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Don't Tax Oil Companies - Nationalize Them!
Thursday Thought - Don't Tax Oil Companies - Nationalize Them!
Courtesy of Phil of Phil's Stock World
I would like to report a crime.
Yesterday, $112M was stolen from US consumers. It will happen again today and probably tomorrow and that is on top of the $800 Million PER DAY that is being overcharged by oil companies in America alone, ACCORDING TO EXXON'S CEO.
That's right, Rex Tillerson himself just testified to Congress that "based purely on supply and demand- should be in the $60 to $70 a barrel range." The reason it’s above $100 a barrel, Tillerson explained, is due to the oil majors using futures contracts to lock in current high prices, and speculation that is engineered by the high-frequency trading of quantitative hedge funds.
Other disclosures were made in last week's testimony that may interest you:
- The average cost of producing 1 barrel of oil was $11 (THAT IS ELEVEN, NOT A TYPO!); the average price of the oil in the marketplace–$92– some 8.5 times the cost of getting the oil out of the ground.
- The profits for the big 6 oil companies was $36 billion in the year’s first quarter. A large part of the $36 billion was used to buyback shares or pay dividends to shareholders.
- The deduction for intangible drilling expenses was given to the oil industry in 1960 when a barrel was worth about $15-17. So, why do they need this favor when oil is $100 a barrel?
Clearly there is no shortage of oil, the US has 1.75Bn barrels of oil in storage, enough to offset 186 days of imports (9.4Mbd) and 60% of those imports come from Canada and Mexico, not OPEC so our 1,750 MILLION barrels of storage would offset over 500 days worth of imports from the Middle East and Africa - even if it was TOTALLY cut off.
Nonetheless, oil shot up from $95 on Tuesday to $101 this morning, costing US consumers an additional $112M per day but that's an UNDERSTATEMENT - when we buy gasoline at $4, we are paying $168 for a 42-gallon barrel and, of course, rising oil prices also impact our home energy bills and even our food. The cost, in fact is more like $250M PER DAY per $5 increase in oil - and that is just for the US. Globally we're over $1 Billion per day that is removed from consumer's pockets for each $5 over that $60-70 range that the CEO of Exxon says (under oath) is the correct price of oil.
Fortunately for Mr. Tillerson, I wasn't a US Senator because I might have said "Gee Rex, you own the reserves, you build the wells, you own the refineries and you own the gas stations - it's nice to blame HFT Bots and Hedge Funds but have you looked in the gold-plated mirror of your 1,500 square foot bathroom lately?" There used to be such a concept, under Capitalism, of an excess profits tax as well as a windfall profits tax - Big Oil's situation is a little of both but it's also something far more sinister - it's market manipulation!
Oil jumped yesterday, as it often does, on a draw-down in oil inventories which Criminal Narrators Boosting Crude play off as an indication that demand is picking up. This could not be further from truth! What CNBC, the WSJ or any kind of real journalist COULD do, in roughly 30 seconds, is LOOK at the ACTUAL EIA Report. Doing that, they would see that the net drawdown of 100,000 barrels (yes, really, 100,000 barrels is what's now causing us to pay another $112M a day, which happens to be enough money to buy another 1.1M barrels PER DAY - are you not outraged by this?) was caused by Net Imports of crude dropping from 10.62Mbd last year to 9.42Mbd this year.
Perhaps it would take more than 30 seconds to have teams from MIT and Harvard pour over this data but, if they did, they would eventually discover that the reason our inventories are down 100,000 barrels in a week is not because demand increased but because they are shipping us 1.2 Million barrels per day LESS than last year EACH DAY or (and here's where the MIT guys really come in handy) 8.4 MILLION barrels a week less oil.
That is (and I cannot emphasize this point enough) 8.4 Million barrels LESS oil PER WEEK (11.3%) being imported than this time last year, WHEN OIL WAS $67.15. $67.15 is, of course, right in Mr. Tillerson's sweet spot, the other $34 a barrel IS YOU BEING RIPPED OFF. When I say you - I mean you, me and every other US and Global citizen who consume 88 Million barrels of oil per day. That is an overcharge of $3Bn PER DAY or over $1Tn per year - JUST FOR THE OIL. Add in refining costs, home energy costs, food costs and other items and we are talking about a $2.5Tn global rip-off (See "Goldman's Global Oil Scam Passes the 50 Madoff Mark!," Fake-Out Thursday - Oil Scam Continues Unabated," and "The scam behind the rise in oil, food prices.")
While the top 10% may not care much whether a gallon of gasoline is $2 or $4 or whether our home electric bill is $300 or $500 or whether a bag of groceries is $100 or $200 - those of us in the business of selling something to consumers other than oil should be outraged! Those are OUR customers that are being robbed! That is $2.5Tn of precious discretionary spending money that they could be giving to US instead of burning it up in our customers' gas tanks.
What we need to do is organize EVERY OTHER business into a lobby to put a stop to this outrage. We are being impacted by this every day - not just in what we pay for oil-related products in our business and personal lives, but the energy sector is sucking $2.5 TRILLION dollars out of our customer's pockets every year.
That would be as much money as ALL US Corporations reported in profits last year and, if you take out the $1Tn of profits in the energy sector and $800Bn of profits in the financial sector (their partners in crime) - that leaves only $700Bn in profits for the rest of us. So, to be clear - that money is being stolen from every business owner in America because if they steal it from our clients at the gas station - they don't have it to spend when they walk into our stores!
The effect on GDP is worse because that money is being removed from the bottom of the chain and being spent on a consumable item of no lasting value (we literally buy it and burn it up). Had my customer not spent $60 for a tank of gas, they might have spent $49 for my newsletter (you can subscribe here) and then I might have taken that $49 and gone out for pizza and Kim, my waitress would have had $5 more to spend tomorrow, and Mina, the owner, would have had $30 to buy some more bread, and the baker would have had $20 to buy some wheat and flower and maybe go out for some pizza himself. OR - my customer could have burned that $45 driving back and forth to work. What do you think is better for our economy?
High oil prices give us trade imbalances, they weaken the dollar by flooding the World with them as we exchange them for oil at the rate of $1.8Bn per day or $657Bn per year. That is the ENTIRE GDP of Turkey, the 17th largest economy in the World and, keep in mind, that is just 40% of what the oil ultimately costs us as it pushes through to other items we use every day. Now my business is global so I look at the US consuming just 1/5th of the World's total and I want to cry. $3.2 Trillion a year spent on oil alone! That's 65 Million newsletter subscriptions! That's right, I'm a Capitalist so I worry about how things affect me - even when they are global tragedies that are causing hundreds millions of people to live in poverty so one man can have a 1,500 square-foot bathroom (allegedly).
And, if you think giving $45 to the gas station puts money into the economy, you are wrong. The local gas station makes very little on each transaction (it's a volume business, that's why they sell food) and half of that money goes directly overseas to pay for our imports and the other half goes to Exxon or whatever big oil company owns your gas station or supplies it.
Now, if you have a business that makes gold-plated mirrors for executive bathrooms (with the cool TV screens behind the glass) - you will be thrilled or, if you are Exxon stock you will be thrilled because XOM bought $19Bn of their own stock back in 2009 (it was a rough year for all of us) and paid out $8Bn in dividends but what they didn't pay was one penny of US taxes on $310Bn in sales.
That's right, although XOM paid $34.7Bn in taxes in 2009, that was only paid to foreign governments who know how to collect money from Big Corporations - the United States Government is either too stupid or too corrupt to tax corporations properly so a company like Exxon can do 65% of their business in the US and make 70% of their profits in the US but pay no taxes in the US. Oh, sorry, I forgot to mention - AND WE PAY THEM SUBSIDIES - so they can pollute our air and our water (anyone in Alaska or the Gulf may know what that means) and use our roads and our electrical grid and our police protection locally and our military protection globally ($1Tn a year for US to keep that up to protect Exxon's interests overseas) and we educate their employees and we fund their retirement, so Exxon doesn't have to and XOM gives us - NOTHING. Sorry, not nothing, they give us a $300Bn bill for their service.
Although I encourage you to send this post (and "like it" in Facebook and Twitter it, and whatever) - to people to make them aware of this scam - including Congresspeople and especially those turncoat Democrats who refused to vote against oil subsidies on Tuesday - I am not saying that any change in policy is going to help. This situation is too far gone, the energy industry has it's hooks too deeply in our politicians and they have WAY too much control over our daily lives. That means the logical thing to do, when faced with an out-of-control vital service that is gouging consumers and damaging our economy, our environment and working against our national interests - is to NATIONALIZE THEM.
That's right, we HAVE TO Nationalize the energy industry. Oil should no more be a profit center than water (and they are trying to privatize water, so soon you will know what a gallon of that costs too!) or air. It is necessary (some form of energy) for life in the modern World and that is why these greedy, bloated, corrupt organizations are able to hijack our economy and siphon of 50% of the planet's disposable income in order to mark up a barrel of oil (according to Exxon's own CEO) 850% and that ends up being 1,360% at the pump.
Clearly the current situation does not lead to oil companies developing safer, cleaner, renewable means of energy - they've had 100 years to do it and we're still using oil. In fact, their massive profits lead them to undermine those developments when they occur and to lobby against sensible measures like conservation or pollution controls. The oil scam is just too damned profitable and the money is too corrupting so, if the American people want to stop losing this game day in and day out - WE HAVE TO END THE GAME!
While the Big 6 oil companies may claim not to have a monopoly, they clearly have an oligopoly and prevention of a monopoly is the strongest argument in favor of nationalization of an industry. Clearly there is no price competition when Tillerson admits he can pull a barrel of oil out of the ground for an average of $11 but, by the time it gets to the refiner's door - it costs $101! Sure, you have to put it in the barrel and you have to drive the barrel to the refiner (or ship it from overseas) but that's about it. To claim that "speculators" are entirely responsible for the $90 mark-up is obvious BS.
Meanwhile, back to business. We are, of course, speculators (indirectly) in the energy market. I called a top yesterday at $99 and, so far, so wrong, but we are just making short-term covers on our long bets because - until someone does put a stop to these criminals - the scam WILL continue.
Back in December, I wrote a post (available to all subscribers on Christmas Day) called "Secret Santa's Inflation Hedges for 2011" and, in that post I said:
Gasoline prices are once again creeping up and, if you are the average family, you buy about 1,000 gallons of gas per year ($2,500) and spend another $1,500 heating your home. That’s $4,000 a year spent on energy and it’s already up over $1,000 from last year – pretty annoying, right?
XLE is the ETF for the energy market and it’s currently trading at $67.41. If you want to guard against another $1,000 increase in the price of fuel next year, buy 2 Jan 2012 $55/60 bull call spreads for $2.60 ($520) and offset that cost with the sale of 1 2013 $50 put for $4 ($400) for a total outlay of $120. If XLE simply maintains $60 for the year (11% lower), you make $880 (733%).
We're only in May but XLE is already at $74, and the Jan $55/60 bull call spread is now $4.40 ($880) and the 2013 $50 put is down to $2.60 ($260) for net $620 - up 416% and up $500 on the $120 investment so far, with another $380 expected if this trade plays out. These ridiculous, out-sized returns on speculation are why the investing class does not give a crap about the suffering inflicted on the bottom 90% by higher energy prices. We don't just buy 2 contracts, we buy 200, and we make enough money to buy a yacht and put 1,000 gallons into it for a weekend cruise. That increases demand and makes the little people pay even more for fuel, and WE MAKE EVEN MORE MONEY -Muhahaha!
If this seems fair to you - then congratulations, you are "one of us" but, if you have no way of taking an XLE bull call spread offset by selling 2013 puts short - then you are the guy whose pockets XOM is reaching into and stealing the money from on our behalf. Where do you think that $500 profit came from - it came right out of your wallet at the pump! It came out of mine too and, since you are reading this, then you are either a customer or a potential customer, so I will either teach you how to play so you can profit from the oil scam or tell you what needs to be done to put a stop to this obscenity.
Don't worry about us, we'll make money whether oil goes up or down, but let's all worry about our country and our planet, which has been taken over by bankers and commodity pushers, who have organized against us to take every penny out they can get their hands on. If all you do is read this and feel mildly upset - then you are just a mark - the kind who comes back to the con again and again until you have nothing left to lose. It's high time we stood up as a country and said - NO MORE!
Please - send this around - let's get a conversation going and make this an election-year issue. It has to stop....
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Correction suggestion in your post
"The average cost of producing 1 barrel of oil was $11"
And you make a big deal about that given oil is at $100
This leaves out the costs of FINDING the oil, which are significant. Barclays has a new report out showing the marginal barrel now costs $85.
Click below to watch YouTube's Harisebon7777777 short videos. He should be commended for his work on measuring the radiation levels in Tokyo. The device he uses costs about $1000, which I am sure he has paid out of his own pocket to provide us with the truth of what is really going on in Japan.
It is eerie to watch his videos. Typically, his hand is shown holding a geiger counter in some public place with people walking all around him as if there was nothing of importance going on; while all along, the geiger counter in his hand reveals what is really happening. Harisebon is documenting the slow irradiation of the Japanese archipelago. A visual unfolding of a tragedy.
While watching these videos. it is hard not to wonder how many of the folks one sees walking down the street will come down with cancer in 10, 20 or 30 years. In fact, the videographer's life itself is in peril. Poignant.
Go to Harisebon's YouTube channel and give him a shout-out. He deserves it.
http://fukushimadisaster.blogspot.com/2011/05/radiation-harajiku-omotesa...
Next, click below to read about the Orwellian steps taken by the Japanese government to hide from the foreign press (and its citizens) what is really going on in Fukushima:
http://fukushimadisaster.blogspot.com/2011/05/japanese-government-takes-...
This article is certifiable bullshit.
Some countries have demonstrated someability to manage NOCs profitably and efficiently when they are net oil consuming nations; they include- PetroChina, Sinopec and ENI.
Others such as Pertamina, Enarsa, and the National Bolivian Oil Company have become laughing stocks and decreased national wealth as a result of mismanagement. ONGC is only slightly less pathetic.
"That's right, we HAVE TO Nationalize the energy industry" Given the examples the Postal Service, Fannie Mae, Freddie Mac, Amtrak, AIG and GM, who do you honestly think is that stupid? What do you think happens to the to the stock market when 40% of corporate profits are obliterated?
"Gee Rex, you own the reserves" No, Exxon doesn't, the US government primarily owns the land and the reserves, which is why the majors sign leases with the government for drilling rights.
"While the Big 6 oil companies may claim not to have a monopoly" which 6 and how are they relevant? Statoil, ROsneft, Aramco, ADNoC, ENoc, INOC, KPC, Sonatrach, NIOC, NNPC, GEPetrol, PEMEX, PDVSA, and Petrobras are alreadynationalized oil companies. The US can't nationalize them, and must purchase their oil through JDAs with other oil companies, or on the open market. By the way, a change in control (e.g. nationalization) can be grounds for termination of JDA. Which means the book value of petroleum rights the company has paid for can literally be erased by nationalization. If you are talking about the six largest publicly owned integrated oil companies- the US is NOT going to nationalize BP (formerly BRITISH Petroleum), Royal DUTCH Shell and Total SA of FRANCE. The big six also have access to less than 15% of the worlds petroleum reserves, most of the rest of the reserves are extracted through agreements with Petroleum Ministries by Statoil, ROsneft, Aramco, ADNoC, ENoc, INOC, KPC, Sonatrach, NIOC, NNPC, GEPetrol, PEMEX, PDVSA, Petrobras, et al.
"High oil prices give us trade imbalances, they weaken the dollar by flooding the World with them" Perhaps you should beg Mr. Bernanke to stop flooding the whole damn world with US dollars, because it makes the people who own the oil demand more dollars for the same amount of oil when they know he is devaluing them. The eventual end result of currency devaluation is that the currency is simply not accepted as a medium of exchange for the desired product - hyperinflation.
Given the US government's history of managing companies, and Ken Salazar's current E&P permitting backlog- which is expected to deep six domestic oil production in a few years: here is what you can expect from US oil nationalizations 1) Significantly Higher Oil Prices, 2) Chronic Shortages of Physical Oil Products 3) the Government seizing more of your wealth to pay for a bigger shortfall of more expensive oil. Obummer is not going to whore out Sasha and Malia on Craigslist to buy you oil after destroying US production and market access, but he will seize your food supplies and trade US advanced military technology, and eliminate what left US intellectual property protection if push comes to shove.
The are ways to reform the domestic petroleum sector but nationalization is NOT one of them.
"Baseball, Hot Dogs, Apple Pie, and Chevrolet"
now
"UFC, Chalupas, Cupcakes, and Whatever"
When the oil lobby can't milk Congress for more of our money, they'll hit up the ag lobby over ethanol and to keep illegal immigration going, or the "Health Care" lobby, or Military Industrial complex.
Just wait; they'll wind up a nice big war (not a regional conflict) and really get things humming here before too long.
The U.S. government has fucked up most everything it has ever touched. Health care, education, homeland security... I could go on and on. This article presents no credible evidence that they are capable of improving the oil situation.
How about destroying the concept of the corporate man and making CEO's
and board members responsible for the actions of the corporation liable?
http://www.youtube.com/watch?v=Pin8fbdGV9Y
This article is idiocy.
The raping of the public was not done by the oil companies. It was done by the politicians taxing the crap out of the public. The oil companies take one tenth the amount out of the price of oil that our honorable politicians take out to feather their power nests.
Feh.
I was thinking this very same thing just yesterday. If you listen to Larry Kudlow, the poor oil companies aren't making any money anyway, so nationalizing them would be doing them all a favor. While we're at it, let's nationalize the health insurance companies too. They are barely squeaking by, profit margins in the microns.
This is a moronic post. The thesis is that "the energy industry has it's hooks too deeply in our politicians and they have WAY too much control over our daily lives" so the Oil Companies should be nationalized. Uhhhhhhhhhhhh...by what mechanism? Forget for a moment that "nationalization" simply doesn't occur in modern America; the argument defeats itself: the same politicians owned by the energy industry are the only force that could nationalize its corporations.
So unless the author is proposing revolution (unlikely; this is pure armchair pipe-dreaming, typical of both the liberal elite and the right-wing militia-scenti), get used to $5 gas, record oil company profits, and politicians on jet-set junkets, paid for by greasy lobbyists.
I'm now dumber for having read 2/3 of that article. I don't know whether to laugh or cry. I've lost all faith in the American public. I had hoped to stand and fight for the America I knew, but I've clearly overestimated the ability of the public to figure out what is going on and who is raping them. If I can't get out of the country, I'm hoping I can find a voluntary lobotomy program. That way I can watch a little Dancing with the Stars, Repo Men, Running Man, Climbing for Dollars, and surf the net on my Ipad with no worries. When the SHTF and everyone is looking for scapegoats, this and every other moronic fascist/Marxist plan that gives government more power will be tried. It will all end in tears. When everyone is standing in line for a government hand-out for a bowl of gruel I'm going to remember this day as the day I realized the American citizen got exactly what he deserved.
Don't be silly, the issue is NOT to make the US into a new USSR. It's to bring innovation and creative investment into the energy sector, KEY future sector world wide. One thing you don't do in life is to JUNK reality in an efficient economy/political system. That reality in the current energy sector is : Fat, oligopolistic corporates, who DONT innovate, who cheat on taxes, and get away with MURDER through crony capitalism and lobbyism. Its this REALITY which has to be recognized and CHANGED. Who can do it? ONLY good honest governments, who break down these structures, nationalizing them if necessary, to spin off new ones, more conducive to market dynamism and create TRUE market impetus by breaking down oligarchic barriers and levying taxes WORLD WIDE on cash cow juggernaughts. Do we have the political structures in the US to achieve this GOOD GOVERNANCE? The evident answer is NO! Especially since 2003, more so since end 2008!
So the crucial issue to changing the mood on good government, good corporate governance, transparent market mechanisms , theoretically lies in the hands of the Electorate. If it fails for whatever reason...the USA continues to sink down the present debt/ corruption trail. Its role in world governance then becomes a thing of the past. Its the people's future which is at stake. And temporary nationalization could be a good thing to stop the rot and start good market oriented governance.
Power corrupts. Absolute Power corrupts absolutely. Government is rarely the answer. And just because you guys call it Governance doesn't make it any different. Crony capitalism and lobbyism is a function of government interfering with markets and picking favorites. I am also officially checking out from debating you statists, government is your religion and I gave up on debating religion along time ago.
You have a religion too : its called free markets. It doesn't exist. Its all manipulated into Oligarchic control by the Plutocrats. So to avoid feudal rule you need regulation. Just look at history. Nation state succeeded feudalism. The issue is that power corrupts on both sides : Charybdis (state whirlpool) and Scylla (Oligarchic 'free enterprise' rock).
If you believe in democracy you must accept that state makes rules and then regulates. Nothing is perfect in human society and all other solutions are worse than republican democracy. I am for regulated free markets and am against controlled monopoly markets either by government or Oligarchs. I don't believe in the invisible hand theory. Ayn Rand is hopium.
Ridiculous. There will be no SHTF in your lifetime, or that of your children. Perpetual war, maybe, and certainly currency "adjustment" by either debasement or default. But the Imperium Americum is in full-effect, and you will get enough oil to drive your SUV and enough beef fed on forage planted on "reclaimed" rain forest for your weekly McDonald's fix.
So, come down from your high-horse with your vindictive pronouncements of just deserts and tear-filled endings. Unless you are willing to do something about it (you're not; look in the mirror), STFU and go back to your couch. I'm sure there's some reality TV to take your mind off such silly fantasies as Marxism.
It isn't the average cost (if the number is true), it's the marginal cost of the most expensive barrel to extract. And, net energy, bitchez!
The oil companies don't have their hooks nearly into the pols as much as the bankers and defense contractors. The government is too stupid to do any real work. They can't even do the small regulating job they have now and you want too give them a bigger job! This article is total bullshit. This is the last time I read this column.
I think that if we were to take a 1st position on class 1 shares.. for the Subsidies paid out over the years.. as well tax benefits.. that we should be able to work on that national debt some what and that would be fair..
I dont want to take anything from anyone..
But at the same time these oil companies have taken from "We the People" left, right and center!
So, I would ask for would I would willingly provide for equity.. a stake!
Is that to fair for people? should big oil get tax breaks and subsidies? without doing anything other than bend over "We the People" at the pump?
Should we do the same to Google, Microsoft, GE, Amazon etc? That have much higher profit margins and pay even lower tax rates. How about gold, silver, and copper miners? They are making money hand over fist and have the same subsidies and tax benefits as oil companies? Let's have the government take over all gold and silver miners.
Misses the point. Oil companies extract resources that can logically be argued are part of the commons, and whose value thus accrues to the populus. Re-read your basic texts on the Law of Capture and mineral rights.
Bullshit. Oil & gas companies compete to lease mineral rights, pay a bonus upfront and perpetual royalties to the mineral owner(s). When a reservoir extends across land boundaries, it gets unitized fairly, and the whole regime of exploration and production is codified by state and Federal law, including a shitload of environmental regs.
My only bitch with the oil companies is how they are taxed. They make huge profits because, duh, they are huge companies. Their margins are very tight. From the perspective of gouging the consumer, take a look at Microsoft (software companies in general), Apple, Big Pharma and of course, the IBs... their margins are obscene.
I gotcha, but I can live without software and a new piece of iCrap. Oil and drugs on the other hand....
Update Venezuela:
Hey, we should nationalize everything because it's working so well for Hugo Chavez. People get to buy gas for less than 25 cents per gallon there.
Though they do have one of the highest inflation rates in the world at 35% and they are now actually rationing food at the grocery stores. Their latest genius act to solve the housing problem is to 'nationalize' people's houses and force home owners to jam strangers into them per the government mandated quota of two per bedroom. The murder rate is one of the highest in the world and journalists who report the troubling situation continue to be murdered. But they got lots of cheap gasoline.
Should we nationalize the farms? Food prices are pretty high and we need food.
I am not for nationalizing anything. Don't read stuff that ain't there. I do, however, believe that they can make it on their own. Cut off them damn old people as well. If they can't pay their own bills, eff 'em.
Ilene is right, up to a point: the oil business is a profit-gouging fuckover. But the solution isn't nationalization; that creates a power-gouging fuckover. The solution is and will be System Collapse and then radical decentralization of all economic and political functions. In short, local free markets.
Yeah, that'll work. For the 30% who survive the collapse/chaos/armageddon interval that lasts for what? Years? before you get sufficient stability and coordination to re-harmonize extractive activities and commercial accomodations.
Will you be among the random elect? Will you have the resources to participate in the new "economy"? Or will you be feudal fodder, fed into the gears of the post-apocolype machinations you dream about?
Know where I can buy some slightly used drilling equipment on the cheap?
PPE On the cheap - tens of millions in USD
E&P Overhead - tens of millions in USD
Mineral Rights - tens of millions in USD
Yet, still a small time player in the oil business, and eligible for current US tax breaks. The majors don't care about pending legislation to cut the tax breaks because they aren't beneficiaries of breaks to be cut in the current legislation, but to the extent that it makes profitability for the small players more difficult the MAJORS ARE ALL FOR CUTTING THE TAX BREAKS, since it enables them to increase their power by acquiring smaller producers on the cheap either through direct M&A or exploitative financing through Bank of Exxon/Chevron/etc.
The suckers on Zero Hedge who buy into the politicians' sales pitch used for the proposed legislation are only slightly less stupid and gullible than those get their daily dose of propaganda through the MSM.
Those with power (big oil, politicians, and bankers) will profit by the current text of proposed legislation to "punish" big oil.
Lobbying dollars well spent, apparently.
Post this over at theoildrum.com... dollars to doughnuts you might get a lead....
Somebody really needs to get the Department of Energy involved in all this ;-)
HaHaHaHaHaHaHaHaHaHaHaHaHaHaHaHa!!!
If you nationalize a company, then all its employees will start pressuring the politicians to provide them with gold-plated pensions and benefits. And soon the average oil-worker will be eligible to retire at 50 with at full pay, etc., just like firemen, police, etc. And efficiency will decline (just like the US Post Office). And industries that use oil (like the trucking industry) will pressure the goverment to provide them with special discounts (just like the post office has special low rates for junk mail). And the consumer would end up paying for all this largesse. The government ruins everything that it touches.
This article advocates stealing. The thought process is since stealing is all the rage then it's ok to steal.
FUCK YOU, THIEVES.
ONE SIZE FUCK ALL GOVERNMENT.
For those who dream of a world where little independents can all run out and drill wells all over the place, you should learn a little about the oil business. If I go out and drill a well and strike oil, I'm not going to be too happy about a guy showing up over in the next quarter section drilling a slant well into my find just because he happens to have a minerals lease on it. It was the oil companies that pleaded for the states to come and regulate drilling because it turns out that too many wells and over-pumping will cause natural production to cease prematurely, leaving oil in the ground. With secondary and tertiary recovery systems like water and CO2 flooding, capital intensive operations, those doing the flooding sure as hell don't want neighboring leaseholders to poach the benefits.
Drilling wells has been a highly regulated business ever since. In the oil producing states, oil companies, the Big Boys and the indies, come with their geologists and lawyers to present evidence before commissions of government folks knowledgeable in geology and geophysics. These commissions issue permits allowing wells to be drilled in certain places to certain depths in certain ways (slant drilling is OK in some circumstances) and establish a production level for the well. They also regulate the disposal of the salt water that is often a byproduct of production. This process recognizes that different companies will all tap into the same field with different wells, and the regulation seeks to maximize production for everybody based on the data and known science.
The oil business actually presents an interesting challenge for those who think simple property and contract law can solve everything, and that there is no such thing as a "commons."
So it's ok to cop out of a tough problem with a brainless solution? Once size fuck all government for everyone, thieving and telling lies.
Love it. The bleating continues incessantly.
Calm down. Did I advocate nationalization? When I read some posters claiming that eliminating the State entirely or at least eliminating its role in oil production would magically solve all problems, that shows a lack of knowledge about the complexity of the oil business. There is an inherent issue with the "commons" since these fields are large, their extent is tough to know up front, and their boundaries don't correspond with lease boundaries.
So any solution to production will have to take these characteristics into account. A free for all allowing anyone with a lease to drill any kind of well they like and suck out oil as rapidly as possible will screw everybody.
BTW, I'm no fan of State Socialism either. At the same time, I understand the author's concern about multinational oligopolies and how destructive they are. I'm just not naive enough to think they'll disappear if the government role is gone. Adam Smith never believed that. He wrote about how all Capitalists will seek to create oligopolies every time they get together. It's the easiest way to maximize profit.
Just to back up the Smith claim, the quote is:
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”Good post....people forget the free for all in the early days of oil... It was not pretty or efficient....
This pile of stupidity boggles the imagination. Is this website any longer about anything except conspiracy mongering and eyeball whoring?
Who held a gun to your head and made you read it? Or did you read it? If not, why comment on something you didn't read? So, so many questions!
Besides, what you got against conspiracies and having sex with eyeballs?
I read the first two paragraphs and scanned enough to see that it's utter stupidity. More importantly, it shows complete ignorance of finance and business and how they work. Time was this was a blog I came to read because it had nuanced and unconventional financial discussion from people who knew what the f*#$ they were talking about. The commenter threads also by and large had comments based on some logic and the topic at hand and even when odd made you think ..........
In particular over the last 6-9 months with the lefty loon George W, who's posts consist entirely of vague out-of-date quotes mostly of himself, the unbearably long-winded and obtuse Cognitive Dissonance, plus the garbage this moron posts - it has attracted a very large volume of mindless drones drooling dorm-room saliva over their navels.
And I'm a big fan of REASONED conspiracy theories and having sex with anything warm but I miss the time when I came to ZH to be informed and have my thinking about finance stimulated......................................
There is one nice thing about ZH, just like your TV you can just change the channel. There are other articles here and you don't have to click on anything you don't like.
If you don't like his opinion, you don't have to read it. He has a right to post his opinion on the article. Are we all supposed to rah rah for every article on ZH?
That's why I'm skipping yours.
Fuck you, commies.
Idiots. Slave wannabes.
How's that working for Mexico, or Venezuela you ignorant morons?
actually its working out very well for venezuela.. for the US who is a net importer, probably not as much.
even if production decreased by 25 % the oil reserve is not going to disappear, and they arent giving away their oil to soccer moms in SUVs in exchange for clownbux.
This is the worst thing I've read on here and that includes all of Leo's work as well. I work for a smaller independent and I promise you the price to produce a barrel of oil is about 6 times what you state up there. This is just pure trash.
And then this pile of shit above misses so many obvious points you would have to be fucking retarded to believe it. Let's see the price of gasoline would also need to factor transportation costs, infrastructure plant costs to refine the product, payrolls, distribution to stations and taxes with some profit as well.
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Guns and Butter
9/11 An American Coup and The Mysterious Collapse of World Trade Center 7
http://www.kpfa.org/archive/id/69875