msubullyfan
Yeah, I'm an engineer...
- :
- 2005 Nissan Frontier 4x4
I posted this in another thread earlier, but I think it was already dying. FYI - hope this sheds some light on the subject.
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A one-day ban on gasoline isn't going to help send notice to the oil companies, who have a month or more supply of gasoline sitting in tankers and who measure revenues in annual terms. However, it does kill the small business owners who run gas stations and depend on daily revenues to feed their families.
Guys, I see a lot of bashing the oil companies going on. I think it's important to point out a few basics of how the oil production/refining industry works to make sure that the spike in gas prices can be understood (I'm an ex-Exxon engineer who worked in refining support -- now I work in the power industry)...
First, the cost of gasoline is mainly made up of five components...
1 - oil exploration/production
2 - refining
3 - energy conversion
4 - transportation
5 - taxes
Explanation of each...
1 - (called "upstream" in the business) This cost is from actually finding the crude oil, drilling for it, pumping it out of the ground, and getting it to the oil storage facilities. While US/British/Dutch companies like ExxonMobil, BP Amoco, Chevron-Texaco, Shell, etc. do much exploration, drilling, and pumping themselves, the American economy relies on much more oil than these companies have production capacity worldwide. Hence, we rely on a great quantity of foreign oil preserves, much of which is controlled by OPEC (Organization of Petroleum Exporting Countries). OPEC has continued to control crude oil prices by restricting demand, so the cost for crude oil has doubled from $20 per barrel to over $40 per barrel in the last 18 months. This is where much of the cost increase has come from -- as oil companies have to pay much more for their raw materials (read: crude oil), that cost must be passed on to the consumer for the companies to make a profit.
2 - (called "downstream" in the business) Refining costs include the cost of building refineries, maintenance on them, and the cost of keeping the refineries running. This cost has held relatively flat in recent years, and has actually declined in many instances as oil companies reduce staffing and try to do more with less people to keep costs down. Also, as environmental restrictions in the US continue to become tougher, companies must produce different, more expensive, blends of gasoline (I'm sure some of you have heard of "reformulated" gasoline, as an example).
3 - Refining is a very energy-intensive, low-efficiency process. It takes much heat to break up the components in crude oil, and natural gas and electrical power are the main energy sources for refineries to run their processes. Natural gas demand has increased at twice the rate that new gas wells and production facilities have been built in the last 5 years due to an increasing reliance on natural gas to produce electrial power. This has been because natural gas burns efficiently and produces less environmental emissions than coal power and because nuclear plants can't be built because of the political hot potato of "not in my back yard". So, almost all new power plants built in the last ten years have been combined-cycle gas turbine plants (I can provide more info on how these work if anyone's interested). So, it's a double whammy: Natural gas costs more because more is being used, and power prices go up because gas is higher. Both of these are needed in large quantities to process crude oil into gasoline. So, the increasing energy conversion costs are passed along to consumers, too.
4 - It might be surprising that transportation costs have dramatically increased in the last few years. Due to two factors (1: the high relative cost of labor in the United States vs. other countries, and 2: the stringent environmental restrictions that refining companies face in the US due to the EPA), much of the world's refining capacity (even in US?European companies) has shifted from North America?Europe to Asia. This has caused a significant increase in transporation costs, although it is partially offset by the reduction in labor costs and the less stringent environmental regulations.
5 - Don't ignore the impact of taxes on gasoline. It's roughly 1/3 of the cost of gasoline (sometimes more in different parts of the country). This cost is completely out of the hands of the oil companies. As gasoline prices increase, I have yet to hear of any state lowering the taxes on gasoline to help the consumer offset the rising costs of the things listed above.
So, what can be done about it?
1 - We have to stop depending on foreign countries over which we have no control to supply the bulk of our oil supplies. We have a HUGE resource in Alaska (in ANWAR) that can help out a lot. President Bush has been a proponent of tapping into these resources until we can develop the technologies that reduce our dependency on crude oil. However, he can't get enough support in Congress to get approval to do it because of people that have no idea what they're talking about who are scared of "ruining the environment".
2 - Make sure that we support the EPA in providing more federal funds for our petroleum and power companies to help develop and implement emissions controls. All the cost of retrofitting refineries and power plants to better control emissions is directly passed onto the consumer. This can be done without increasing taxes IF many federal entitlement programs are cut.
3 - THIS IS IMPORTANT - make sure you use your vote to vote for politicians (whether Democrat or Republican) that stand for a sound energy policy of increasing domestic production, encouraging development of new technologies, and providing tax credits for companies to make power plants, refineries, and industrial facilities more energy efficient so they can afford to pay for them. Guys, I'm not trying to get politically biased, so please don't get onto me for this, but John Kerry has stated for the record that he favors increasing the taxes on gasoline up to twice what they are now (which could drive gasoline to $3/gallon) to force people to go to more fuel-efficient cars. This is not a political slant -- it's a fact. Other politicans (mostly Democrats, but some Republicans have, too) have stated the same idea. Anyone who is involved in the energy industry will tell you that this is a BAAAAD idea because it doesn't matter how efficient your car is, you're still going to get taxed for it at the pump.
I'll be glad to respond to any questions...
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--------------------
A one-day ban on gasoline isn't going to help send notice to the oil companies, who have a month or more supply of gasoline sitting in tankers and who measure revenues in annual terms. However, it does kill the small business owners who run gas stations and depend on daily revenues to feed their families.
Guys, I see a lot of bashing the oil companies going on. I think it's important to point out a few basics of how the oil production/refining industry works to make sure that the spike in gas prices can be understood (I'm an ex-Exxon engineer who worked in refining support -- now I work in the power industry)...
First, the cost of gasoline is mainly made up of five components...
1 - oil exploration/production
2 - refining
3 - energy conversion
4 - transportation
5 - taxes
Explanation of each...
1 - (called "upstream" in the business) This cost is from actually finding the crude oil, drilling for it, pumping it out of the ground, and getting it to the oil storage facilities. While US/British/Dutch companies like ExxonMobil, BP Amoco, Chevron-Texaco, Shell, etc. do much exploration, drilling, and pumping themselves, the American economy relies on much more oil than these companies have production capacity worldwide. Hence, we rely on a great quantity of foreign oil preserves, much of which is controlled by OPEC (Organization of Petroleum Exporting Countries). OPEC has continued to control crude oil prices by restricting demand, so the cost for crude oil has doubled from $20 per barrel to over $40 per barrel in the last 18 months. This is where much of the cost increase has come from -- as oil companies have to pay much more for their raw materials (read: crude oil), that cost must be passed on to the consumer for the companies to make a profit.
2 - (called "downstream" in the business) Refining costs include the cost of building refineries, maintenance on them, and the cost of keeping the refineries running. This cost has held relatively flat in recent years, and has actually declined in many instances as oil companies reduce staffing and try to do more with less people to keep costs down. Also, as environmental restrictions in the US continue to become tougher, companies must produce different, more expensive, blends of gasoline (I'm sure some of you have heard of "reformulated" gasoline, as an example).
3 - Refining is a very energy-intensive, low-efficiency process. It takes much heat to break up the components in crude oil, and natural gas and electrical power are the main energy sources for refineries to run their processes. Natural gas demand has increased at twice the rate that new gas wells and production facilities have been built in the last 5 years due to an increasing reliance on natural gas to produce electrial power. This has been because natural gas burns efficiently and produces less environmental emissions than coal power and because nuclear plants can't be built because of the political hot potato of "not in my back yard". So, almost all new power plants built in the last ten years have been combined-cycle gas turbine plants (I can provide more info on how these work if anyone's interested). So, it's a double whammy: Natural gas costs more because more is being used, and power prices go up because gas is higher. Both of these are needed in large quantities to process crude oil into gasoline. So, the increasing energy conversion costs are passed along to consumers, too.
4 - It might be surprising that transportation costs have dramatically increased in the last few years. Due to two factors (1: the high relative cost of labor in the United States vs. other countries, and 2: the stringent environmental restrictions that refining companies face in the US due to the EPA), much of the world's refining capacity (even in US?European companies) has shifted from North America?Europe to Asia. This has caused a significant increase in transporation costs, although it is partially offset by the reduction in labor costs and the less stringent environmental regulations.
5 - Don't ignore the impact of taxes on gasoline. It's roughly 1/3 of the cost of gasoline (sometimes more in different parts of the country). This cost is completely out of the hands of the oil companies. As gasoline prices increase, I have yet to hear of any state lowering the taxes on gasoline to help the consumer offset the rising costs of the things listed above.
So, what can be done about it?
1 - We have to stop depending on foreign countries over which we have no control to supply the bulk of our oil supplies. We have a HUGE resource in Alaska (in ANWAR) that can help out a lot. President Bush has been a proponent of tapping into these resources until we can develop the technologies that reduce our dependency on crude oil. However, he can't get enough support in Congress to get approval to do it because of people that have no idea what they're talking about who are scared of "ruining the environment".
2 - Make sure that we support the EPA in providing more federal funds for our petroleum and power companies to help develop and implement emissions controls. All the cost of retrofitting refineries and power plants to better control emissions is directly passed onto the consumer. This can be done without increasing taxes IF many federal entitlement programs are cut.
3 - THIS IS IMPORTANT - make sure you use your vote to vote for politicians (whether Democrat or Republican) that stand for a sound energy policy of increasing domestic production, encouraging development of new technologies, and providing tax credits for companies to make power plants, refineries, and industrial facilities more energy efficient so they can afford to pay for them. Guys, I'm not trying to get politically biased, so please don't get onto me for this, but John Kerry has stated for the record that he favors increasing the taxes on gasoline up to twice what they are now (which could drive gasoline to $3/gallon) to force people to go to more fuel-efficient cars. This is not a political slant -- it's a fact. Other politicans (mostly Democrats, but some Republicans have, too) have stated the same idea. Anyone who is involved in the energy industry will tell you that this is a BAAAAD idea because it doesn't matter how efficient your car is, you're still going to get taxed for it at the pump.
I'll be glad to respond to any questions...
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