Ending Big Oil's stranglehold

[Weester]

The Bush administration and the Congress are counting on ethanol and other biofuels to play a big part in the long-term solution to America's oil problem. Ethanol could play a significant part in breaking the market power of the oil industry in the short term, but the oil industry is determined to prevent ethanol from helping to solve the critical shortage of refinery capacity that has been driving recent gasoline price increases.

Without any major changes to auto engines or gasoline transportation and storage facilities, ethanol could increase the supply of liquid fuels going into the nation's cars and trucks by almost 10 percent. That is the critical margin of spare capacity that would keep prices from spiking every spring and that the refining sector has been missing in the past decade.

That is also the critical margin of spare capacity that Big Oil intends to prevent from ever providing relief to the consumer. The oil industry, which has failed to invest in sufficient refining capacity to alleviate the tight conditions in the gasoline market, is now faced with a competing source of supply of liquid fuels.

Ethanol competes with oil at three levels. Ethanol plants add production capacity to the liquid fuel stream for on-road use. The raw materials – corn, soybeans and in the future cellulose of various forms – compete with crude oil. And, ethanol producers are not members of the oil industry, but new entrants into the liquid fuels business. While it is important to diversify the raw material inputs in the long term to prevent upward pressures on food prices, in the near term it could alleviate upward pressures on gasoline prices.

But Big Oil, in the classic fashion of a cartel, won't let it. When ethanol is cheap, they refuse to blend it. Now that there are plans to expand ethanol, Big Oil is threatening to reduce future refining capacity. The industry calls it capital discipline. When markets are tight, the oil companies earn high profits, so they under-invest in more capacity. This has the effect of ensuring high utilization rates at refineries, keeping inventories low, markets tight and profits high.

Running refineries at 90 percent to 95 percent capacity also makes them more prone to breakdown. When refineries go down, the oil industry shrugs it shoulders and raises prices, further increasing profits. The rest of our manufacturing sector has a capacity utilization rate of about 80 percent to 85 percent in good times. The competitive market forces manufacturers to have sufficient spare capacity to cover outages or surges in demand and to avoid price increases. The oil industry does not work that way because of insufficient competition in the refining sector.

article:

Ending Big Oil's stranglehold | The San Diego Union-Tribune

[John Larkin]

Seriously though, if everyone in America planned their day, made a shopping list, put their kids on buses instead of having to drive them to school individually, combined trips, and lessened most of the senseless driving around, collectively we could reduce gas consumption by 10% with no other changes. If we did that, would not refineries only produce as much as they can sell and make a profit at? Do you really think they would just mindlessly glut the market with overproduction?

The only way to end the cartel is for government to allow competition to increase by new refiners coming on-line with eased environmental restrictions.

[The Blob]

Ethanol is fashionable right now, but it is not the answer.

Problems:

1.)The net energy gain from burning ethanol is small. It takes nearly as much energy to produce a gallon of ethanol as the gallon of ethanol contains.

2.)There's no free lunch (pun intended). As more and more corn... which is far and away the best source... is used to make ethanol the price of it (corn) goes up which is causing the price of food to go up. It's happening already.

3.)The long term environmental impact will be bad. As the demand for ethanol grows more and more forests will be reconverted back to farmland to plant corn. I'd rather pay more for gas than have forests cut down to plant corn.

4.)Economics. The only reason ethanol can compete with oil is that it is subsidized by the govt to the tune of something like $0.58/gal. I'd rather not have my tax money spent to subsidize industries that cannot compete on their own merits.


And, even if those problems did not exist and ethanol was a good answer, what is wrong with the oil industry protecting itself? If you owned a company would you willingly make less money by diluting your product?

I wouldn't.

[sailbrd]

You mean we don't subsidize big oil companies?

[whitehot84]

Originally Posted by The Blob

Ethanol is fashionable right now, but it is not the answer.







And, even if those problems did not exist and ethanol was a good answer, what is wrong with the oil industry protecting itself? If you owned a company would you willingly make less money by diluting your product?

I wouldn't.

It's called price fixing. Gouging the population to the advantage of a few. CEO's getting 50 and 100 million dollar bonuses. The more they get the more thy want. It's called greed and it's going to cause some side effects that are yet to be determined.

[Weester]

Blob,

Ethanol isnt the final solution but it is a step in the right direction. The bigger issue is the Oil industry and their price gouging! The are manipulating the market and pocketing BILLIONS!

They dont want efficient cars or alternative fuels! They lose money!!

[STAGE 2]

Originally Posted by Weester

Blob,

Ethanol isnt the final solution but it is a step in the right direction. The bigger issue is the Oil industry and their price gouging! The are manipulating the market and pocketing BILLIONS!

They dont want efficient cars or alternative fuels! They lose money!!

Can you show us some evidence of gouging. I ask because none of the investigations have been able to prove anything.

[Weester]

"Can you show us some evidence of gouging. I ask because none of the investigations have been able to prove anything."

LMAO.....You really are blind!

[henschman]

ethanol isn't a viable answer right now. but after gas prices start to get ridiculously high, it will start to be more and more attractive i think. if gas prices get high enough (as then inevitably will), subsidies will not be necessary for ethanol to start selling.

[UNGN]

Ethanol is great right now. Not as a fuel but as an investment vehicle to get rich quick on, very similar to 90's tech stocks.

The bubble won't burst for a few years, so invest in ethanol now, with a time horizon of about 3-5 years before you get out hard (Maybe 6-8 years if a Democrat gets elected in '08).

Ethanol is only a solution to low corn prices and detonation on turbocharged motors. Other than these two positives, it has zero hope of becoming a replacement of gasoline. ZERO.

The reason is our 500 year supply of coal and our soon to have ability to turn that coal into gasoline, while sequestering the excess carbon to keep the chicken little crowd happy (If not happy, then at least less P.O'd than normal).

This is the future of automobile fuel in the US and once it happens, the Middle East is done.

[Weester]

"Ethanol is only a solution to low corn prices and detonation on turbocharged motors. Other than these two positives, it has zero hope of becoming a replacement of gasoline. ZERO."

Psssssssst,

Dont tell Brazil that.......................

[STAGE 2]

Originally Posted by Weester

LMAO.....You really are blind!

I'm not disagreeing, I just would like some tangible evidence. I would say that it not too much to ask, but you never back anything up so I suppose it is.

[UNGN]

Originally Posted by Weester

"Ethanol is only a solution to low corn prices and detonation on turbocharged motors. Other than these two positives, it has zero hope of becoming a replacement of gasoline. ZERO."

Psssssssst,

Dont tell Brazil that.......................

Don't tell Brazil what?

Brazil produced 2.1 Million Barrels of oil/day in 2006.

In 2006, Brazil produced only 300,000 Barrels of Ethanol/day.



In 2006, the US produced 311,000 Barrels of Ethanol/day.

A big yawn goes out to Brazil.

[The Blob]

Originally Posted by Weester

The bigger issue is the Oil industry and their price gouging! The are manipulating the market and pocketing BILLIONS!

No they aren't.

Look, nailing the oil industry for price gouging or manipulating the market would be the political plum of all political plums. It is irresistible... which is why there have been probably two dozen probes and investigations over the past ten to twenty years.

And what have those invesatigations uncovered? Nothing.

The last one was about the spike in prices after Hurricane Katrina. What did they find? Same as always... nothing.

Do you honestly think if there had been a shred of evidence of some wrongdoing that Congress wouldn't have been all over it?

You bet your ass they would have. And yet... nothing.

They dont want efficient cars or alternative fuels!

So what?

Why on earth would or should the oil companies want efficient cars and/or alternative fuels? There is not one single good reason for them to want either. That doesn't make them bad.

[Weester]

"Do you honestly think if there had been a shred of evidence of some wrongdoing that Congress wouldn't have been all over it? "

Congress will turn a deaf ear to any critizism of the Oil industry! After all, they are probably the largest special interest group in the U.S. of A!

You honestly dont think that there is any collusion between Congress and Big Oil? No one is that naive......then again............

[The Blob]

Originally Posted by Weester

"Do you honestly think if there had been a shred of evidence of some wrongdoing that Congress wouldn't have been all over it? "

Congress will turn a deaf ear to any critizism of the Oil industry! After all, they are probably the largest special interest group in the U.S. of A!

You honestly dont think that there is any collusion between Congress and Big Oil? No one is that naive......then again............

How many Democrats are in Congress? A bunch.

How many Congressional Democrats would give their right arm to be able to nail the oil companies? All of them.

How many have ever been able to do so? None.

Now you tell me who's being naive...

[Drew L]

name what the last 10 administrations have done to combat the use of foreign oil?

blame blame blame................there is plenty to go around