miyu1975

miyu1975

Well Known Member
Anyone else here worry about oil being 200.00 a barrel soon and the price at the pump even more rediculus than it is now....? or is it just me? :mad:
 
Still a bargain at $200. Don't believe me? Push your suv to work.
The higher it gets, the happier you'll be with your RV. Can't beat the economy.
 
Reality

GA gets closer to a moribund status with every price increase.

PS Rick...moribund means dying.
 
I just ordered all the big stuff last week. I thought about it a lot...........Ya only go 'round once, and I want my own plane.
 
I just don't get the cost of oil.

This week they said the falling $ and the decreased demand for oil is driving the price up.

It is as if any news, good or bad, is used as an excuse to raise the price.

Here is what I really don't get. If the price of the oil companies raw material goes up and the demand for their end product goes down, how is they have record profits month after month. What am I missing here?
 
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My take on oil prices...

This chart may bring things into perspective. It is crude prices adjusted for inflation through Jan of this year. It is interesting to note that spikes are typically caused by issues in the mideast. 1973, the Arabs embargoed the west due to the Yom Kippur war. 1979 - the Iranian revolution happened (we pulled support for the Shah), 1990 Saddam torched the oil fields on the way out of Kuwait, 2001 9/11 of course, Iraq war. The latest runup has been likely due to talk the last year of bailing out of Iraq. Investors listen to this talk, and speculate that the price will go up with increased turmoil in the mideast. Obviously, this recent runup has exceeded the 1980 price record. The good news is that prices tend to go back down. Demand vs supply will drift things up, but most is speculation based on mideast problems.


 
With Congress passing moritoriums on exploritory drilling in Anwar & off shore oil, not allowing new oil refineries in 30 years, the decline of the USD, we are not done yet.

We have met the enemy, and they are us.
 
Motivation to finish sooner

It's actually making me work harder to make the 40 hr Phase I less expensive!:D

A friend of mine is getting ready to start his PPL in July. (Married, wifey rules, whatever.) I tried to get him to start in the fall. If he had, and was finished by now, he would've saved about $600.:eek: (FBO just raised prices due to fuel.)

Bart
 
Oil fuels our passion of RV's - we should try to understand the business

N941WR said:
I just don't get the cost of oil.

This week they said the falling $ and the decreased demand for oil is driving the price up. WTF?

It is as if any news, good or bad, is used as an excuse to raise the price.

Here is what I really don't get. If the price of the oil companies raw material goes up and the demand for their end product goes down, how is they have record profits month after month. What am I missing here?
Click to expand...

I don't know about demand dropping (worldwide) noticeably. But, I think the part that is missing is that it isn't reported when their profits are down. For years, oil companies' profits were low (as a percentage of capital invested). It has only been the last year or so where their profits have been in line (percentage wise) with most of industry. Big industries will have large dollar amounts of profit. The dollar amount, albeit huge, is meaningless. It is only the return on investment that matters. The huge part that is missing is that the news doesn't report it that way.
 
N941WR said:
I just don't get the cost of oil.

This week they said the falling $ and the decreased demand for oil is driving the price up. WTF?

It is as if any news, good or bad, is used as an excuse to raise the price.

Here is what I really don't get. If the price of the oil companies raw material goes up and the demand for their end product goes down, how is they have record profits month after month. What am I missing here?
Click to expand...

I'm pulling numbers out of my derrierre here, but here are the basics of how to make money in oil today.

Let's say you are an oil company that owns a lot of wells and can satisfy a large portion of your need out of wells you own. Five years ago, it might have cost you $10/barrel to pump crude out of the ground, but that crude was worth $20 barrel in the market. You basically made $10/barrel on every barrel of oil you pumped because you charged the refinery (even the one you owned) the market price for the oil you extracted for them. That profit was realized when you transferred your oil to the refinery. Then you made additional profit on the markup the refinery charged to the distributors/retailers.

Today, it still only costs you $12/barrel to pump your own oil, but you charge the refinery $120/barrel for it. So your profit on every barrel of oil you extract is $108 plus whatever additional profit you can generate on the refined product.

So, if you own the wells, your profit per barrel has gone from $10 to $108 on something that only costs you $10-$15.

Even if you are selling slightly less oil, your profit margin is up by a factor of 10, so you're really racking up the profits if you have your own (owned) source of crude.
 
Exactly correct.

I do earn my living in this industry, and I see it firsthand.

The large majority of the producing wells owned by the domestic oil companies have been drilled and producing for many years - and they were drilled when oil was selling for a fifth of it's current price - which means they were profitable enough at that point to be worth drilling. As the WORLDWIDE price of oil goes up, the DOMESTIC market follows it - so all of a sudden that oil that is coming out of the ground at a production cost of $14 per barrel (when the well was drilled with a selling price of $25 per barrel) is selling at $110 per barrel and we're making big money.

What the general public DOESN'T see (but is happening today) is all the drilling rigs out in the field punching new holes into the tiny pockets and reservoirs that were ignored for the last 50 years because their production costs are around $60 per barrel or better. They were simply not economical (read PROFITABLE) to drill for until the price came up to current levels. Today it is now worth it to go after that oil, and it's being recovered. At some point in the future we'll be going after even smaller quantities of oil with recovery costs of $200+ per barrel, and probably griping about the price of gas and oil company profits even then.

The global energy market is not being driven by American consumption or lack of OPEC production as it has been in the past - it is now being driven by emerging market demand. China and India are going through their industrialization period similar to what the US experienced in the '20s and '30s, and they are absorbing all the available steel and energy the world has to offer at this point. The steel market has jumped 65% since the first of the year and is expected to go another 50% before the end of this year.

It's a new world, with new economic forces at work, and we'd better figure out how to live in it.
 
swift

That swift fuel does look impressive. Is 100LL really banned after 2010?...then what? The swift alt looks like a winner according to their website but I wonder what the downside is.??:confused:
 
The relevent point being.. IF YOU OWN YOUR OWN SOURCE

Kyle Boatright said:
So, if you own the wells, your profit per barrel has gone from $10 to $108 on something that only costs you $10-$15.

Even if you are selling slightly less oil, your profit margin is up by a factor of 10, so you're really racking up the profits if you have your own (owned) source of crude.
Click to expand...

Yeah, but the "evil oil companies" DON'T own the source of supply. The Saudi's do. That's why, if you bother to check the numbers, you will find that Exxon's profit margin is actually only 10.8%. Would you go into business for a measly 10% return? And where did you get the idea that they are selling LESS product? I don't know what your commute is like but mine's about an hour and a half. Ten years ago it was 15 minutes. That's because 10% of the population of Mexico now lives in America and can afford a car. And of course, there's also that little problem of the 1 BILLION new drivers in India and China. Less product? What are you smokin'?

You want to see high prices? Wait until Obama's "windfall profits tax" confiscates that 10% profit and investors take their money elsewhere -- as happened when Carter tried the same stupid trick in the 70's. Ever waited an hour in line to buy gas? Not fun.
 
jonbakerok said:
That's why, if you bother to check the numbers, you will find that Exxon's profit margin is actually only 10.8%. Would you go into business for a measly 10% return?
Click to expand...

If it's 10% of BILLIONS...............I think I would..

L.Adamson
 
N941WR said:
I just don't get the cost of oil.

This week they said the falling $ and the decreased demand for oil is driving the price up.
Click to expand...

Oil is traded in dollars.

For every 1% drop in the dollar equates to a $4.00 increase in price of a barrel of oil.

If the dollar went up 10%, the price of a bbl of oil would drop $40. Our friends in DC don't seem to recognize this.
 
jdmunzell said:
This definitely sounds promising! I'm even considering putting a smaller engine on my -8 so as to get a little better economy....an O-320 vs. O-360.
Click to expand...
I've taken to throttling back for local sightseeing and pancake breakfast runs in the less than 100 nm range.

I can live with 130+ kts and less than 10 minute increase in ETE for the privelige of burning only 6 GPH :D

And the really sweet thing? I still make it there faster than 90% of the spam cans I'm flying with :p

The nice thing about the O-360 is that I have that power available to me when it comes time to easily lift my rather large posterior, and that of a friend, out of a 2000 foot grass strip on a warm summer day, and then throttle back to the equivalent of an O-235 for a leisurely trip home ;)

I really do like to go fast, but I really prefer to be able to fly often, more than I enjoy going nowhere, more seldom, and faster!
 
Who is really making the money!

While we can bash the oil companies all we want (and they probably deserve some bashing), the real winners in the oil game are the oil producing countries. In a recent CNBC report, it was stated that only 10% of the WORLD oil was PRODUCED by publicly traded companies (Exxon, Chevron, etc). The other 90% being PRODUCED by the GOVERNMENTS of countries like Saudi Arabia, Iran, Venezuela, and other "friendly" nations. So sure, the oil companies make a killing off of the oil they produce for $20 a barrel and sell for $120 here in the U.S. - just remember the vast majority of the oil they refine they have to pay $120 a barrel to Hugo Chavez and friends!

Hhmmm... just food for thought.:rolleyes:

PAUL
 
I paid $3.99 9 a galon for regular unleaded yesterday in Detroit. I shudder to think what 100 LL costs there now.
 
Rush Limbaugh was just talking about fuel prices and mentioned that Jet A at LaGuardia at the FBO is $8.08 a gallon.
 
Lot's of good stuff here--I am impressed because the street folks usually aren't so well informed.

Weak dollar--That's one factor, for sure. When it takes $1.60 to buy a Euro and a gallon of gas in Europe costs $8, divide that $8 by 1.6 and you get $5 per gallon, just a little more than what Europeans paid a couple years back. So with our weak dollar, we see a huge increase, others see only a little.

When governments own the oil, they have less incentive to explore and produce and use the latest technology. Their priorities are often keeping people employed and lining the pockets of government officials.

Demand won't shrink as much or as rapidly as one might hope. The average American car stays on the road about 10 years, much longer than they did a decade ago. So it takes longer to switch to a more efficient fleet, even if more efficient cars were available. But because of more safety features, pollution controls, more power, etc., cars sold here get lower mileage than they did 10 years ago.

Speculation: The price you hear quoted is governed by the commodities market and somewhere around 40% of that price is speculation, so when riots break out in Nigeria, the price goes up.

China and India--What, close to half the world's population? Looking for the American and European standard of living. Of course they are going to buy a car when they can afford it. Only a few years ago China was an oil exporter, now they import.

Risk: The oil market crashed a couple decades back. In the financial news were numerous stories about Houston being a ghost town with downtown office space going for a fraction of what it had been renting for a year before. The oil companies are risk shy now; they know it's a volatile market.

Mergers: Recently it was cheaper for an oil company to improve it's reserves by buying another company with plentiful reserves than to explore. It was a more certain way to acquire reserves, also. Related to risk. So now we have Phillips-Conoco, Exxon-Mobil, etc.

Probably other reasons, also.

Sure the profit numbers look good. But last year, each of us made more money than Ford and Chrysler combined. They just had a bigger cash flow. Bigger losses, too.

I like the chart one of the first posters put up.
 
food for thought.

I guess I feel compelled to put in my .02 worth. I am no expert, I don't even play one on TV. I am just your average "Joe" (ok, I'm Steve) working for a living trying to enjoy the things in life I think are worthwhile to pursue.

So my take on all of this goes like this:

We consumers have to look at the percentages. What percentage of our income are we having to spend on fuel, on food, housing, clothing, etc.? Compare those percentages to what percentage our parents had to spend on such things when they were raising us kids in the 60's, 70's, 80's? I do not have any hard figures so if anyone does have them I would be very interested in seeing them. It is these percentages of our real world net or gross incomes that affect our comfort levels of what we have to spend on things. This holds true for everything. Taxes included. What percentage of your income has to cover those taxes?

Are you spending more of your take home pay to cover the cost of fuel than your parents? What about how much goes to cover your food bill each month? As much as I think about the fact that it is hard to make ends meet now I am thankful that I can do so. Granted I pay more for more things than my parents ever did in dollars, I have to ask if I do in terms of a percentage of my income.

I think back to my childhood growing up through the late 60's and 70's. When it came to food we never ate out. I mean we NEVER went out to eat ever! My wife and I think of ourselves as frugal but we do eat out at least one night a week and I will eat out at lunch several times a week. How much more am I spending to do this than my parents did?

Milk is around $4.00 a gallon today. I distinctly remember riding my bicycle to the local grocery store and having to pay $1.20 a gallon in 1976. So, in percentages of my take home pay what does that $4.00 compare to when looking at the $1.20? Without going into details that disclose my personal income (I am a government employee, so if anyone out there really wants to know what I make, you most certainly can go out and do so) I can say that gallon of milk does not cost me near as much in real dollars when compared to my parents cost in 1976.

Whether my abilities to earn more than my parents are because of individual choices I have made concerning my occupational path or if they are due to the economic landscape can be debated. The reality is, so far anyway, I am better off than my parents were.

This by no means alleviates my concerns and fears about the rising cost of goods and services in my life. It just helps me try to keep a little perspective when I look at these type of issues.

I do agree that we are living in a new world though. I believe we are at the doorstep of a world wide change when looking at energy usage. I think back a decade or so ago when everyone in the world economy was very excited that China was going to be opening up for trade and that there would be a great opportunity to sell products to new millions of consumers. My thoughts at the time were not so optimistic. I kept thinking about the fact that all of those millions (yeah, right, all of those BILLIONS) of new consumers would first have to come up with the income to pay for those new cars, electronics, etc. then somehow the world would have to figure out how to sustain the demand for all of those consumer goods they would be buying.

So, this brings up the other issue we are now facing. As posted earlier by Jonbakerok, demand is exponentially increasing. Just not here. All of those places in the world that we pompous Americans at one time thought were "third world" countries are now stripping world resources of anything and everything that provides for the acquisition of these new consumer goods.

Americans to this point have been sheltered from having to deal with what the rest of the world has been having to deal with for decades. I am afraid a "New World Order" is developing and that more than anything concerns me. It concerns me more than the price of gasoline, the price of food, the price of living period. Because the reality I fear is that the price of "living" is getting ready to escalate to a point none of has ever seen before in our, our parents or even our grandparents lifetimes.

Wow! I did not know I even had those kind of thoughts rolling around in my head. I did not intend to go down a "THE WORLD IS ENDING!" path. I will end my comments with the idea that as much as it pains me to say I think we are only beginning to see changes to the way we used to do things. We are going to have to address them at some point. These fuel prices are some of the first teething pains we Americans are seeing but the reality is we are coming to the party later than the rest of the world so we had better get up to speed quickly or who knows what will happen around here.

Live Long and Prosper!
 
Really?

L.Adamson said:
If it's 10% of BILLIONS...............I think I would..

L.Adamson
Click to expand...

Really? If you owned Microsoft instead of Exxon, your BILLIONS would have made a 28% profit margin instead of a measly little 10%. You would have almost tripled your profit, and Obama wouldn't be planning to confiscate it. Maybe that's why the richest man in the world invests in software instead of oil.

Even Proctor and Gamble does better than big oil, with a 13.9% margin.
 
jonbakerok said:
Really? If you owned Microsoft instead of Exxon, your BILLIONS would have made a 28% profit margin instead of a measly little 10%. You would have almost tripled your profit, and Obama wouldn't be planning to confiscate it. Maybe that's why the richest man in the world invests in software instead of oil.

Even Proctor and Gamble does better than big oil, with a 13.9% margin.
Click to expand...

Your comparisons are somewhat misleading....

At the end of the day, profitability depends on units/cost sold. Fuel prices have well over doubled and are getting close to triple of what they were four years ago. Therefor, that "measly" 10+% margin will be triple the income of four years ago. And happily for the oil monopolies, the units sold never to to decrease much, and only temporary if they do.

My income certainly hasn't tripled! In fact, thanks to rising steel, copper, and fuel prices; my income seems to be on the decrease.


L.Adamson
 
L.Adamson said:
...At the end of the day, profitability depends on units/cost sold. Fuel prices have well over doubled and are getting close to triple of what they were four years ago. Therefor, that "measly" 10+% margin will be triple the income of four years ago. And happily for the oil monopolies, the units sold never to to decrease much, and only temporary if they do.

My income certainly hasn't tripled! In fact, thanks to rising steel, copper, and fuel prices; my income seems to be on the decrease.

L.Adamson
Click to expand...

hammer.gif


You nailed it. Additionally, the dollar has been on the rise the last week or so and so has the crude oil supply. The 'current' crude oil price is actually being driven by futures market trading speculation for the most part, and hopefully that bubble will burst when we get past the current liquidity crunch and the stock market gets back into gear, giving big money investors some more options as to where to put their money.

We need to drill for more oil and build more refineries right here in the good old USA.
 
MacNab said:
We need to drill for more oil and build more refineries right here in the good old USA.
Click to expand...

[political rant ON]

EXACTLY! Tell that to the left wing nut-jobs blocking access to the Gulf and ANWR!

We now return you to your regularly scheduled generalized economic grumbling.

[/political rant]
 
I work for the big evil oil company ConocoPhillips. Its frustrating to hear people blame the high gas prices oil companies when in reality they have very little to do with the price of gas. Most of us understand this so I wont get into this. What I dont understand is why people think its necessary to levy even higher taxes on a select few companies that average 10% profit margins. Thats like punching the mailman in the face when he brings you your cable bill. If taxes are raised i can assure you that gas prices will go much higher. The refinery margins are very low right now due to the $125 crude prices and low gasoline prices. The price you pay at the pump reflects the price of oil about 1 month ago. The 325 thousand bpd refinery i work at is only making 280 thousand bpd because they arent making money on gas. Take a look at Tesoro, a strictly refining oil company, and notice how they posted losses for the first quarter. Again, higher taxes = lower throughput = lines at pump.

There are things we can all do to reduce the demand for oil. I started riding my bike 10 miles each way to work every day. That adds up to 50 extra bucks in my pocket each week. Ill be trading my wrangler in for a honda fit in 2009. I try to avoid food that is covered in plastic packaging. The list goes on. Everyone has their breaking point with respect to what they are willing to pay for fuel before they changer their habits and $4/gallon gas is mine.

On a side note, i personally wonder how the impending rise of cost of living will affect the human reproductive rate. Im willing to bet that 3+ kid families will be pretty rare in the future. Japan is sort of a good model for human response to limited space and resources. They have ridiculously high costs of living and the one of the lowest reproductive rates on the planet.

Anyway, if fuel prices are 7, 8, 10 bucks/gallon i will be looking to sell my 3 to build one of these http://www.pipistrel.si/planes/33 :D
 
jonbakerok said:
Really? If you owned Microsoft instead of Exxon, your BILLIONS would have made a 28% profit margin instead of a measly little 10%. You would have almost tripled your profit, and Obama wouldn't be planning to confiscate it. Maybe that's why the richest man in the world invests in software instead of oil.

Even Proctor and Gamble does better than big oil, with a 13.9% margin.
Click to expand...

you can own a food store and get 3% profit. Yup invest in oil and forget about food, we don't need it.
 
airguy said:
[political rant ON]

EXACTLY! Tell that to the left wing nut-jobs blocking access to the Gulf and ANWR!

We now return you to your regularly scheduled generalized economic grumbling.

[/political rant]
Click to expand...

I wonder why, we Republicans, who had control of the White House and Congress for 6 years, couldn't get this done?:confused:
Not shooting at anyone...just wondering.
 
One more thing on the gas prices vs. weak dollar: The Treasury and the Federal Reserve could, if they chose to, prop up the dollar and keep it strong. If the dollar were equivalent to the Euro, oil, which is priced in dollars (except for Iranian oil which just went to Euro based pricing), oil would be at around $75 per barrel. Since we, as citizens, own the Treasury and the Federal Reserve, to a large extent we have done this to ourselves. So rather than blame the oil companies, blame our own government.
 
"[/political rant]"

Now would be a good time for a moderator to remind people that politics is not a subject for the polite company of strangers and their children. :rolleyes:
 
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