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Do oil companies pay their fair share?
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mrgybe



Joined: 01 Jul 2008
Posts: 2827

PostPosted: Mon Apr 09, 2012 10:31 am    Post subject: Reply with quote

"The basic answers to why no more use of natural gas in transportation is infrastructure, inertia, and lobbying by the oil companies."

That comment, as it relates to oil companies, is absolutely, utterly false. Nothing could be further from the truth. Anyone who would make such a statement does not know what he is talking about. Readers beware of blind prejudice.
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coboardhead



Joined: 26 Oct 2009
Posts: 2034

PostPosted: Mon Apr 09, 2012 12:51 pm    Post subject: Reply with quote

Mrgybe:

I will give you the benefit of the doubt and assume you know what you are talking about and ask this...

If XOM indeed has such a significant position in natural gas, as you posted, why is XOM not rapidly developing a distribution system for this product to phase out gasoline use?

And...Did or did not the petroleum industry actively lobby against the Federal tax credits for natural gas distribution and transportation use?

When you see articles like this one...it gets confusing to know who is telling the truth.

Quote:
Reporting from Washington ó A top official of Koch Industries is sending letters to Capitol Hill on Wednesday urging opposition to energy legislation that would boost the use of natural gas, a proposal backed by energy billionaire T. Boone Pickens.


http://articles.latimes.com/2011/jun/22/news/la-pn-koch-natural-gas-20110622
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mac



Joined: 07 Mar 1999
Posts: 5477

PostPosted: Mon Apr 09, 2012 3:02 pm    Post subject: Reply with quote

Somewhere in here there is probably an adult conversation about appropriate energy policy, fueled by facts rather than hatred and polemic. I guess that the Branch Davidians in Virginia aren't much interested in explaining their industry; that secrecy thing dies hard.

There is substantial paranoia on both the right and the left about the rise in gasoline prices, with the right blaming it on Obama for not approving whatever big oil wanted, and the left blaming it on Big oil for manipulating the supply. Both are idle; oil based products, including but not limited to gasoline, dropped in price when the economy tanked, and have risen in response to the economic recovery. I found some interesting (and credible) rebuttals of the left's paranoia, apparently sponsored by the American Petroleum Institute API.
Quote:
Most well-known oil and natural gas companies are large. As a result, their earnings are often reported prominently. What is not reported is that, compared to the earnings of companies in other industries, there is nothing out of the ordinary about them.
Over the last five years, average earnings for the oil and natural gas industry have been well in line with the rest of the U.S. manufacturing industry, averaging about 7 cents for every dollar of sales. The latest published data for the third quarter of 2011 shows the oil and natural gas industry earning 6.7 cents for every dollar in comparison to manufacturing earnings, which rose to 9.2 cents for every dollar of sales.
The industryís relatively small earning on each dollar of sales is not well understood, in part because reports usually focus on only half the story ó profits. Profits reflect the size of an industry, but theyíre not necessarily a good reflection of financial performance. Profit margins, or earnings per dollar of sales (measured as net income divided by sales), provide a more useful way to compare financial performance among industries of all sizes.
When looking at net profit margins, the U.S. oil and natural gas industry ranks 114 out of 215 industries. Thus, the oil industry is right in the middle of other industries by profitability and actually has a net profit margin that is much lower than industries that have benefited from higher commodity prices, such as silver, copper, gold, industrial metals and lumber.
Itís also important to note that earnings allow the oil and natural gas industry to invest and reinvest in innovative technologies that improve our environment, increase production and help provide a more secure tomorrow. The oil and natural gas industry has enormous investment needs and U.S. energy companies must continually invest in new energy projects in order to keep pace with global energy demand.


Of course net profit margin is a metric that can be manipulated. There is much less risk in the gasoline market as there is in other markets, and less volatility, so I would think a more appropriate measure would be one that reflected both capital investment and risk.

While I gave you a cost/BTU figure for natural gas, that cost appears to be substantially more volatile, with a high of $13/million BTU's dropping to $2.50/million BTU's. Mrgybe can dispute my experience of big oil lobbying against funding of natural gas infrastructure in California all he wants, it doesn't make it true. The idea that the man who posted lies about William Rurckleshaus, sourced to junk science, the disgraced tobacco apologists, is concerned about journalistic integrity and rigor at the New Yorker is just hysterical.

It would be interesting to look at different energy sources per million BTU's, along with the challenges such as infrastructure development and warming impacts and relative scarcity which are expected to affect cost trends, and devise an energy strategy that made sense. I await the oil industries willingness to discuss that in public forums instead of Cheney's office.
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mrgybe



Joined: 01 Jul 2008
Posts: 2827

PostPosted: Mon Apr 09, 2012 3:27 pm    Post subject: Reply with quote

coboardhead wrote:
I will give you the benefit of the doubt and assume you know what you are talking about and ask this...

If XOM indeed has such a significant position in natural gas, as you posted, why is XOM not rapidly developing a distribution system for this product to phase out gasoline use?

If you have any doubt about the facts in my post, look it up. XOM's annual report and numerous industry publications will confirm what I am saying. With regard to distribution, you are assuming that XOM is targeting the gasoline market. It appears they are not; rather they are targeting the power generation market which is currently using coal. They have built, and are continuing to build, the world's largest LNG trains and regasification plants, and a large fleet of bulk LNG vessels. Chinese shipyards are currently building 4 more bulk LNG vessels for XOM.

I have no idea about the tax issue you mention.
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mac



Joined: 07 Mar 1999
Posts: 5477

PostPosted: Mon Apr 09, 2012 3:50 pm    Post subject: Reply with quote

Oh, is there a correction here that mrgybe didn't know that oil companies were lobbying against greater use use natural gas? I think you would do well to heed the rest of his advice--beware of blind prejudice, as well as half truths from industry flacks.
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mac



Joined: 07 Mar 1999
Posts: 5477

PostPosted: Mon Apr 09, 2012 5:00 pm    Post subject: Reply with quote

What do you want to bet, apology forthcoming or silence? Waiting....
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mrgybe



Joined: 01 Jul 2008
Posts: 2827

PostPosted: Mon Apr 09, 2012 5:03 pm    Post subject: Reply with quote

For those who favor facts over name calling...........this is the Koch's position on the proposal to subsidize natural gas distribution.

"While Pickens and others in the natural gas industry favor the proposal as a way to reduce dependence on foreign oil and encourage use of cleaner burning gas, the Kochs are urging members to oppose the Pickens-backed legislation, saying they believe government subsidies distort the economy and create inefficiencies."
http://articles.latimes.com/2011/jun/22/news/la-pn-koch-natural-gas-20110622

The major oil companies dwarf the Koch's oil interests. All the majors, and the overwhelming majority of smaller players are aggressively pursuing increased use of natural gas. To suggest that the Koch's libertarian antics are representative of the oil industry, and have stalled growth in the use of natural gas, merely reinforces that our anti-oil company poster doesn't know what he is talking about. Those who are caught in a lie, should move on, otherwise they look silly.
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coboardhead



Joined: 26 Oct 2009
Posts: 2034

PostPosted: Mon Apr 09, 2012 5:18 pm    Post subject: Reply with quote

mrgybe wrote:
coboardhead wrote:
I will give you the benefit of the doubt and assume you know what you are talking about and ask this...

If XOM indeed has such a significant position in natural gas, as you posted, why is XOM not rapidly developing a distribution system for this product to phase out gasoline use?

If you have any doubt about the facts in my post, look it up. XOM's annual report and numerous industry publications will confirm what I am saying. With regard to distribution, you are assuming that XOM is targeting the gasoline market. It appears they are not; rather they are targeting the power generation market which is currently using coal. They have built, and are continuing to build, the world's largest LNG trains and regasification plants, and a large fleet of bulk LNG vessels. Chinese shipyards are currently building 4 more bulk LNG vessels for XOM.

I have no idea about the tax issue you mention.


Mrgybe

I had asked the question of why natural gas was not being used more as a transportation fuel and received the following respsonse from Mac...

"The basic answers to why no more use of natural gas in transportation is infrastructure, inertia, and lobbying by the oil companies."

Now, you stated this was untrue and Mac did not know what he was talking about. Apparently, XOM is not interested in transportation use of their natural gas reserves and is not interested in promoting this use of natural gas. Could it be that they have a good thing going and do not want to change course (inertia). And, others in the petroleum industry (Koch Bros. for one) have lobbied against the continuation of the tax credits I had been discussing.

Infrastructure costs should be apparent to all. So, where was Mac wrong?

You stated that you would rather see natural gas promoted over solar (which started this discussion of natural gas) I assumed you knew that the Obama Administration had been offering tax credits to natural gas suppliers and consumers as part of the stimulus package. And, since you diss Obama's energy policy on a regular basis, I assumed you were also aware of the ongoing battle in Congress over the continuation of those incentives.

I really would like to understand the pitfalls of conversion of at least part of our transportation fuel use to natural gas.
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mac



Joined: 07 Mar 1999
Posts: 5477

PostPosted: Mon Apr 09, 2012 9:14 pm    Post subject: Reply with quote

CBómrgybe continues to play ďgotchaĒ instead of making any effort at education, so let me try again. Itís fun needling someone who is so defensive, and works in an industry only marginally more popular than Congress. But the role of the oil companies in the fate of natural gas is relatively minor. Iíve been around California public policy forums long enough to have ample experience with Western States Petroleum taking a position on many bills in behalf of the oil industry in opposition to cleaner fuels. So I know what I know, and Iím not going to pull out WSPA positions on clean fuels to show the position of big oil and their efforts to preserve market share. Big oil has been no friend to Californiaís efforts to increase the use of CNG. Perhaps mrgybe is so wedded to Exxon that he thinks that if Exxon didnít do it didnít happen. As an Exxon insider he does know that they think long, and were one of those early in with natural gasóbut that is only part of the story. In any event, being called a liar by the master of half-truths and junk science is pretty much a badge of honor.

Now let me return to substance, and add a little explanation of what I meant. Infrastructure is the big deal in CNG. Gasoline stations, although less present than they once were, are vastly more available than CNG stations. While there are now over 100 CNG stations in Los Angeles, there are over 13,000 gas stations in California. For long haul trucks, which need LNG to get enough energy, refueling is problematic, and California has been grappling with different approaches to increasing infrastructure for more than a decade. But I suspect (as a non-insider I donít know) that profitability and institutional capabilities have a lot to do with what is going on. Letís go back to the figure of gasoline at $18.16/million BTUís. At the 6.7% profit share on sales, thatís $1.22/million BTU in profit. Natural gas at $5.67/million BTU would need a 21% return on sales to generate the same profit per energy unit. With natural gas dropping to $2.00, and putting many investors in the tank-Ö.well you get the picture. But as Iíve said throughout the thread, the energy density of natural gas is lower, compression is new, and although is safer than storage of gasoline, is not always seen as safer. While the attitudes of the oil companies, and coal companies, hasnít helped, I think infrastructure, the tendency of us all to do what we know, and price are the key factors. Interesting comment in Forbes partially excerpted for your reading pleasure if you think that energy companies care about anything except market share and the bottom line:

Quote:
Barriers to Change

Although the outlook for the sector is bright, significant obstacles remain. Powerful lobbying groups, including the coal industry, are actively fighting the conversion from dirty energy sources to natural gas. Proponents of natural gas believe the U.S. government should let old coals plants expire that are up for renewal.

But coal companies and other groups are actively lobbying the U.S. government against supporting natural gas. This is stalling federal support for natural gas fueling stations as well. More of these fueling stations would push truck and automobile operators to purchase vehicles that run on natural gas. Demand for natural gas would pick up dramatically if it were to become a core transportation fuel source.


While natural gas certainly has a better carbon footprint, and particulate emission footprint than gasoline and diesel, and dramatically better than coal, it is not benign. Burning natural gas does create some particulates, indirectly and less carcinogenic than diesel emissions, but still of some concern. Of course, the suppliers of gasoline and diesel pay nothing for the impacts of their fuels on such emissions. But industry insiders keep insisting they reap no subsidies.

The other phenomenon that merits some consideration is that natural gas is most commonly supplied by public utilities, using pipelines that are often old and not necessarily well maintained. We have had several spectacular pipe failures in California, which have showed that maintenance of pipelines, or even of records, is lax. What that means to pricing long term I donít know, but I think the difference between regulated public utilities and privately owned oil companies is a significant institutional difference.
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swchandler



Joined: 08 Nov 1993
Posts: 5969

PostPosted: Mon Apr 09, 2012 9:30 pm    Post subject: Reply with quote

"The major oil companies dwarf the Koch's oil interests."


No doubt that probably true internationally, but the Koch brothers could represent significant national interests in a bit different facet of the oil industry. While I could be wrong, but recent news suggests that the Koch brothers are trying to discourage a broader use of natural gas. Could that be rooted in where their money is?
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