I may be slightly left of middle...barely....but I'm definitely not a tree hugger. I say let's drill! :idea:
Let's not forget that crude is not the only commodity seeing big upward price movements. Agricultural commodities have also skyrocketed causing problems for big food importing countries similar to our issues with crude....the same dynamic driving oil prices is also driving food prices. It seems as if the big ag companies have a better PR staff than the oil guys. Why no hue and cry over the excess profits at Cargill? Are there charges from the leftist conspirancy theorists that the Bush Admin also controls the worldwide ag markets as they do energy? Informative article from yesterday's Wall Street Journal... http://online.wsj.com/article/SB120949327146453423.html
Let the good times roll for the farmers....I'm tearing up the grass in my backyard and planting corn!!!
Here's some thing I picked up on another board. It's common for people to just hammer Exxon/Mobile for their record profits. But they also have paid record taxes. Exxon Financial Statements
FCF stands for free cash flow....capex is shorthand for capital expenditures. EBITDA is short for earnings before interest, taxes, depreciation and amortization - one of many metrics used to determine how much cash a firm is generating. Free cash flow is the primary determinant of the value of a company and it is defined as how much of the cash flow is left (free) after providing for the capital investment (cap ex) necessary to maintain and grow the business. A firm could be generating a material amount of cash from operations but in capital intensive businesses - big oil - vast sums of capital investment are necessary to enable the firm to continue R&D, replenish obsolete equipment, increase the efficiency of existing assets and expand capacity to meet demand. A firm will only seek to invest capital if the returns expected are in excess of its cost - (cost of capital). People think that firms like Exxon only use their "excess profits" to bag up in piles of currency and drop them Santa-like on their fat cat shareholders in the darkened smoke filled corporate board rooms and giggle at the plight of the "common man". In truth, Exxon invests the VAST majority of cash flow in R&D, maintain its existing plant and in new more efficient capital equipment and capacity expansions to do their part to ensure a steady supply of product to an very, very thirsy economy. If you tax Exxon's "excess profits" you in effect dry up the very capital that is finding new energy supply, expanding the efficiency of our energy infrastructure to what end? To let the federal government do what? I hope that made some sense and I hope that wasn't too long winded but I'm stuck in an airport and I'm bored!!!!!
Another point I think the writer was trying to make was that with the higer prices, companies will be able to generate a return on investment attractive enough to continue to compell new investment....new R&D, new plant, more efficient facilities at a rate greater than they would otherwise....therein lies the truth of the old adage, "nothing cures high prices like high prices" in that, 1) it tends to diminish demand, 2) it tends to attract incremental capital investment to increase supplies to the point of price equilibrium. You artificially constrain prices, you tax earnings you will inevitably reduce capital investment.....
Funny the same principle works in a Dental Practice. The more money I make the more likely I am to invest in new technologies such as digital x-rays, chairside cad-cam systems, lasers for various uses, computerized record keeping, etc ...all of which open up new areas of treatment or make me more efficient etc and build the practice. Funny how that works. Of course there is always that portion of practice growth that goes towards sending the doc for R&R at Hilton Head...where I'm heading Sat morning!! Terry
I heard today that oil companies, on average, make 8 cents profit on a gallon of gas. Meanwhile, Federal taxes account for 60 cents per gallon. I can neither confirm nor deny.
The article linked by Vic is one I've read in different places about three or four times recently. I'm amazed it doesn't get more coverage. Here's the link again and the article. There is also a couple of interesting charts with the article. I think, but am not sure, that this oil is shale oil which is much more difficult to drill, but new technology and rising costs may make it feasible. Thanks Vic, I was looking for this article. Massive Oil Reserves North Dakota Massive Oil Deposit Could Increase US reserves by 10x America is sitting on top of a super massive 200 billion barrel Oil Field that could potentially make America Energy Independent and until now has largely gone unnoticed. Thanks to new technology the Bakken Formation in North Dakota could boost America’s Oil reserves by an incredible 10 times, giving western economies the trump card against OPEC’s short squeeze on oil supply and making Iranian and Venezuelan threats of disrupted supply irrelevant. In the next 30 days the USGS (U.S. Geological Survey) will release a new report giving an accurate resource assessment of the Bakken Oil Formation that covers North Dakota and portions of South Dakota and Montana. With new horizontal drilling technology it is believed that from 175 to 500 billion barrels of recoverable oil are held in this 200,000 square mile reserve that was initially discovered in 1951. The USGS did an initial study back in 1999 that estimated 400 billion recoverable barrels were present but with prices bottoming out at $10 a barrel back then the report was dismissed because of the higher cost of horizontal drilling techniques that would be needed, estimated at $20-$40 a barrel. It was not until 2007, when EOG Resources of Texas started a frenzy when they drilled a single well in Parshal N.D. that is expected to yield 700,000 barrels of oil that real excitement and money started to flow in North Dakota. Marathon Oil is investing $1.5 billion and drilling 300 new wells in what is expected to be one of the greatest booms in Oil discovery since Oil was discovered in Saudi Arabia in 1938. The US imported about 14 million barrels of Oil per day in 2007 , which means US consumers sent about $340 Billion Dollars over seas building palaces in Dubai and propping up unfriendly regimes around the World, if 200 billion barrels of oil at $90 a barrel are recovered in the high plains the added wealth to the US economy would be $18 Trillion Dollars which would go a long way in stabilizing the US trade deficit and could cut the cost of oil in half in the long run.