POST SCRIPTS

As I noted early in "comments," Lee Raymond, Exxon's former CEO, took a fat $400 mil bonus gift for his retirement. Never mind the one billion in salary since 1993. If he is overcompensated, then stockholders can blame the board of directors, they are the watchdogs for investors, but wait...Lee Raymond appointed most of them?

Raymonds case is not all that unusual, oil company CEO's and the executives at the largest oil companies, Exxon-Mobil, Chevron Texaco, Shell, Conoco Phillips and BP, (we call them the BIG FIVE) have been really raking it in thanks to your generousity at the pump. So what's a little $400 mil going away present, there's plenty more where that came from and it's sitting right in your pockets.
Oil company profits went up on average about 75% in 05 and that would be great except it had less to do with the normal forces of supply and demand and good ethical leadership than outrageous price manipulation.

Speaking of supply and demand, gasoline supplies are at an eight year high, says OPEC. And this has more than matched consumption, even taking into consideration China and India.

****"Predatory capitalism" or just good business?****

The members of the exclusive Big 5 Oil Club probably smile all the way to the bank when disaster strikes, be it a refinery fire or war fears, anything that threatens the free flow of oil or impedes the production of gasoline causes retail gasoline prices to rise faster than you can say, bend over.

These crisis' are golden opportunities to exploit. They (oil bosses) instantly send out orders to raise prices at the pump, even though this is gas manufactured under a total different set of circumstances and costs. This is how "gasoline in the ground" at your local station gets near instant price hikes as a refinery fire in Texas or a skirmish in Iraq happens and nobody in government seems bothered by this practice. But, let one hotel chain raise prices for victims fleeing a hurricane and government decends on them like an avenging eagle!

But, what if no good excuse to raise prices is available? Well, there is an unstable group of people who make a good living buying and selling oil "futures" on the world commodity market and by the mere hint of a ripple in the smooth flow of oil, they often panic and drive up prices through speculation and that helps big oil too.

Is big oil ever guilty of helping these speculators yank the market around? Good question, one that only government inquiry could really know for sure. But, if they did, it might go something like this, say a major refinery shuts down for a problem or a safety inspection and the boss says lets not get to quick to get back on line, so it takes longer than expected, this minimally slows production, but it has an exaggerated effect with the ol "greed and panic" boys doing the oil speculating. That's all that is needed to cause commodity speculators to run up spot price of crude and gasoline "futures" and we know it happens, but the precise reasons are a little fuzzy and that's the way the oil companies like it.

Oh, this is a great business to be in, they hold all the good cards. But, don't y-o-u plan on creating your own oil company, because even if you had the mega-bucks it would take, those doors are closed on so many levels you don't stand a chance. Big government is their willing accomplice (some might say dupes) via helpful government regulations which obstructs competition. In this case government is not your friend (are they ever?). Yep, as usual government is part of the problem, not the solution. Did you know since 1981, government has increased gasoline taxes 43.9%? That translates to an additional 45.9 centsfor every gallon you buy at the pump today. There's your government help!

I could spend pages on dumb government and their oil connection, but it comes down to the influence and access money buys (mostly through campaign donations to key legislators). Public records indicate between 2000 and 2004, the oil and gas industry poured more than $75 million into political campaigns...that's a lot of influence buying...gee and you wonder why government doesn't investigate price gouging in the oil business?

As DHB articulated in his post, 20 gallons of gasoline can be produced from one 42 gallon barrel of oil and if I may add, as a bonus they also get 10 gallons of diesel or heating oil. But, wait! There's more (as the TV ads say), they also get 4 gallons of jet fuel, 1.7 gallons of heavy oil and 1.7 gallons of liquefied natural gas LPG. So a 42 gallon barrel of crude oil actually "supplies 44 gallons of petroleum products. This gain from processing the crude oil is similar to what happens to popcorn, it gets bigger after it is popped." The total return from the barrel is about $108 and that is about 32% profit, if they had to buy the oil from someone else for $74, if not, well, thats why they call it black gold.

Obviously, the profit from one barrel of oil, no matter who's stats you use, is still substantial or they would not have those hundreds of billions in corporate profits hanging around after paying the Execs their bonuses and billions in wages.

Unfortunately, since oil is a key economic indicator, this sort of corporate profiteering will eventually translate to significant inflation when thing go bad, as they are now.

Have you ever wondered why up till just the last decade diesel was always the lowest priced fuel and now it sells for as much and sometimes more than premium gasoline? I have, remember diesel is a bi-product of gasoline, so what has changed to make it cost more than regular? The answer is not that much. Mostly the price is top dollar because they can charge "top dollar". This is a bit too predatory for me and it reminds me this is how a monopoly works. The normal market forces have ceases to function as they should when an industry is dominated by too few big companies. It makes it too easy to work in concert, without really (technically) working in concert, if you know what I mean?

Last year we brought you a story about a slip up by one of the refinery CEO's at a gasloine producers convention. Its seems when he told members they had a good thing going and not to be too anxious to raise production, he thought ALL the media had left their room, but one hadn't and so that insider's comments went right into the media and created a minor scandal until the spin doctors did their work and the "influence money" kicked in and it was all fogotten.

****This is what we, the consumers, are up against and it's not a fair fight.****

As if it could get any worse... Citgo is one of the USA's largest refiners, but did you know it's a subsidiary of Venezuela's state-owned oil company, Petroleos de Venezuela S.A. (PDVSA)? This means it basically belongs to Venezuelan Communist leader, Hugo Chávez, one of Castro's closest friends and ally. Venezuela's owns and controls about 6% of the total U.S. refinery capacity and that makes for more instability in our oil supply, a good thing for the "Big 5" and a bad thing for you. This is the cost of being addicted to oil; we have to deal with a lot of unsavory characters, from oil princes to baby killers in Africa and we will continue this relationship and be at their whims until the game changes.

By the way, I didn't lay into OPEC for charging $74 a barrel, because you already know all you need to about those greedy guys, but they are from being let off the hook and they need to have their day of reckoning too.

There are reasonable alternative fuels. Hydrogen has great promise, but at the moment trying to store hydrogen is like trying to wrap marbles with a tennis net, those little hydrogen molecules keep slipping through their containers, but the solution may be close. Next, enthanol, it has its down side, but it works and it may be a decent stop gap measure for now. I know there is at least one South American country that is now completely self sufficient on sugar based fuel, so there are options and I hope as these fuel spikes occur, it motivates us to free ourselves from these unholy alliances with unreliable sources of oil. Till, then a government that really keeps a close eye on fairness and equitable regulatory adherance for consumers would be a nice change of pace.

And before I close, may I suggest... that perhaps it's time for our government to take a look at breaking up some of these mega-mergers that have resulted in too few oil companies and force at least two new refineries to be built for national security. We have too few refineries and that means if any one was knocked out by an attack, it could be a real economic disaster. And that's just what our enemies want; so why should we make it easy for them and besides it would help keep pump prices down...a win, win!

Well, there it is and don't forget to do your part and drive less and avoid the gas guzzlers, that will help bring down gas prices too!