they go to your place for cheap martinis on mondays and then they'll come to my place for "Tuesday Tapas". BFD, we both do basically as many people total, we just each make less on them. Why the f would I want that?

 

Uhhmmm, I think you are confusing your taco joint with places that do compete with each other, Chili's, Applebees, Houlihans, etc.

 

If your place has it's draw without the need for gimmicks, then great. Your analogy sucks.

 

Buying a car is not quite as impulse

 

Says some burger flipper with ZERO experience in the auto industry. Seriously, stick to toasting poptarts doughboy, you are clueless here.

[detlef]

Lie. Many dealers choose to close on sunday, many more are open. Some are open on Sunday for the impulse buyer, others close cause it's not worth it to them.

 

How is Chik Filet doing?

Actually, that makes no sense, and it is obvious why you will make copies for someone else the rest of your life.

Hi Castro!

Uhhmmm, I think you are confusing your taco joint with places that do compete with each other, Chili's, Applebees, Houlihans, etc.

 

If your place has it's draw without the need for gimmicks, then great. Your analogy sucks.

Says some burger flipper with ZERO experience in the auto industry. Seriously, stick to toasting poptarts doughboy, you are clueless here.

 

As for #1. Don't be stupid. The number of car dealers that aren't open on Sunday far outweigh those that are. Unlike liquor stores, one can hardly point to the church for the reason here. Once again, very slowly, so somebody as drunk or stupid or both as you can understand. If you were in an industry and could manage to come to an agreement with all your competitors to all shut down at the same time so you could fish, golf, etc. and not worry about someone stealing your business, why in the hell wouldn't you? Segue to the Castro bit. This isn't communism, rather closer to a cartel. Did you see the movie Beautiful Mind? This, along with the example I gave about drink specials, is essentially an example of the theory he had. As competitors, we can either fight like hell against each other for the something that only one of us can have or we can each pick our spots and make better money easier.

 

The poor bastages who actually are involved in pure competition would give their left nut to find themselves in such a situation.

 

Fortunately for me, I don't have to give food or drinks away to gain customers. I don't do coupons or any such thing, but that's another story entirely. That said, I would imagine that I do lose a few marginal customers to the guys fighting each other with drink nights, which, BTW do happen at independent places, not just the chains.

 

You're just worried about restaurants cutting out the cheap drinks because your a redneck drunk trying to get by on what he makes at K-Mart.

 

Lastly, I don't think it takes an industry insider to figure out that buying a car is something people take a bit more seriously than picking up a bottle of smirnoff at the liquor store. Do people buy a car somewhat on impulse? I suppose, but they had to at least be thinking about it, and once they do, they're pretty much out of the market. A bottle of vodka, on the other hand, is something grab on the way home if you've got company coming by. Unless it's sunday, then you grab some beer. If you need a car and it's sunday, are you going to buy a boat instead? No, you're going to go back on Monday or next Saturday and get it.

 

Don't be an idiot.

Edited May 27, 2007 by detlef

[Dr. Love]

You'll have to trust me that it does fit in here. (If you want to look it up, search under "prisoner's dilemma" and "repeated game prisoner's dilemma"). Not really. Because if one firm opens a new refinery it is likely that other firms will also open other refineries. That is the problem.

 

All of this gain in revenue comes from assuming that Shell won't counter by opening a new refinery of its own. It almost certainly would. (and so would other firms)

 

I understand the theory of what you're saying, and I've never questioned that not expanding capacity wouldn't be good for the industry. However, I think that it's pretty clear that the real world almost never emulates Game Theory.

 

I can think of a few examples off of the top of my head of players in commodity or commodity-like industries taking steps that would, in theory, hurt the entire industry and eventually themselves. I know for a fact that US Gypsum is building both a new paper mill and new wallboard plants, even though the housing cycle is down and the wallboard market is soft. Another is when an airline lowers prices, even though they know (or should know) that most of their competitors will follow suit.

 

The first example gets into more subtle economic factors than we've discussed to this point in the debate. The biggest is probably that newer, bigger facilities usually lower the cost-per-unit production cost for making a commodity. We've been focusing in on revenue to this point, but it's profit (or EBIT or economic profit) that really motivates a company. If they think that they can lower their overall cost-to-produce enough to improve their profitability (even if prices go down), they have no problem increasing capacity, as long as the NPV is sufficient.

 

The second example is basically yet another attempt to show the irrationality of how even large companies can behave. Even though the airline industry should behave as closely to the theoretical Game Theory behavior as any, there are plenty of times when it hasn't. Why? Because businesses are run by people, and people are irrational.

 

So, back to the oil industry. I think that Game Theory is a poor way to attempt to explain why there is little construction of new refining capacity. I think a much more simple, and hence likely, explanation of the reality of the situation is that is the underlying economics for an individual company that prevents new refineries from being built, not some implicit or explicit agreement within the industry.

 

I'm pretty sure you misunderstood my point.

You definitely misunderstood my point.

 

You seem to think I'm saying that there is some sort of conspiracy to keep refinery production low in order to drive prices up, and that I am holding this against oil companies.

 

Others had said or implied this in the thread, and it is definitely a prevailing view in the general public. Try to remember that it's not all about you, you egotistical bastage.

 

What I'm actually saying is that it's not profitable to increase refinery production... and I said very clearly that that makes sense from a business perspective.

 

However, when the only solution dorkmart provided was "we need to remove all environmental regulations so that the oil companies can do whatever they want", I disagree with that concept. There are other ways to incent greater refinery capacity.

 

Lowering environmental standards would be one economic incentive. I don't like it personally. I'm pretty sure your idea of nationalizing gasoline refining would not contribute positively to the overall economics of refining. If your idea is somehow giving tax incentives to refiners, I don't know how you could rationalize that with your railing against corporate welfare.

 

The best solution is to just leave things as they are. People need to realize that they are not getting a bad deal at the pump - especially in a world of $65+/mo cell phone plans and $65+/mo cable or satellite bills.

 

i don't know what thread this discussion came from, i must not have been reading it...but the one question i have from reading this one: as far as the whole economic decision whether or not to open new refineries, don't y'all think that the regulatory environment is going to be a pretty strong factor in that decision? and wouldn't you have to say it has BEEN a pretty strong factor in the past? whatever other factors may or may not go into that decision, i think that factor stands regardless.

 

Environmental costs are definitely a part of the economics of a decision, but I think that this factor is highly overblown. Trying to retrofit old plants to improve their environmental profile is usually much more costly than engineering in the better designs when building a new facility. That's my experience in the chemical industry, at least.

 

Although I don't have the data to back this up, I think it's pretty likely that environmental costs for refining can be put in the same category as drilling in ANWAR for lowering gas prices. While it's technically true that you could lower costs by taking away environmental regulations on refining, and while it's technically true that you could increase overall oil supply by drilling in ANWAR, neither is big enough to have any real net impact on the overall economics. It's likely all political bluster.

[Big F'n Dave]

Gasoline is expensive.

[The Holy Roller]

Bought some cheap gas yesterday, $3.05.

[dmarc117]

As competitors, we can either fight like hell against each other for the something that only one of us can have or we can each pick our spots and make better money easier.

 

 

 

so you want to collude and screw the drinking public like big oil is supposedly screwing the driving public? shame on you!! i think we should impose windfall taxes on your establishment!!!

 

[AtomicCEO]

Others had said or implied this in the thread, and it is definitely a prevailing view in the general public. Try to remember that it's not all about you, you egotistical bastage.

 

 

The second part I quoted was what you said in direct response to me in the locked thread.

 

i don't know what thread this discussion came from, i must not have been reading it...but the one question i have from reading this one: as far as the whole economic decision whether or not to open new refineries, don't y'all think that the regulatory environment is going to be a pretty strong factor in that decision? and wouldn't you have to say it has BEEN a pretty strong factor in the past? whatever other factors may or may not go into that decision, i think that factor stands regardless.

 

 

It's more expensive to properly dispose of motor oil than to just dump it onto the lawn. I propose that we repeal the regulations that deal with disposing of motor oil.

[nuke'em ttg]

George Carlin's Solution to Save Gasoline -

 

Pres. Bush wants us to cut the amount of gas we use. The best way to stop using so much gas is to deport 11 million illegal aliens! That would be 11 million less people using our gasoline. The price of gas would come down. Bring our troops home from Iraq to guard the border. When they catch an illegal immigrant crossing the border, hand him (or her) a canteen, rifle and some ammo and ship 'em to Iraq . Tell 'em if they want to come to America then they must serve a tour in the military. Give 'em a soldier's pay while they are there and tax 'em on it.

 

After their tour, they will be allowed to become a citizen since they defended this country. They will also be registered to be taxed and be a legal patriot. This option will probably deter illegal immigration and provide a solution for the troops in Iraq and the aliens trying to make a better life for themselves. If they refuse to serve, ship them to Iraq anyway, without the canteen, rifle or ammo.

[detlef]

George Carlin's Solution to Save Gasoline -

 

Pres. Bush wants us to cut the amount of gas we use. The best way to stop using so much gas is to deport 11 million illegal aliens! That would be 11 million less people using our gasoline. The price of gas would come down. Bring our troops home from Iraq to guard the border. When they catch an illegal immigrant crossing the border, hand him (or her) a canteen, rifle and some ammo and ship 'em to Iraq . Tell 'em if they want to come to America then they must serve a tour in the military. Give 'em a soldier's pay while they are there and tax 'em on it.

 

After their tour, they will be allowed to become a citizen since they defended this country. They will also be registered to be taxed and be a legal patriot. This option will probably deter illegal immigration and provide a solution for the troops in Iraq and the aliens trying to make a better life for themselves. If they refuse to serve, ship them to Iraq anyway, without the canteen, rifle or ammo.

 

One of the numerous things Carlin has not actually said

[muck]

LoL...

 

It is an interesting solution. Prolly would piss a TON of people off, though, if it were even suggested!

[Grits and Shins]

George Carlin's Solution to Save Gasoline -

 

Pres. Bush wants us to cut the amount of gas we use. The best way to stop using so much gas is to deport 11 million illegal aliens! That would be 11 million less people using our gasoline. The price of gas would come down. Bring our troops home from Iraq to guard the border. When they catch an illegal immigrant crossing the border, hand him (or her) a canteen, rifle and some ammo and ship 'em to Iraq . Tell 'em if they want to come to America then they must serve a tour in the military. Give 'em a soldier's pay while they are there and tax 'em on it.

 

After their tour, they will be allowed to become a citizen since they defended this country. They will also be registered to be taxed and be a legal patriot. This option will probably deter illegal immigration and provide a solution for the troops in Iraq and the aliens trying to make a better life for themselves. If they refuse to serve, ship them to Iraq anyway, without the canteen, rifle or ammo.

 

I don't care who said it ... I like it.