[Vision2020] Re: Exxon Mobil earned $11.23 billion first six months of 2004

[B.C. Strand]

Ted,

I have to admit that my interest in this subject is trying to track and 
predict the dynamics of the petroleum industry (and less of an interst 
in the political process). One of my jobs is predicting oil, gas, 
propane and distillate prices over the next 12- 24 months. To do this, I 
spend time looking at many of the supply and demand issues we have 
discussed. But supply and demand only explain a small amount of the 
price changes. Government regulations, tax policy, environmental regs, 
local and regional conflicts, acts of terrorism - all have a significant 
effect on the price.

I have little "stake" in either political party - but I have observed 
that they have slightly different ways of taking on these issues 
(although most of it is rhetoric). You object to my statement that a 
Republican administration might be more effective at dealing with the 
issue of limited refining capacity - or that their methods are not in 
the best long term national interest. I have found that there is little 
chance to change someone's mind about political persusion. My wife is a 
very liberal Swede, my best friend and business partner is slightly to 
the right of Attila the Hun. Little I can say will convince them to 
cross "party lines". On the other hand, I am one of those swing votes 
(the last candidate I voted for that won was Carter)

You are correct that I avoided the questions regarding morality, 
patriotism etc... But since I got myself into this situation by 
mentioning the Republicans in any but a satanic fashion, I will take one 
(and only one) attempt at explaining my views on some of this. I've 
never felt that anyone else gains from listening to extended verbal 
boxing matches (although I enjoy reading Joan's posts - damn, I wish I 
could write like that but I'm just a fumble fingered engineer). Any 
additional discussions must be conducted over a beer (you buy the first 
round and if the discussion remains interesting for the five minutes it 
will take me to consume the first pint, I will buy the next round). I 
prefer pilsners. Here goes:

Tbertruss at aol.com wrote:

Bill et. al.

And I was pointing out the gigantic profits the oil companies are 
making, including the best profits off refining oil in 15 years, as we 
are at war and making sacrifices as a nation.  You did not address this 
point in your reply.

My response:

The oil companies are making money because of two facts:

1. Buyers are speculating on the price of oil based on possible 
interruptions in oil supply
2. Shortage of gasoline becase of an unexpected increase in US 
consumption starting in February 2004

How do you regulate this? Buyers are competing for oil and gas - the 
only thing that differentiates them is how much they are willing to pay. 
I guess the government can regulate this situation. They can do as well 
as they did in the California energy situation two years ago.

Tbertruss at aol.com wrote:

Nor the question of why we should offer the oil companies tax breaks 
when they are making a huge healthy profit off the US consumer?  If 
Exxon/Mobil wants to make 100s of millions of dollars in profit off the 
US taxpayer, are you saying we should have no control over whether they 
stick it to us with high gas prices, because they don't want to pay good 
American wages at a new US refinery?  We must lure them with tax breaks, 
or they will take those good jobs elsewhere?

My response:

Ted - however you want to look at this, we are a global community. If a 
company is looking at locating in Silicon Valley California or in 
Monroeville Alabama, the fact that labor is cheaper in Monroeville will 
affect the decision. If it is cheaper still in Mexico, they are going to 
go there. Our lifestyle prices the US (and other countries) out of the 
market for providing certain services and products. We can argue that we 
have better personnel, but the fact is many other countries can provide 
the process and engineering experience.

When these products or services are considered to be "strategic" 
governments tend to subsidize these areas someway. Examples of these are 
food production (farm subsidies), transportation (airlines, railways), 
etc... Tax breaks are one form taken by these subsidies.

Tbertruss at aol.com wrote:

Why don't we tell Exxon/Mobil that they must build more US refining 
capacity, or we will by law regulate the price of gas and their profit 
margins?  Unthinkable?  We do it (or we did) with electricity and phone 
service.

My response:

I have worked in the power industry both before and after deregulation. 
Regulation was a crock because they guaranteed both the low end and the 
top end of the profit. So there was no incentive to increase efficiency. 
For every dollar they spent they were guaranteed a profit. They got rid 
of this type of regulation for a reason. If we are going to cap the oil 
company profits, are we also going to cover their losses? Sounds like we 
would be nationalizing the oil industry.

In early 1981, the U.S. Government responded to the oil crisis of 
1978-1980 by removing price and allocation controls on the oil industry. 
For the first time since the early 1970s, market forces replaced 
regulatory programs and domestic crude oil prices were allowed to rise 
to a market-clearing level. Decontrol also set the stage for the 
relaxation of export restrictions on petroleum products. One of the 
results of this deregulation was the reduction of crude oil costs from 
$35/barrel to $15/barrel.

Tbertruss at aol.com wrote:

Oh, excuse me, the noble free marketplace, allowing gigantic 
multinational corporations the freedom to rob people left and right, 
must be protected.  Of course Exxon/Mobil probably owns as many 
politicians here in the US and around the world as they do oil wells.

My response:

Do you have real information on this or did you see this on CBS.

Tbertruss at aol.com wrote:

These questions I ask pose a dilemma for the morality of capitalism and 
free markets when they appear to function in an unpatriotic and disloyal 
manner.  Or are these values only for our soldiers dying and being 
maimed in Iraq?  They don't apply to Exxon/Mobil?

My response:

I must admit, I don't have a good historical perspective on this. How 
was it handled in WWII, Korea or Vietnam? Did the government regulate 
profits and cover losses? I'm asking this question because I have NO 
idea how this was handled.

Tbertruss at aol.com wrote:

You did not address the fact that you asserted that voting Republican 
might be a good choice to encourage tax breaks for the creation of new 
US refining capacity.  Yet isn't Kerry running on a change in the US tax 
system to give incentives to keep jobs here in America, to not reward 
corporations who ship US jobs overseas?  Perhaps you should rethink your 
recommendation for what party to vote for when considering what 
political party would encourage a US Corporation to build a refinery in 
the US?

My response:

I have to admit, I don't put much stock in election promises/platforms.I 
have better odds believing my kids when they say they have cleaned their 
rooms. I just look at it from a historical viewpoint. The Republicans 
have a track record for this. I'm not saying it is right or wrong - only 
that it is one possible solution.

Tbertruss at aol.com wrote:

And as far as Kerry or the Democrats saving the middle east from the 
mess George Bush has made of it, helping to ease the fears of disruption 
of oil supplies, don't hold your breath.  We are stuck in a quagmire in 
Iraq that could keep oil prices high for decades!

My response:

I agree completely. The question is "who is the best person to get us 
out of this situation". Yep - Bush got us here. But is Kerry better at 
Bush to get us out? I don't have the answer to that.

That is the best I can do without more beer and my fridge is presenly 
lacking. I can usually be found at the Moscow Hotel on Friday evenings 
between 5 and 7. The bartender (Kevin) can point me out.

Bill Strand