Operation Re-Elect Bush

[Azat]

It seems like "Operation re-elect Bush" is in full swing now. We probably will have strikes on Baghdad within few days possibly within few hours. It is somewhat amazing to me that the US is going into this war somewhat alone. Yes Britain is in support and Spain and about a dozen other countries, but the only country with the 50+% of the population support outside of the US is Israel.

 

What is it that makes allies like Australia, and India and Germany and Turkey and ........ are against this war? Why is it that Americans are SO much in favor of this war? What proof do the American authorities have that convinces them that they have to go after Saddam that they have not shared with the leaders of other countries?

[Stormig]

What is it that makes these people oppose the war?

Some intellect, a few pints of decency, a brief knowledge of the scientific method and law (way to prove guilty and innocent until proven guilty), fear of terrorist attacks on their own land, and, most important of all, sickness of the U.S.'s banal ways, trying to teach people about their "right of defense" when you just have to look at the long list of countries transgressed against for much less than WMD. Oh, and not to add that the U.S. is going to be rocking the economy of the region for an unprovoked war. More than enough.

[MJ]

OK, Azat…

 

As meaningless as I think it is to be part of this discussion, let me provide you with a couple of insights, since I am sitting here and waiting for a call, and until I receive it, I am not much in the mood to do other work today.

 

First of all, 1 barrel is not equal to 40 gallons but 42. Second, the prices reflect not an instantaneous impact of crude oil prices (which you are referring to), but there is a time-lag due to the consequences of the storability of oil, the time required for processing it, and due to the time that will be required to build further inventories. Therefore, the price of gasolin is higher today because only few days ago the crude oil price was at $40 per barrel. That’s what is relevant – not what the crude prices are today. The lower crude oil price today, if sustained, and if the anxiety associated with the uncertainty goes down, will imply lower gasolin price in a while (a week or so).

 

However, your entire methodology of assessing profit margins is flawed, even if we assume that your numbers are accurate.

 

The thing is that your methodology assumes that the only cost of production is associated with the price of crude oil. However, it is far from being true. You have to add the cost of building refineries, or better to say the cost of financing of these refineries, the transportation costs, the maintenance cost, the cost of meeting the environmental requirements, salaries, and a whole host of other costs. When all these costs are taken into consideration, it will become evident that the oil industry profit margins are very small, and the money is made not from the size of the profit margins but from the volume of the consumed oil. Therefore, let me reiterate one more time that the insinuations of huge profit margins per unit volume of crude oil in this industry are highly baseless.

 

As far as the premise of your original material is concerned, I find it regrettable that you would tie the issue with the elections.

 

[ March 17, 2003, 01:17 PM: Message edited by: MJ ]

[Azat]

I said approximate.

 

I agree with all that you have said, but all that is also true when the price is at 24 dollars a barrel.(building refineries and all other costs) I know that profit margins are minuscule in the Oil industry. I also understand why prices are much higher in CA as compare to other states.

 

I was not concerned about the profit but more about the ratio. You possibly explained some of that by explaining the time constraints.

 

MJ, you know that I was just kidding about that. They have not found a good name for this war so far and "Operation re-elect Bush" was just a joke.

 

BTW: it is good to see you here. Where have you been hiding?

[MJ]

As I said, Azat, the prices are impacted from a whole host of factors - the anxiety (in professional circles it is called volatility) being one of the most significant. This is a complicated subject and I think not something warranted to be discussed on a professional level in Hye Forum.

 

Well, I guess I have also lost some of my sense of humor, since I have not detected your tone.

 

I have been around. Just don't see much substance in the latest round of discussions so that to be motivated to participate.

[Guest Fadi]

MJ, since you were gone(an me as well) for a long time, the one hour courses you own me per week has accumulated to a bunch of many hours. Where shall you start ?

[MJ]

Well, Domino, I have come to a conclusion that you are not a good student, and when left alone, you drift in all possible irrelevant directions. So, I am withdrawing my offer.

[Guest Fadi]

quote:

---

Originally posted by MJ:

quote:

---

Originally posted by Domino:

MJ, since you were gone(an me as well) for a long time, the one hour courses you own me per week has accumulated to a bunch of many hours. Where shall you start ?

---

Well, Domino, I have come to a conclusion that you are not a good student, and when left alone, you drift in all possible irrelevant directions. So, I am withdrawing my offer.

---

But thats the way a student such as me will find out a relevant direction, afterall, statistically speaking, there is much chances that in all my irrelevancies there is as least one relevancy.

[MJ]

Theoretically speaking - yes. But who has the patience to bear with all your irrelevant outcomes?

 

Also, what you said above, is sometimes paraphrased as, “the truth is found when all the stupid attempts are exhausted.”

 

But that is a very wasteful endeavor.

[Harut]

what are you talking about, Azat?

we have full support of the most powerful countries such as England, UK, and GB.

 

actully i heard this on your favorite station, NPR.

[Azat]

LOL. I had not heard that. I hope they were joking.

[Harut]

they were.

[Guest Fadi]

quote:

---

Originally posted by Azat:

LOL. I had not heard that. I hope they were joking.

---

If its an American radio station, then they were probably not jocking, considering American knowledge of worlds states. :-)

 

It reminds me when Bush was just elected president, a Canadian TV show interview has exposed him not knowing the Canadian prime Ministers name... few years later, he sent his toups to attack Iraq, I won't be surprised if, when asked, won't be able to place Iraq on the map.

[Azat]

I was just looking at the price of Oil and it is down to 32 a barrel. Yet I filled my car up(I know you guys are thinking that I am rich because I can afford to fill it up) at the local gas station and prices were higher then ever before.

 

I still do not understand why the price at the pump is not equally effected by the price of the barrel.

[Azat]

Domino, after US goes thru Iraq i don't think anyone would be able to find it on the map or on the globe. (just kidding of-course)

[Azat]

It seems like there are alliances being built. There is the west and then there is the US and UK combined. I hope we do not see "cold war" type of stuff after this war.

[MJ]

Azat, read this so that not to complain later.

 

 

U.S. Faces Summer Gasoline Crunch

 

 

NEW YORK — Time is running out for extra oil supplies expected from the OPEC cartel to hit U.S. shores and allow the world's biggest fuel consumer to smoothly build gasoline supplies before the summer driving season.

ot getting the supplies could leave the United States more dependent on imports than ever, at a time when the White House edges to the brink of war on Iraq and retail gasoline prices hit all-time highs, threatening the stuttering economy.

"The U.S. needs large slugs of extra oil to cope with the increase in (refinery) runs, stop the erosion of inventories and to begin to claw back some cover," JP Morgan said in a research note. "The U.S. oil market is undersupplied."

U.S. oil stockpiles have fallen below 270 million barrels, the government's suggested level for seamless operations, as supply disruptions from Venezuela and an unusually long, cold winter drained supplies.

Resulting inventories, near the lowest level since 1975, could prove a problem for U.S. suppliers, who tend to use the brief respite in consumer demand in the second quarter to refine more crude and build fuel stocks before summer.

"The main problem is that while global oil demand does indeed hit a minimum in (the second quarter), U.S. crude oil runs increase," said JP Morgan, meaning deeper declines in crude supply are likely if imports don't shoot higher.

The U.S. second-quarter increase in crude oil demand averaged roughly 1 million barrels per day in 2001 and 2002, and is expected to be even sharper this year as the industry struggles to buffer paper-thin inventories.

"There's potential for trouble," said Tim Evans, senior analyst at IFR-Pegasus. "Low crude inventories limit the extent to which higher refinery rates can be sustained. But the cavalry rising up over the hillside is represented by OPEC, which has already started pumping away."

OPEC, which accounts for 60 percent of world oil exports, has signaled it will defend against global short supply by increasing shipment volumes even as it declines to lift its official production curbs due to worries over overall weakness in global demand.

OPEC powerhouse Saudi Arabia has already raised production sharply in the first two months of this year to make up for lost Venezuelan supply. Tanker brokers said Friday the kingdom snapped up 14 tankers to move 29.5 million barrels of crude oil to the U.S. Gulf for May delivery.

So far, the increased production has yet to translate into higher U.S. crude stockpiles.

And, while Saudi Arabia has reassured the market that it will continue to pump more oil in the event of a war, there are doubts about whether Riyadh has enough spare capacity to compensate fully for disruptions from Iraq, which has a sustainable export capacity of 2.2 million bpd.

The International Energy Agency in a monthly report on the oil market outlook released Wednesday estimated that OPEC in total has only 900,000 bpd to spare, with 400,000 bpd in Saudi Arabia.

If crude becomes scarce enough to hinder the U.S. oil industry's attempt to build up gasoline supplies before summer, pump prices will likely continue to surge, pushing through record levels.

The average retail price of gasoline in the United States on Saturday was $1.719 a gallon, a new all-time high, according to the American Automobile Association's latest survey.

The U.S. inventory situation has worried the White House enough to consider tapping the Strategic Petroleum Reserve -- something reserved for only the most dire supply crunches.

U.S. Energy Secretary Spencer Abraham said Friday Washington reserved the right to make a unilateral release of crude from the emergency reserve in the event of a severe supply disruption. The statement came after a similar comment from Japan, which said it would tap its reserve if Iraq is invaded by U.S.-led forces.

Sen. Jeff Bingaman, the top Democrat on the Senate Energy Committee, urged the Bush administration on Monday to immediately begin releasing up to 750,000 barrels of oil a day from the reserve until fresh OPEC supplies arrive. Oil from the Middle East takes about 45 days to reach the U.S. market. "This modest release would complement and not compete with the oil that is heading this way," Bingaman said. "We will be helping to prevent a gasoline supply shortage and further price spikes," he said.

 

http://www.foxnews.com/story/0,2933,81305,00.html

[Azat]

Thanks for the note. But I am still going to complain. It's in my soul.

[Azat]

I had to refinance my house to pay my bill for Unocal 76 this week.

 

MJ if I may ask one more question.

 

Today the price for a barrel of oil was 26 and change(I think) and the gas at my local Unocal was $2.33 for premium grade.

 

I understand you explanation about why prices take a while to come down and all that. But how come prices take only days(sometimes hours) to go up at the pump when the oil price goes up?

[MJ]

There may be several reasons, Azat. In an article that I posted yesterday, I think I had provided some arguments about the skepticism of the market towards being able to adequately build inventories. In reality, the market expects only bad news as far as the gasoline is concerned. The price of gasoline depends not only on the crude oil price, but also on few additional factors. Every now and then, it happens that the crude oil prices will go down, but the gasoline prices still would go up. This is primarily related to the lack of sufficient refining capacity. In the last 30 years or so, there have been no new refineries built in USA. In the summer time, primarily, the refineries start operating at a full capacity and may not be sufficient enough to meet the demand. Especially, sometimes one or two refineries may go down (last year there were fires, for example), and then you would have a huge problem. This is all in general.

 

As far as your concrete question is concerned, one possible explanation is that the market reacts to bad news quicker than to good news.

 

It is a public information that the crude oil inventories are at a historic low levels in US. Therefore, even if the crude prices go down for the next month, it will take a while to fill the storage facilities. Therefore, the gasoline prices still may stay at a high level. I think you should not expect significantly lower gasolin prices till the end of the summer, while the crude oil prices may continue to go down.

 

Sorry, it is a late hour, and I am a little tired.

[Azat]

 

I think I need to get me a bike. I can't afford to drive much even on a programmer salary.

[MJ]

You may also consider moving to NY. Then, you can use the train system.

[Azat]

True, but then who can afford an apartment in Manhattan?

[MJ]

It is true that real estate in Manhattan is very expensive. But one can live at much lower cost outside Manhattan and commute to work for about 25-45 minutes.

 

Besides, the compensation in New York is also higher then elsewhere, and a cost of living adjustment is built in the employment packages.

[khodja]

Jersey City (Frank Sinatra's once blue-collar hometown), Hoboken and Union City (where destitute Armenian immigrants settled) are now becoming affordable upper-class commuter suburbs of New York City. Just a short hop across the Hudson River.