$100 A Barrel Oil is on the Way

#179
#179
So someone makes a profit and you are not in favor? Or it is the amount? What would be your target profit the oil companies should shoot for?
 
#180
#180
oklavol said:
1 Billion dollars is low margin to you? Is 18 billion?
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Margin is based on unit price less unit costs x units sold.

The total dollar amount tells you nothing about the profit percentage - which is the basis for your argument (returning the profit percentage to consumers).

For example - US customers consume 142 billion gallons of gas per year. At $3/gallon that's $426 billion spent on gas - take out the $18 billion and gas prices drop about 13 cents.

Total profits look big because volume is huge.
 
#181
#181
volinbham said:
I'm still trying to figure out how they came up with this number.

If a refinery clears $39 a barrel then the must charge more - let's say $50.

Assuming crude goes for $80 a barrel (and leaving out the markup) we are at $130 of costs in a barrel.

A barrel of oil yields about 20 gallons of gas (after refining).

If these numbers are correct, gas would be selling for $6.50 per gallon. Clearly it's not.

Most sources claim refining adds a total of about 20% or so to the cost of a gallon of gas.

The fact that margins doubled is consistent with a large jump in the price of raw materials (price of oil).
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Doesn't your suggested $6.50 value imply that gasoline is the only product of value from the oil when refined? Obviously, that isn't true - and while some of the volume is worthless, much of the remaining volume can be sold as end-products or feedstocks...
 
#182
#182
TennTradition said:
Doesn't your suggested $6.50 value imply that gasoline is the only product of value from the oil when refined? Obviously, that isn't true - and while some of the volume is worthless, much of the remaining volume can be sold as end-products or feedstocks...
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If refineries are somehow generating large amounts of profits from by-products of the refining process then the issue of their profit inflating gas prices is moot.

My assumption is that crude is selling at $80. I don't know if that is the price a refinery pays or if there is some markup since that is the out of the ground price.

There are plenty of assumptions here but the notion that $39 per barrel is profit at the refinery level doesn't hold given the range of % of the price/gallon (range from low single digits to a high of about 28%). Even at the high and assuming a 20 gallon yield (an assumption based on some DOE info) the numbers don't add up given gas prices in the $3 range.

Using the DoE info on % of price/gallon of gas accounted for by refining costs and profit continually yields the same conclusion - anywhere from low single digits to mid-teens cents on a gallon of gas are refinery profits. The same result occurs if you examine Oklavols document vs gasoline consumption. By in large, the biggest factor in gas prices is and has been the price of oil - something Big Oil doesn't control. Eliminating refinery profits (which I maintain is impossible) would have a very limited impact.
 
#183
#183
I was just glancing at your numbers and noticed that the $6.50 value was derived from $130/20, thus my point. I agree with your comment about the argument with refineries inflating cost of gasoline being a moot point if gasoline is a minority of their sales. I doubt, however, that gasoline is a minority ... I'm just not sure what fraction it is. Other sales would be LPG, diesel, and chemicals like benzene. I would say a fair amount of the sales are in LPG and diesel; however, gasoline has to be a big moneymaker.

My comment was made less in the context of the rest of the discussion and more in just noticing the math and pointing out the implied but unstated assumption (that's what they pay me to do :) ).
 
#184
#184
I did find this data on the breakdown of summer demand for crude oil distillates:

Light Gases (e.g., LPG): 3.6%
Gasoline: 32%
Kerosene: 12%
Diesel: 17%
Residue: 20%
Bitumen: 15.4%

You will likely notice that 32% of 42 gallons is not 20 gallons. However, I think that this is because these breakdowns only represent straight distillation, not secondary processes like catalytic cracking to make gasoline out of some of the heavier products (at least, that is my guess).
 
#185
#185
I saw a conversion chart claiming about 20 gallons per barrel going to gasoline. I assumed that was a yield issue - meaning a barrel could only yield 20 gallons of gasoline.
 
#186
#186
volinbham said:
I saw a conversion chart claiming about 20 gallons per barrel going to gasoline. I assumed that was a yield issue - meaning a barrel could only yield 20 gallons of gasoline.
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I think that you're right about the 20 gallons of gasoline from a barrel of crude oil, volinbham. As I understand it, the distillation of crude oil gives you about 15 gallons of gasoline (carbon chains of length around 6 to 8). You also get some heaver carbon chains that can be catalytically cracked down to the gasoline range. I believe it is this sum that would give you the 20 gallons that is often cited (I have seen that number elsewhere). I think that crude oil has carbon chains of length around 2-3 (LPG), through gasoline, and diesel, up to carbon chains much longer (say 20 or more carbons). The refining process will result in all of these as products that can be sold (if there is a market, of course).
 
#187
#187
TennTradition said:
I think that you're right about the 20 gallons of gasoline from a barrel of crude oil, volinbham. As I understand it, the distillation of crude oil gives you about 15 gallons of gasoline (carbon chains of length around 6 to 8). You also get some heaver carbon chains that can be catalytically cracked down to the gasoline range. I believe it is this sum that would give you the 20 gallons that is often cited (I have seen that number elsewhere). I think that crude oil has carbon chains of length around 2-3 (LPG), through gasoline, and diesel, up to carbon chains much longer (say 20 or more carbons). The refining process will result in all of these as products that can be sold (if there is a market, of course).
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Great info and points TennTradition
 
#190
#190
wish I had some spare cash laying around, I'd invest in some oil futures.
 
#191
#191
I have been a very happy shareholder of (XOM) for the past 4 yrs. The $$$ this company makes just blows my mind.
 
#192
#192
myrobbins7 said:
I have been a very happy shareholder of (XOM) for the past 4 yrs. The $$$ this company makes just blows my mind.
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Be quiet - you're letting out the secret. Only the CEO makes money....

No one's 401K is invested in Exxon -- only the CEO.
 
#195
#195
06.04.25.GasFumes-X.gif
 
#196
#196
volinbham said:
Be quiet - you're letting out the secret. Only the CEO makes money....

No one's 401K is invested in Exxon -- only the CEO.
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what do you suggest we do for transportation when we begin to feel we are being price gouged? Start riding bicycles to work? horses?
 
#198
#198
oklavol said:
what do you suggest we do for transportation when we begin to feel we are being price gouged? Start riding bicycles to work? horses?
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2nd job maybe. less time on the internet and more time earning cash. then you could easily pay for your gas and donate to research alternative fuel sources.

otherwise, ride your bike, move within walking distance, levitate, take your warp driven Jetson wagon, make some Flintstone style footholes in your current rig, retire, protest, practice siphoning from neighbors, get a new flux capacitor that operates on garbage. goodness gracious, look at all the options. I had no idea until I really thought about it.

I'm for buying fuel at the price the heavily regulated market sets.
 
#199
#199
BigPapaVol said:
2nd job maybe. less time on the internet and more time earning cash. then you could easily pay for your gas and donate to research alternative fuel sources.

otherwise, ride your bike, move within walking distance, levitate, take your warp driven Jetson wagon, make some Flintstone style footholes in your current rig, retire, protest, practice siphoning from neighbors, get a new flux capacitor that operates on garbage. goodness gracious, look at all the options. I had no idea until I really thought about it.

I'm for buying fuel at the price the heavily regulated market sets.
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Bbecause I think the oil companies are overcharging the consumer doesn't mean I have to work 2 jobs to pay for it. So you don't have to thumb your nose down because you think it hurts me financially.

The fact I have the money to pay higher fuel prices doesn't mean I am going turn a blind eye to those who don't.
 
#200
#200
oklavol said:
Bbecause I think the oil companies are overcharging the consumer doesn't mean I have to work 2 jobs to pay for it. So you don't have to thumb your nose down because you think it hurts me financially.

The fact I have the money to pay higher fuel prices doesn't mean I am going turn a blind eye to those who don't.
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the supply v demand argument just hasn't ever worked for you. I don't get it. You want oil to be a government supplied or overregulated commodity. How does that make any sense?

The day the market stops buying oil at the price being asked is the day that the oil companies have to find a way to make it cheaper. It's no secret that they operate off of a fixed %. As oil gets more expensive, they make more gross profit. Asking them to arbitrarily lower their spread is effectively socialism.
 
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