^^or maybe he feels that giving oil companies tax breaks doesn't help anything but perpetuate a problem.

4/15/2008 4:38:02 PM

markgoal That's the point of competition. Exxon may want to keep its prices as original levels, but Shell will realize that if it cuts its prices just a bit, they will be able to get almost all the customers and still have higher prices. Exxon will see what's going on, cut its prices just a little bit less than Shell's and so on and so forth.

Competition the force that drives prices toward the marginal costs of production.

If you don't think that will happen, you will have to explain it. You could say that information on prices is costly to obtain (if shell is on the other side of town, you may just stop at Exxon rather than shop around), but it's hard to believe that problem would be so large as to prices to stay totally fixed (personally, i have a gas price map on my igoogle). Or maybe you could say that petroleum refining companies are not all that competitive, though that would contradict recent findings of the FTC (link provided on request).

So just what do you think gas prices won't move?

[Edited on April 15, 2008 at 4:41 PM. Reason : ``]

4/15/2008 4:41:24 PM

sarijoul,

What problem? The negative externalities of consuming petroleum fuel products? Well if you're worried about pollution or GHG emissions in particular, a smarter idea would be to tax the products actually creating those emissions or maybe just tax emissions themselves. Either way would provide consumers a direct incentive to buy fewer products that emitt "bad" things when used.

Taxing oil company profits only provides them incentive to record fewer profits. You might hope that they would record fewer profits by selling fewer products, but even if they did they would not necc. selling less of the ones producing the most emissions. For example, they may produce fewer lubricants than motor gasoline (which create much more GHG emissions). Or they may not produce less of anything. They may just find new ways to get around the tax.

If Obama's goal is protecting the environment, he's doing it in a very stupid way. Of course, that isn't actually his goal and he never said it was. He's playing off the class warfare vibe among many Democrats--the belief among some that oil companies are making an "unfair" amount of money.

[Edited on April 15, 2008 at 4:58 PM. Reason : ``]

4/15/2008 4:47:31 PM

I want to automatically bash this b/c it's McCain and I don't like his policies nor direction - but it's not like I'm going to turn down a tax break at the pump.

HOWEVER, I fail to see how this accomplishes a goddamn thing. Furthermore, I don't believe politically it scores him any brownies with voters out there - they aren't so dumb as to think this will do anything. In fact, because it is so temporary and doesn't deal with this problem in a serious manner, I almost think it's a net loss on 'issue points' for him.

Cmon- put something out there that really matters....you've got all this time to think it up with no scruity, make more out of it McCain.

Also, for the record when talking about energy in general- I really agree with this point here - part of why I'm glad that Obama supports it on the Dem side.

Quote :

" start building more nuclear power plants "

[Edited on April 15, 2008 at 6:20 PM. Reason : 657]

4/15/2008 6:17:39 PM

Quote :

"I don't believe politically it scores him any brownies with voters out there - they aren't so dumb as to think this will do anything. "

We are talking aboout american voters right?

4/15/2008 6:40:31 PM

I strongly disagree that petro is a perfect market. Additionally, while I am not arguing that consumers will not see some benefit in reduced cost (either in actual cost reduction, or more likely in some amount of increase that doesn't take place), I'm also not naive enough to think the oil companies will return the full tax "savings" to the consumer.

4/15/2008 6:59:37 PM

not gonna happen...the states want that money too much....i mean a bridge fucking collapsed last summer come on...

4/15/2008 7:00:28 PM

Quote :

"What problem? The negative externalities of consuming petroleum fuel products? Well if you're worried about pollution or GHG emissions in particular, a smarter idea would be to tax the products actually creating those emissions or maybe just tax emissions themselves. Either way would provide consumers a direct incentive to buy fewer products that emitt "bad" things when used."

You mean... like gasoline?

4/15/2008 9:05:27 PM

So is this a real plan or just something to boost his campaign with the "pissed at the gas prices" voters?

4/15/2008 9:29:34 PM

^Definitely a grab for voters

Considering that assuming that over the summer the average American drives 4,000 miles in a car averaging 20 miles a gallon, this would save them $36.80 over three months

4/15/2008 9:52:45 PM

Steve,

Yes. Exactly like gasoline.

I already said that McCain's proposal doesn't make much sense from a policy perspective. But from a political perspective, it gives McCain ground to trash Obama's even worse policies.

4/15/2008 10:16:51 PM

Quote :

"until we a) start building more nuclear power plants, b) improve refinery production and build more of those, c) research and incorporate alternative fuel sources into the mainstream we're always going to be stuck with this... unless a force of 2,000 citizens march the headquarters of shell and exxon mobil and ask them nicely to stop holding us hostage or become hostages themselves. mwahahaa. "

Bravo! and another thing, we need to stop with this Ethanol BULLSHIT. Its hurting everyone's wallet at the pump and other things like the grocery store.

4/15/2008 10:43:54 PM

What? It doesnt do shit to give him 'grounds' to attack Obama's proposal? Just because he set out some lame duck terrible economic policy with a ridiculous gas tax proposal that would never pass anyway, and even if it did, it would effectively do nothing for us.

So just for trotting that out he has grounds? Don't see any logic in that.

4/16/2008 12:17:22 AM

^ The next time Obama does bitch about how "Exxon’s making $40 billion a year, and we’re paying $3.50 for gas" (like he did in a recent ad http://www.factcheck.org/elections-2008/obamas_oil_spill.html), McCain will be able to make a sharp and easy to understand contrast: Obama wants to raise taxes oil companies, he wants to cut taxes on gasoline.

Even if McCain's "tax cut" is only temporary, it will do more to lower gas prices for that short amount of time than Obama's plan and I think voters will easily understand that.

Neither of these are very good policy proposals, but I guess both candidates feel like they have to pander to voters obsessed with gasoline prices. *shrug* In any case, McCain's policy is better because it at least makes sense and it's temporary. Obama, on the other hand, wants to play off people's class resentment to permenatley raise taxes on oil companies (which could potentially lead to them producing less gasoline and other products and therefore higher prices). It makes no sense.

[Edited on April 16, 2008 at 6:31 AM. Reason : ``]

4/16/2008 6:22:20 AM

They need a tiered gas pricing that charges you more based on amount.

If people want to hop around gas stations to try to avoid it so be it.

Anyone who is dumb enough to buy an excursion is too lazy to constantly use gas pumps to 10 gallons.

4/16/2008 8:21:58 AM

This is just a dumb poorly thought out populist chaff from McCain. I'll take penalizing soaring oil companies profits ANYDAY over this. Besides doing nothing for the consumer, this bit of fluff legislation will weaken infrastructure, hand more profits to the oil companies, and dump more of our bills on the next generation. So before the wingnuts start spewing their lies on cable news, let's fumigate some talking points with facts:

The Federal fuel tax amounts to 18.4¢ per gallon. Talking heads will no doubt imply this money is thrown into the Black Hole of Washington, never to be seen again. Absolutely wrong. The funds are used for transportation infrastructure with the lion share going for roads and bridges. As of 1997, the 18.4¢ tax on a gallon of gas goes to:

- 15.44¢ Highway Account
- 2.86¢ Mass Transit Account
- 0.10¢ Other Trust Funds (note, that's a tenth of one cent, which goes for projects like leaking fuel tanks)
- 0.00¢ General Revenue (Note: an old 4¢ deficit reduction component was redirected into the highway account in 1997)

So the money goes to keeping you safe on the road and growing mass transit as a sane alternative to our unsustainable oil dependent culture.

----"But the gas tax is growing out of control!" -----

Wrong!

The federal tax has not increased since 1997. And since it is a static fee, it has not grown with the gigantic leaps in fuel cost through the Bush years. Nor has it has not kept pace with inflation or increased road maintenance costs. When better automotive efficiency is factored in, the federal gas tax affects drivers less than it did in 1970.

----"But a tax holiday will spur the economy!" ----

Fat chance.

Gas prices also include a US average 28.6¢ state tax, with individual state taxes ranging from 8¢ (Alaska) to 44.4¢ (California). If you are paying $3.45 today, will you travel more if you pay $3.27 this summer-- a 5% discount? That, of course, assumes prices come down at all. With the constant fluctuation in oil prices combined with the oil companies' strong incentive to keep pump prices up, it is likely the consumer will see no decrease when they fill up.

----"The government will find the money elsewhere." ----

Yeah, in the national debt.

Taxes not collected this summer will never be recouped. That means less money to fix our highways going forward. Sure, Congress will put emergency spending on the national credit card, but funding will come later and more erratically. I-35W had temporary repairs pushed back to 2008-2009 in part due to budget concerns. The result was a disaster that will cost billions more on top of the human tragedy.

Make no mistake, McCain's proposal is irresponsible pandering at its worst.

4/16/2008 9:42:38 AM

A temporary tax cut on gasoline consumption is worse than a permenant tax hike on oil companies....why?

If you want to pay less for gas, McCain's proposal is not much to celebrate but it would be provide temporary relief. Obama's policy on the other hand would provide no relief. The only thing it actually does do is give some voters the smug satisifaction of "sticking it" to the oil companies.

Personally, I agree that McCain and Obama are both just pandering to a small segment of voters. Of course, I prefer McCain's pandering to Obama's crude plays on people's worst instincts. So much for appealing to the better angels of our nature.

PS* If you give a fuck about national debt, don't vote for Obama. He has openly acknowledged that he will not be balancing the budget any time soon.

[Edited on April 16, 2008 at 10:14 AM. Reason : ``]

4/16/2008 10:11:47 AM

let's just re-emphasize this: the oil companies were given tax breaks under the bush administration. obama wants those to go away.

4/16/2008 10:13:58 AM

You know, I'm fine taking away the tax breaks handed out to the oil companies. But let's be fair and take away the tax breaks given to every other sector of the energy industry at the same time.

And yes, that includes your "sacred cows" of "alternative energy" technologies. Or is corporate welfare suddenly a good thing when put to the appropriate uses now?

4/16/2008 10:27:18 AM

That would be fine. No tax breaks for anyone I always say. That includes consumers.

4/16/2008 10:46:02 AM

Quote :

"A temporary tax cut on gasoline consumption is worse than a permenant tax hike on oil companies....why? "

You keep misdirecting Obama's policy on Oil. He's for taxing windfall oil profits. Because in your point about blaming oil companies instead of supply versus demand as the real reason we're in the mess we are in is a wrong perpetuation and I agree with you. HOWEVER, I just don't feel like that's what's at play here with his policy.

The difference is that a windfall tax is a good idea. Americans have deep national interests in reducing oil demand, but oil companies have little incentive to invest their windfall profits in ways that would advance those interests. A windfall tax would generate money for mass transit and alternative fuels, for helping carmakers move from sport utility vehicles to energy-efficient models, and for other ways to cut demand.

This is opposed to McCain's policy which actually refutes logic as to who is to blame. Using revenue to provide consumer rebates and/or ridiculous TAX HOLIDAYS would be counterproductive because that would foster only more consumption.

What is the logic of making oil companies fund alternative energy ideas? Keep in mind that these windfall profits are SOARING huge amounts of money, and an investment in America to get us out of this mess before it's too late, although to free capitalists seems sacrilege - do we really have a better option at this point?

4/16/2008 10:57:54 AM

Quote :

"You keep misdirecting Obama's policy on Oil. He's for taxing windfall oil profits. Because in your point about blaming oil companies instead of supply versus demand as the real reason we're in the mess we are in is a wrong perpetuation and I agree with you. HOWEVER, I just don't feel like that's what's at play here with his policy."

So how about you do us a favor and define what exactly constitutes a "windfall" and what differentiates it from say, ordinary profits. Profits in excess of $1b? 20%? Give me a number, here.

And while we're at it, why stop at oil? Why, there's windfall profits in all kinds of industries - why single them out for special exclusion?

Unless of course this is not about "windfall profits" at all but rather more about political posturing over a particularly easily vilified industry.

[Edited on April 16, 2008 at 11:14 AM. Reason : .]

4/16/2008 11:09:53 AM

Honestly Steve I do not know. I'll be honest. Hell, I don't even know of Obama knows, but it is not a sweeping tax he said and only a certain amount over a profit line (and temporary) to reinvest money to get us out of this problem.

Do I think it's the real problem? Not really, the real problem is supply vs. demand and our government has not been responsible enough to do damn thing about it. Obama will eventually need to figure out how to do this, but let's make it clear that ALL candidates are posturing becuase currently there is no way to find some utopian solution to this long term. It's about getting us out of jams now, and yeah alot of this is political posturing.

I personally would take a temporary windfall tax on oil over some ridiculous tax holiday break that fucks over other areas we need that tax for (badly). We still have serious transportation infrastructure that needs money badly that McCain's proposal just ignores for the same posturing you mention.

But I guess that all harkens back to the R vs D debate where I say it's not some crime to skim huge profits to help invest in America where otherwise it would never be invested and we would decline into the shitter, where you would say ANTI CAPITALIST OH NOES.

4/16/2008 11:43:26 AM

Quote :

"The difference is that a windfall tax is a good idea."

Ahh, but we already have a corporate windfall tax; it has been in place since the 19th century. The only difference is that it applies to all companies, not just oil companies, which in the U.S. today are paying 35% of all profits, windfall or not, to the government.

Now, why is it so horrible when oil companies earn profits but perfectly fine when Microsoft corners the OS market or Ben & Jerry's ice cream is a smash hit? Should we not also apply your windfall profits tax to Ben & Jerry's? What about all the American corn farmers which have gone from millionares to billionares in the past few years?

4/16/2008 11:47:49 AM

I dont know. Just being honest, I don't know.

I don't have all the answers and it's a a tough question and one I'm not going to play empty party lines or stances with and ignore any prevailing logic for the benefit of a push-pull debate. there's validity there and I'm not sure where the 'buck stops' or where it begins. I'm just trying to think about how to make this all work as what's been done lately in the past two presidential terms has provided across the board irreconcilable and devastating for us.

4/16/2008 12:07:22 PM

So, Kainen, what do you want from us, then? We have explained to you why what you want to do is morally indefensible, and your response is that what has been done in the past was equally indefensible? You say you don't have all the answers, yet you still believe his proposal to be beneficial, why?

That said, what has been so devastating? There is nothing Congress could have done short of openning up ANWR or allowing offshore drilling that would have brought down oil prices. By not doing that Congress has made the owners of existing oil wells filthy rich. Well, that was their choice and they made it, now you don't want to live with the consequences. Well, that is not how life works; you made decisions and then you live with the outcomes even if that involves making people you don't like filthy rich.

If you really want to cut back on Exxon and BP's profits then legalize drilling in ANWR and offshore. Otherwise just get over yourself and consider it a character building exercise.

4/16/2008 12:47:19 PM

morally? how do morals get into this?

4/16/2008 12:50:10 PM

Quote :

"Now, why is it so horrible when oil companies earn profits but perfectly fine when Microsoft corners the OS market or Ben & Jerry's ice cream is a smash hit? Should we not also apply your windfall profits tax to Ben & Jerry's? What about all the American corn farmers which have gone from millionares to billionares in the past few years?"

Well society can survive with out Ben & Jerry's. While it would be a major blow to not have an OS like windows this does not compare in magnitude of the effects and ingrainment of oil in our society. I don't blame the oil companies for seeking profits; I blame the gov't for setting up the condition in which they were able to realize the windfall.

4/16/2008 12:50:34 PM

Quote :

"What about all the American corn farmers which have gone from millionares to billionares in the past few years?"

Unless they are into the massive agri-business, and even then it isn't likely, the majority of American farmers are not millionaires and not billionaires.

4/16/2008 12:55:06 PM

Quote :

"'A character building exercise and get over yourself'?"

You can take that condescending bullshit and shove it up your ass. I was trying to be civil and admit that you had a point about taxing profits and where does it start/stop, and you had to exploit that didn't you? couldn't resist being an ass could you?

Quote :

"That said, what has been so devastating? There is nothing Congress could have done"

Where do I start? How about rip Bush and Cheney's dick out of the oil companies asses where they went and splooged out some ridiculous tax deal and then sit back and watch oil prices go from $28 when Bush was inaugurated to $111 now to roaring profit margins to all involved.

Two times in the past year the House has voted to roll back those tax breaks for the oil companies and use the $ to develop alternative forms of energy. That's the critical piece - Get some serious R&D going. Both times that bill has failed to get through the Senate because Bush and his cronies of the Republicans in the Senate are blocking it, because they don't want to offend their buddies in the oil industry.

All the while driving us into huge debt, a recession, a pointless war that has us mired, and countless other issues and you have the gall to say what could they have done? Ever wonder why his approval rating is the lowest EVER?

[Edited on April 16, 2008 at 12:58 PM. Reason : -]

4/16/2008 12:57:13 PM

everyone can live without a 14mpg truck/suv/van

nobody wants to.


same with icecream. what is your point?

4/16/2008 12:59:13 PM

Quote :

"Where do I start? How about rip Bush and Cheney's dick out of the oil companies asses where they went and splooged out some ridiculous tax deal and then sit back and watch oil prices go from $28 when Bush was inaugurated to $111 now to roaring profit margins to all involved."

I can't take you seriously when you start off like this.

4/16/2008 1:14:25 PM

Quote :

"Honestly Steve I do not know. I'll be honest. Hell, I don't even know of Obama knows, but it is not a sweeping tax he said and only a certain amount over a profit line (and temporary) to reinvest money to get us out of this problem."

So, you can't really define for us what constitutes a "windfall" from ordinary profit, and you can't tell me why we should target only the oil companies, but we have to do it right now.

Honestly.

Then we get the "re-investing part." As if somehow you know better than the oil companies where their profits would be fruitfully invested. With that kind of business acumen, why not simply spare all of us the trouble by putting your money where your mouth is? If you think alternative energy needs investment, open your checkbook already. Make yourself a millionaire.

The idea that a windfall tax specific to the oil companies is required to raise that kind of seed capital is laughable.

Quote :

"Do I think it's the real problem? Not really, the real problem is supply vs. demand and our government has not been responsible enough to do damn thing about it. Obama will eventually need to figure out how to do this, but let's make it clear that ALL candidates are posturing becuase currently there is no way to find some utopian solution to this long term. It's about getting us out of jams now, and yeah alot of this is political posturing."

And now we cut to the meat of it. Not even Obama knows what the hell he's doing with this, but by golly, we can do it! Even if we don't really know what "it" is, because, well, shit, we better do something!

Quote :

"I personally would take a temporary windfall tax on oil over some ridiculous tax holiday break that fucks over other areas we need that tax for (badly). We still have serious transportation infrastructure that needs money badly that McCain's proposal just ignores for the same posturing you mention."

How about neither? One stupid idea does not justify the other.

Quote :

"But I guess that all harkens back to the R vs D debate where I say it's not some crime to skim huge profits to help invest in America where otherwise it would never be invested and we would decline into the shitter, where you would say ANTI CAPITALIST OH NOES."

Two rather amusing observations come out of this mini-rant. The first, of course, is your supreme hubris that you seem to know better than the market of where this money could be profitably be invested, and therefore are entitled to take it out of the hands of those to which it belongs and do it for them. Instead of, you know, investing your own money, since you seem to know better than the market.

But the more telling point is in the fact that you don't even seem to need a reason for your so-called "windfall tax" to specifically target oil companies - they have money you want, so who the hell needs things like "logic" or "reason" or even a "plan" - they have money, and we want that money. It's brilliant.

4/16/2008 4:14:28 PM

Very large profits are in fact a sign that you don't have a competitive market.

4/16/2008 4:24:01 PM

^Or a sign that the companies do a lot of business, and their profit margins are in line with most other industries. Oil is one of the most competitive markets out there. The big 5 US oil companies only produce 13% of the worlds oil. Not even close to the kind of market share needed to manipulate prices.

Quote :

"let's just re-emphasize this: the oil companies were given tax breaks under the bush administration. obama wants those to go away."

Obama wants to institute a windfall profits tax on big oil companies. He said so in his latest advertisement.

[Edited on April 16, 2008 at 4:31 PM. Reason : 2]

4/16/2008 4:29:16 PM

Quote :

"The big 5 US oil companies only produce 13% of the worlds oil. Not even close to the kind of market share needed to manipulate prices."

but gasoline is sold on a local/regional market, and the big 5 US oil companies are making their money from selling gas to consumers. Sure, oil is traded globally and can be competitive (of course you also have to deal with cartels), but the finished product of gas is trucked to local markets all over the country. The main US oil companies can do whatever they want with the price they charge at the pump, regardless of how much their Cost of Goods Sold is.

Quote :

"^Or a sign that the companies do a lot of business, and their profit margins are in line with most other industries."

there's a big difference between "profits" and "profit margins". Nobody can blame a company for taking high profits, if they're selling a desirable product at a competitive price. If, however, they are raising their prices at a disproportional rate to their costs, and therefore increasing their profits and margins, then people might rightly feel like they're being gouged.

and "Very large profits are in fact a sign that you don't have a competitive market." is true. In a perfectly competitive (hypothetical) market, prices settle at the incremental cost of a product, and profits are pushed to zero.

[Edited on April 16, 2008 at 4:45 PM. Reason : .]

4/16/2008 4:40:25 PM

Quote :

"In a perfectly competitive (hypothetical) market, prices settle at the incremental cost of a product, and profits are pushed to zero."

This is a common mistake. In a perfectly competitive market, profits are pushed to the natural rate of return for capital. So, if to market gasoline you must build a billion dollar refinery and the prevaling rate of return is 10% then every remaining firm will earn on average about $100k a year in profits because this is the point at which investors look elsewhere and therefore no new entrants enter the market. So, in other words, it is perfectly natural for Exxon to earn tens of billions in profit every year because it's installed capital is in the hundreds of billions. As a return on capital invested, oil companies are only recently getting returns similar to those of other companies.

But, again, no one is suggesting that oil companies are operating in a competitive market when OPEC has tied up over 80% of the world's reserves. All we are saying is that privately held companies are not engaged in restraint of trade because they have no incentive to do so. Think about it: if the big 5 got together and decided to restrict supply in an effort to drive up prices the OPEC, being the price setter, will simply produce more. The net effect on prices would be negligible.

Now, yes, OPEC has decided to restrict supply and drive up prices. But how can you blame the big 5 for what OPEC does?

Kainen, with the possible exception of invading Iraq, I see nothing you reference which can be credited with making oil companies filthy rich. However, as Iraq's current oil production is back at pre-war levels even this effect should be discounted as not affecting current high oil prices and thus high oil company profits.

Feel free to address DrSteveChaos if you feel I was unfair with you

4/16/2008 5:40:41 PM

Quote :

"This is a common mistake. In a perfectly competitive market, profits are pushed to the natural rate of return for capital."

I should have qualified that with "normal profit", which takes into account the RoR and cost of capital and such.

Quote :

"Now, yes, OPEC has decided to restrict supply and drive up prices. But how can you blame the big 5 for what OPEC does? "

the question (or at least a question) is not whether the US companies have power over OPEC to control their costs, but how they are forwarding these costs onto the customer in the form of gas prices. If OPEC raises the cost to the Big 5 by 10% (or effectively does so through supply restrictions or whatever), then they turn around and markup gas at the pump by 25%, they are increasing their profit margins and blaming OPEC for it. Or if you call them out on it, they're "building in for future uncertainty" and shit. But you can be damn sure that whenever the future uncertainty arises, they'll just jack prices up again instead of dipping into their $100B reserves in order to keep prices down

4/16/2008 6:31:26 PM

in light of current economic conditions, the gas holiday sounds like a needed bandaid for the average consumer. i liken it to interest rate cuts -- curing the hangover of excess liquidity with more liquidity. it is a short term fix, and should be treated as such.

how about massive massive tax incentives for auto companies for making gas efficient cars instead? the auto companies are in financial trouble anyway, why not direct them towards energy efficiency with such a carrot?

4/16/2008 9:44:59 PM

Quote :

"If OPEC raises the cost to the Big 5 by 10% (or effectively does so through supply restrictions or whatever), then they turn around and markup gas at the pump by 25%, they are increasing their profit margins and blaming OPEC for it."

Hmm, do you have any evidence that is what they are doing? I check the crack spread and sure enough owning a refinery has never been more profitable than in the last few years (see graph). But looking at the graph we can see this is not a permanent mode for the industry, as it keeps returning to $5 a barrel. Therefore, we can explain the summer abnormalities by capacity shortages from huricane damage and surging demand. Some U.S. refineries devastated by Katrina did not regain full capacity until late 2007. Meanwhile, foreign refineries which traditionally export to the U.S. are diverting their supply to Asia.


That being the case, refining is not a natural monopoly. If owning a refinery is highly profitable then current ones will seek expansion and foreigners will hope to build new ones (U.S. citizens no longer have the right to enter this industry thanks to regulatory restrictions).

4/16/2008 10:04:31 PM

crack spreads are terrible right now. a lot of the capacity absence right now it is due to repairs and housekeeping being done on refineries ahead of summer driving season.

there is a bit of an 'if you build it they will come' issue with refineries, and i can't say i understand the costs of building and running refineries.

another thing is - it makes no sense to build a bunch of capacity when there is so much backwardation in crude prices (long term futures lower than near term futures). if one were to plot a graph of futures it would look like a bunch of waves that were about to crescendo and collapse on themselves; but i bet if you plotted on a long enough timeline you would see these are waves in a rising tide or even a sea change.

4/16/2008 10:16:53 PM

A refinery is not an oil well, it does not produce oil. Really, it does not even produce gasoline. If you tell a refinery operator that gasoline prices are going to be sky-high in the future, he will look at you funny and say "so what. What I want to know is the crack spread" (the difference between the price paid for a barrel of crude and the revenue of selling everything you made out of it). That is the only place they operate. oil at $200 barrel or $20 a barrel? A refinery operator does not care. So, just because oil prices are crazy in the future is not evidence as to whether or not owning a refinery will be profitable.

4/17/2008 12:52:43 AM

http://www.johnmccain.com/involving/petition.aspx?guid=a837aab2-bbad-43ae-a6eb-d0289869fe42

signed

4/18/2008 11:54:57 AM