What Does it Cost to Fill'er Up in Places where Oil is Publicly Owned? Guess Who Fixes Oil Prices?

[FourScore]

Thu Mar 08, 2012 at 06:34 PM PST
What Does it Cost to Fill'er Up in Places where Oil is Publicly Owned? Guess Who Fixes Oil Prices
by Pluto

If a nation has NO domestic oil wells, the people must pay top dollar at the pump -- a cost that reflects the spot price of crude oil on any given day in the commodities market. This is the case for much of Europe. (Norway, with the highest standard of living in the world, is a notable exception and belongs with the next group.)

But it's a whole lot different for those lucky nations that DO have oil. These nations generally export much of their oil -- which produces significant profits for them. These profits let them subsidize fuel costs domestically, which is a direct wealth transfer to the people. Furthermore, oil export profits are generally invested in additional domestic exploration, energy resource diversification, and economic development -- in the form of infrastructure investment, public and private enterprise investments, free higher education, and social security. Nations that produce but do not export still achieve increased revenues through nationalization, which comes from the price spread between real non-profit costs and global spot prices.

That's pretty much the way the world works for 93 percent of the oil produced in nations where oil is nationalized.

It doesn't sound familiar, huh?

That's because the US, unfortunately, is part of the seven percent where oil is NOT nationalized. None of America's natural resources are nationalized or included in the commonwealth, by design. Thus, these resources can be exploited by privately-owned for-profit companies. In the case of oil, the US sees comparatively "token" revenues through its leases. It earns more revenue by taxing the American people to use their own resources at top dollar. We pay that tax when we fill up our gas tanks.

And, wow! Talk about sticker shock...

SNIP

...So, regardless of how much we drill, baby, drill -- the American people will realize absolutely no benefit at the pump. The oil we are buying does not belong to us in any way...

SNIP

...Let's head out on a global shopping trip and see which oil-producing countries are offering the best prices at the pump today. And along the way, I'll share the real story of how and why oil prices go up and down -- and exactly who is behind it.

Climb in....

10. Venezuela -- $0.18 per gallon.

SNIP

9. Saudi Arabia -- $0.48 per gallon.

SNIP

8. Libya -- $0.54 per gallon.

http://www.dailykos.com/story/2012/03/08/1072547/-What-Does-it-Cost-to-Fill-er-Up-in-Places-where-Oil-is-Publicly-Owned-Guess-Who-s-Fixes-Oil-Prices-?via=siderec

[Scuba]

1. Thanks for this important post. If the Republicans are screaming for Obama to do something...

... then the obvious answer is to nationalize our "extraction" resources.



Or at least jack up the royalty fees. I understand we get a small fraction of what Norway gets per barrel.

[WingDinger]

3. I giggle every time Oreilly calls for nationalizing the oil industry.

[lacrew]

4. Norway gets 74%

The US Royalty varies, but the very low end is 40%.

These are based on revenue, not profit.

Looking at the top 3, Exxon, Chevron, and Conoco, the total revenue last year was $888 billion...meaning a low end US royalty collection of $355 billion....or a full month of federal spending.

To bring it up to 74%, would at most bring in an additional $165 billion, or 16 days of federal spending.

Or we could look at the $165 billion, and see what it would do to reduce gas prices, if it were all dedicated to that purpose....it would reduce gas prices by $1.17 per gallon.

Or we could look at it through the prism of profits, which were $20 billion for the top 3. I don't know if companies making $20 in profit could pay an additional $165 in royalty...so that type of royalty would put them out of business...highlighting the fact that their cost of doing business is much more than it is in other places.

[lacrew]

2. 18 cents a gallon is less than extraction costs

The article goes on to describe how profits from exports subsidize their own usage.

In order for this to work, it seems you must export at least as much as you use.

Lets look at the top 3 oil companies, and their 2011 profit (ignoring that most of the profit was domestic, and not export).

Exxon: $10.7 billion
Chevron: $6.2 billion
Cononc: $3 billion

Impressive numbers. Totals to $19.9 billion

But what if those profits were used to subsidize our driving? We use around 140 billion gallons a year.

Well, we could reduce gas costs by 14 cents a gallon.

Why doesn't this work here? We aren't an oil state.

[Bluenorthwest]

6. The US is actually the world's #3 oil producer, after Russia and the Saudi Kingdom.

So.....

[lacrew]

9. So....

We still don't export enough oil to become an 'oil state' and have an economy predicated on oil revenue. It wouldn't matter if we were the number one producer...without looking at our consumption.

Go ahead, nationalize their profits, and enjoy the 14 cent discount on gasoline. We still won't be at Saudi price levels will we? Can you see how that works? (hint: Saudi Arabi has 8% our population, uses 13% of the amount of oil we do, and produces 12% more oil than we do).

As long as there is oil in the world easier to extract than our own (i.e. forever), we will never be a major exporter of oil...and will NEVER be able to become a one commodity society, reliant on oil revenue.

Sorry to burst your bubble.

[bhikkhu]

11. If it were 14 cents a gallon...

There'd be a whole lot more driving going on, mpg would be almost irrelevant - it would be all v8's, v12's, whatever, sucking gas for all they're worth. Horsepower would be the name of the game, and the vehicles would get bigger and bigger.

Which would lead to a problem fairly soon - in that oil production depends on having oil in the first place, and what we have is very limited. We'd run through it at record pace, with no signals of trouble from the market, until everything was gone but the stuff we couldn't afford to produce.

Then, I'm sure we'd vote some batch of people out of office, and vote some other batch in who couldn't fix a darn thing.

I think the price now primarily reflects the scarcity of the product, and the cost of extracting what remains. High prices should drive us to find alternatives, rather than try to rejigger the market for the sake of one brief last free-ride.

[DippyDem]

5. Ok interesting info but can someone explain

how that works when US collects royalties and turns around and subsidizes the oil companies? Isn't that giving money back to them? Or am I confused?

[bvar22]

7. The great majority of Americans have absolutely NO idea how the rest of the World operates,

...and the 1% like to keep it that way.

Did you know that the term "Medical Bankruptcy" is unknown in the civilized World?



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[Spider Jerusalem]

8. Hello, amazing economic ignorance.

The US exports almost no crude oil, and domestic demand is nearly three times domestic supply (still more than double when biofuels, natural gas liquids, and refinery gains are taken into account). Venezuela, Saudi Arabia, and Libya are net exporters; they produce much more oil than they use. The US imports over half its oil and as such you can nationalise US oil and it won't matter; the price of oil and thus of refined products is still going to be largely determined by the world market price the US will have to pay for the ten million plus barrels a day of demand it can't meet with domestic supplies.

[thesquanderer]

10. The U.S. currently exports more gasoline than it imports

http://content.usatoday.com/communities/ondeadline/post/2012/02/us-exported-more-gasoline-than-imported-last-year/1#.T1qxK5iXRk8

[bhikkhu]

12. ...but it has to import the oil to refine that gasoline.

Diesel was more traditionally what we exported, as it was produced at a fixed ration to gasoline in the refining process, and much more in demand overseas than here.

In any case, exports are good for the economy as offsets against imports. The price of gas isn't going down, as the break-even point for oil production has increased steadily over the years (it is more geologically determined than anything else), and there is about zero chance of that changing.

[Spider Jerusalem]

13. Gasoline is not oil.

The US imports more oil than it produces.

[thesquanderer]

14. True, but...

this thread is about the cost of gasoline. We are net exporters of gasoline, meaning that some of the U.S.'s higher cost of oil compared to some other countries is somewhat offset by the relatively low cost in the U.S. of turning it into gasoline.

[Spider Jerusalem]

15. This thread is about subsidised pricing in countries that are net oil exporters.

Which the US is not. And most of that gasoline that's exported is refined from imported oil, not domestic oil. The US is only a "net exporter" of gasoline because the US imports very very little gasoline, it imports crude oil which is then refined. Week ending 2 March, total imports, 8.7 million barrels per day of crude oil, 127K barrels per day of finished gasoline. Exports, 616K barrels per day of finished gasoline and over 1 million barrels per day of diesel (which is still the bulk of US fuel exports because there's greater demand abroad). See here: http://www.eia.gov/dnav/pet/pet_move_wkly_dc_nus-z00_mbblpd_w.htm