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how the oil companies feel about diesel owners

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The guy that lives across the street from me used to be a trucker and is looking into buying his own truck now. I expressed concern over the high cost of fuel and he said he was already offered a contract with a company that had locked in fuel prices at $1. 60/gallon! Can this be true? If so, this is another example of the everyday average citizen getting shafted in order to line the pockets of big business. Maybe if he does start trucking I can siphon fuel out of his tanks for $2 a gallon!

Danny
 
BErmoyan said:



I don't care how fast India and China's need for fuel is growing. They can't afford to pay a fraction of the price we pay for fuel, and the companies can't be making their big dollars there.



It is important to remember that in many of the developing economies, such as China and India, fuel prices are controlled and/or subsidized by the government. China for example is a Communist nation with much central pricing control, which insulates them to a degree from fluctuations in price.



Below are some interesting links to information about the increased demand overseas. I have excerpted some info and highlited some portions for emphasis:



http://www.chinadaily.com.cn/english/doc/2005-10/30/content_488808.htm



China to reform oil pricing mechanism

(Agencies)

Updated: 2005-10-30 09:03



BEIJING -- China will reform its long-debated oil pricing mechanism by making the prices of its processed oil more responsive to the global oil price fluctuation, said a senior official here Friday.

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China long set the price of processed oil based on the average price of oil products in the Singapore, Rotterdam and New York markets. However, as the government only adjusts the price of oil products when the international price changes enough, the final price is not only too sluggish for the market but also transparent enough for speculating activities.



Some folks looking at the Chinese fuel demand say the numbers don't add up. It is interesting that the article below from August mentions "either users will be forced to pay the real cost of fuel", and by the end of October the Chinese government was moving to (possibly) relax controls.



http://www.econbrowser.com/archives/2005/08/more_to_the_sto.html



August 15, 2005

More to the story on Chinese oil demand

As more facts come out about Chinese oil demand, the more fascinating the picture becomes.



I earlier admitted to being puzzled by the conflicting statistics and forecasts coming out of China. Chief among the questions here are: (1) how could Chinese oil demand have grown 17% in 2004 despite a 35% increase in the price of crude oil; (2) how could this demand growth suddenly be reduced to a 1. 4% growth rate in the first half of 2005 despite real output growth continuing at 9. 5%; and (3) what do these trends imply is going to happen to Chinese oil demand over the next year?



The Oil Drum notes this account from Petroleum World that connects the dots in a way that makes a great deal of sense:



The picture that emerges from careful reading of the IEA reports over many months is of a country that is heavily subsidizing huge growth in demand for oil to feed the insatiable Chinese economy -- and this has led the IEA to some surprising figures in the August report.



The IEA estimates that at the beginning of July suppliers to the Chinese domestic market were losing 20 dollars per barrel or more on every barrel of gasoil supplied.

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Whatever that means, it doesn't sound like supply equals demand, and the remarkable photo at the right (hat tip: the Oil Drum) doesn't much look like supply equals demand.

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Other reports of rationing and losses by China's petroleum refiners reinforce Petroleum World's inference.



None of this sounds to me like an economy that is capable of sustaining 10% growth in real output. Either users will be forced to pay the real cost of fuel, or economic growth will come to a grinding halt. Either way, this does not look like a country whose petroleum demand can continue to grow at anything like the rates that we have seen over the last two years.



China has been investing significant cash to develop alternative fuels technology to help with their fuel demand crunch, including coal-to-fuel processes licensed from American companies, based on DOE "clean coal" research. The Chinese are no doubt appreciative of the US Taxpayer funding research that helps them out :-laf



http://www.findarticles.com/p/articles/mi_m0CYH/is_15_6/ai_89924477



Ultra-clean fuels from coal liquefaction: China about to launch big projects



Pending final government approvals, Shenhua Group -- China's largest coal producer -- just announced it aims to build a 50,000 barrels/day refinery to make ultra-low sulfur diesel and gasoline from direct coal liquefaction .



The $2 billion plant , to be built adjacent to coal mines at Majata, Inner Mongolia, will use coal liquefaction technology developed by U. S. -based Hydrocarbon Technologies Inc. , (HTI) a division of coal-synfuels developer, Headwaters.



HTI developed the process in part with U. S. Department of Energy "clean-coal" liquefaction research in recent years, HTI president L. K. Lee told us in an interview. Shenhua spent the last five years evaluating technology options from vendors and conducting feasibility studies, before signing technology licenses with HTI last week.



Assuming that the Chinese government grants final approval, construction of Shenhua's first reactor train would start in early 2003, followed by plant start-up in 2005. A total of three licensed reactor trains would process about 12,800 tons/day of the local coal.



Finally, it is interesting to read a European perspective on the impact of China / India demand on the fuel situation world-wide:



http://www.total.com/en/group/news/news_2005/051026_fuel_prices_8062.htm?template=print.htm



An interview with Jean-Paul Vettier – President, Refining-Marketing, Total



1. As President of Refining-Marketing, what is your message about fuel prices?

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In the face of mounting oil prices, the French government recently demanded that oil companies lower their prices at the pump. How much leeway to oil companies really have to cushion the price hike?



It's quite simple; the room for manoeuvre is practically zero!



To start with, the increase in oil prices is an international phenomenon driven by booming demand in Asia, especially China and India, and made worse by the aftermath of Hurricanes Katrina and Rita, which took out more than 15% of total American refining capacity.



Secondly, France is the market with pretax prices among the lowest and margins long recognized as the weakest in Europe. An oil company has an average operating margin of around one euro cent per litre of motor fuel! And it's now widely understood that in Europe, the French state levies the highest fuel taxes (a position recently shared with the United Kingdom). So, if you want to talk about lowering fuel prices, you know where to look.

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2. What has Total done to deal with Europe's diesel deficit and the United States' unending demand for oil products?



For more than 10 years, Total has been warning politicians that very rapid production of diesel engines is leading us down a dead end. And the problem isn't going to be resolved quickly, because the real growth in the use of diesel engines wouldn't have been possible and would still be difficult had there not been tax incentives.



The deficit of diesel fuel is in fact a European phenomenon that is now spreading to the United States. so now we have both regions competing to import diesel fuel.

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For all these reasons, it's pretty easy to predict that barring a major economic upheaval in Asia, fuel prices will remain high over the next five years due to strong demand, insufficient refining capacity in the United States and the limited ability of European refineries to supply the demand for diesel. On this last point, contrary to what the United States has said and to what you may hear or read, Europe has sufficient refining capacity. However, the lack of balance between supply and demand for gasoline, diesel/jet and heavy fuel oil has led to the afore-mentioned problems of adaptation.



We often forget that American standards of business do not always apply overseas. Governments like China can exert enormous influence over the pricing and distribution of goods and raw materials, and if they ever got into a big financial crunch they could nationalize portions of industry overnight, taking all those trillions of foreign investment $$$ right down to the local Chinese bank and leaving the American investors to cry to Uncle Sam for a bailout. Unlike other nationalization scenarios that have played out in the past, the Chinese could actually get away with because of their huge technical and scientific infrastructure - in most Bananastan scenarios the nationalized industries quickly decay away due to lack of support and maintenance, in China this would be tremendously unlikely. The Chinese also enjoy a huge pool of liquid capital thanks to their heavy investment in USG debt.



Many in America like to view the Chinese market as a developing microcosm of the American one, but this is far from a true picture. With their Communist government, the demand and pricing fluctuation that we see could EASILY be manipulated contrary to the interests of the United States - they are, after all, still a stated enemy of our nation. Only time will tell whether our lust for cheap Chinese goods will turn out to be a positive influence on China, or something that will come back to bite us all in the butt. Yesterday even with diesel down to $2. 79 at the local stations, I thought I felt some teeth clenching on my hams... but maybe I was mistaken! :-laf :-laf
 
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Wow Mike, thanks for the clear up, you really did some research there. It's really frustrating to read that though. What we need to do is get on that Biodiesel case, and start paying our farmers salaries instead of someone's form a foreign country. All the buses at my school run on Biodiesel(Univ. of Colorado) and seem to work great, how long till we start seeing it in our trucks and will we be 100% confident it won't ruin our engines?
 
"The $2 billion plant , to be built adjacent to coal mines at Majata, Inner Mongolia, will use coal liquefaction technology developed by U. S. -based Hydrocarbon Technologies Inc. , (HTI) a division of coal-synfuels developer, Headwaters. "



"Pending final government approvals, Shenhua Group -- China's largest coal producer -- just announced it aims to build a 50,000 barrels/day refinery to make ultra-low sulfur diesel and gasoline from direct coal liquefaction . "





In another energy related thread, I pointed out that if only *15-20%* of the last reported oil company bottom line profit was required to be reinvested into development/production of altenative fuels in our own country, great strides would be made to cut back our dependency upon foreign oil. The combined reported oil profits was about 15+ BILLION dollars as I recall so that would allow perhaps *2* coal liquification plants like those above within our OWN borders if that 2% profit reinvestment was a reality, and 100,000 barrels a day NOT coming from OPEC...



Why do ya suppose it ISN'T a reality? ;) :D
 
Mike Ellis said:
From Speedway:







From BP:







We have had many threads on the forums where we discussed the probable outcome of America's current fad for offshoring / outsourcing jobs and manufacturing to China, India, etc. When we buy their products, we are building THEIR economy and infrastructure to the point that they compete with us for scarce resources like oil, diesel, steel, etc.



We, the American consumers, are directly responsible for a good part of the increase in fuel costs. As long as we continue to support the overseas economies at the expense of our own, we will be hostage to the forces of supply and demand in a market that WE created. The oil companies are only doing what the American consumer has told them to do: "Sell the Chinese more diesel so they can keep manufacturing cheap products for us!"





This really sums it up Mike. We flock to massive retail stores and buy goods made overseas and wonder why the world’s resources ore going to these fast growing economies. Not only are good manufacturing jobs going overseas, but also so is our independence in the world arena. I have posted this link before. http://www.usstuff.com/



If we could all spend as much time considering the consequence of what we buy as we spend earning the money we are spending we could make much more difference than letter writing or griping. If we like being puppets enriching foreigners we can continue ignoring our own people and continue to support others by spending our hard earned money building our competitions camp.



Mike Ellis said:
Buy American, employ American, keep our country strong.
Thought that was worth repeating. Think I will add that to my sig
 
"Buy American, employ American, keep our country strong. "



On the surface, the above sounds stirring and grand - but in reality and point of fact, much of it is either impossible or impractical - a situation largely created outside our control in smoke-filled back rooms!



Today's world is where Chevrolets are made in Canada, and Toyotas are made in California - and even the vehicles that ARE still made here, contain high percentages of foreign made components. Where did the tires come from on your new truck? Who made the sound system? Was the engine made in the US, Mexico, or maybe Brazil?



If you want to buy a new TV or stereo, which American brand will you choose - or most household appliances for that matter...



Take the foreign content out of any vehicle on our roads today, and most - maybe all - would be halted in their tracks! Take the foreign-made construction tools from the construction sites, and they would instantly fall silent...



Beginning to get the picture?



And no, NONE of it was done by our direct vote, or with our permission - we were simply sold out by those supposedly representing our "best interests" with acronyms like "NAFTA" and "GATT". Did YOU get to vote on those? *I* sure didn't!



So now, the remaining choice, where a choice IS possible, is does a working man pay more for a "made in the USA" product, or save significant $$$ by buying what is likely a better foreign built product, and keeping the change for other family needs instead of adding to some wealthy CEO's quarterly bonus?



That choice might be an easy one for the ones of us with more disposable $$$ - and another entirely for someone barely getting by...



Often, choices for the working family man aren't black and white, but varying shades of grey...
 
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So now, the remaining choice, where a choice IS possible, is does a working man pay more for a "made in the USA" product, or save significant $$$ by buying what is likely a better foreign built product, and keeping the change for other family needs instead of adding to some wealthy CEO's quarterly bonus?



It is a tough decision to make sometimes, and in the case of TVs and other electronics there may very well be NO viable American option. However there are still some products made here, if we all vote with our pocketbooks and buy American maybe MORE product will be built here.



All of us in the "Buy American" camp have struggled with these choices. Is a Daimler Chrysler mini-van more American than a Honda Odyssey that is built in Alabama? Do your dollars benefit America more when the profit goes to a German company, or a Japanese one? On some products it may be a coin flip, but even if you buy a foreign car you can still help Americans by buying something that is built / assembled here. Once that car is in service, you can vote with your pocketbook again by buying American-made tires (Cooper, for instance), oil, accessories, etc.



The working man who is barely eking out an existence may not have the luxury of taking a philosophical stand, but a significant percentage of Americans do. Where we suffer a breakdown is in the exact same place that our leadership does - we are increasingly unable to distinguish between tactical and strategic goals.



When we make a decision based on our finances TODAY, we are working in the tactical environment - doing what we can to accomplish our immediate goals. However, tactical planning can be absolutely worthless if we aren't keeping an eye on the long term consequences of our actions. For the long term, we should plan strategically to position ourselves for maximum advantage - and if we do, our daily economic tactics may need to be altered to achieve our long-term goals. If we want to be comfortable in retirement, for example, we should have a long-term strategy of saving money. That strategy is often incompatible with impulse buying, so our shopping tactics must be adapted.



As a people, we should be "voting with our dollars" to reward our allies and punish those who oppose us in any sense (militarily, economically, culturally). We may have to give in to tactical necessity and buy Maw that new plasma-display toaster that she has been wanting, but we may be able to make a good choice even if an American-made variant is not available. Is it better to pump those dollars into the economy of Communist China, Taiwan, Japan, or Ireland (where an increasing amount of high-tech gear is being built nowadays)? The product from China may be a few $$$ cheaper at Wal-Mart, but Japan, Taiwan, and Ireland have no professed desire to crush the United States. Hmmmm, what to do - what to do... . :D



It is up to the American people to look out for the long-term interests of our nation, because nobody else cares whether the nation exists for the long haul. The free market doesn't care whether our nation prospers or not. In a very real sense nationalistic concerns are viewed by leadership and big business as just an impediment to free trade - we the people are simply consumers and producers, citizenship being an arbitrary construct that could impact profit. Businesses will always act to maximize profit, and if the American public will keep buying their products even if they ship the jobs and manufacturing overseas, they WILL do so to make a buck. Our government leaders are in the hip pockets of big business, and as a consequence many of their decisions and policies are based on maximizing trade opportunities instead of focusing on the long-term security and economic viability of the populace. We are stupid enough as a voting public that we let them get away with it, too.



This disregard for the well-being of our nation is evident in every aspect of our governmental and economic life, as our leaders focus on the tactical picture (make money today, appease the voters with a handout today) and ignore the strategic implications. Big Movie/TV/music types don't care whether their product contributes to the decay of the American family or not - they just want to sell product and make a buck. It is up to the individual American citizen to make wise choices for their family - nobody else cares.



The agriculture and construction industries don't care whether the massive influx of illegals costs the rest of us a fortune and changes the cultural landscape of our nation - they just want somebody to work cheap picking fruit and building houses so they can make a buck. Similarly President Bush and the rest of our politicos don't care whether leaving the border open causes long-term problems or not - the influx produces more votes and windfall profits for those who illegally employ the illegals. It is up to individual American citizens to discourage these practices with their pocketbook, if they want their nation and culture to endure - nobody else cares.



Uncle Sam happily gives foreigners equal access to American markets with free-trade agreements like NAFTA, and subsidizes countries like China with "most favored nation" trading status - but does little to prop up failing industry here at home. Many of our leaders don't care whether high-tech machining or steel mills or goat farms are viable industries in the USA for the long haul, in their view it is the availability of the PRODUCT that counts, not the CAPABILITY TO PRODUCE it. Accordingly when we buy foreign product, we are paying to train THEIR sons and daughters in high-tech engineering, manufacturing, design. For the long haul it might be desirable to have those skills fostered here in AMERICA, but the free market doesn't care whether the world's best machinist lives in Boise or Shanghai. It is up to the individual American citizen to vote with their pocketbook to encourage high-tech industry here in the USA - nobody else cares.



It will be a terrible shame if we let America transition into another 3rd world Bananastan over the long haul, simply because we were too fixated on the tactics of today to think about the implications for tomorrow. It will make one heck of a tombstone though:



HERE LIES THE AMERICAN REPUBLIC

1776 - 2076

It's death was not in vain, for we made a few bucks along the way.
 
EXCELLENT and accurate post Mike - I really like and fully agree with THIS:



"It is up to the American people to look out for the long-term interests of our nation, because nobody else cares whether the nation exists for the long haul. The free market doesn't care whether our nation prospers or not. In a very real sense nationalistic concerns are viewed by leadership and big business as just an impediment to free trade - we the people are simply consumers and producers, citizenship being an arbitrary construct that could impact profit. Businesses will always act to maximize profit, and if the American public will keep buying their products even if they ship the jobs and manufacturing overseas, they WILL do so to make a buck. Our government leaders are in the hip pockets of big business, and as a consequence many of their decisions and policies are based on maximizing trade opportunities instead of focusing on the long-term security and economic viability of the populace. We are stupid enough as a voting public that we let them get away with it, too.



This disregard for the well-being of our nation is evident in every aspect of our governmental and economic life, as our leaders focus on the tactical picture (make money today, appease the voters with a handout today) and ignore the strategic implications. Big Movie/TV/music types don't care whether their product contributes to the decay of the American family or not - they just want to sell product and make a buck. It is up to the individual American citizen to make wise choices for their family - nobody else cares. "




RIGHT ON! ;)
 
Diesel fuel is the blood of the USA. The increased price I pay for fuel at the pump is going to be of small consequence compared to the increase I pay in everything I buy. The increase in operational cost to trucking companies, rail roads, and the shipping business WILL hit me in the pocket. Just this morning on the news they were talking about fuel prices are down to pre-Katrina levels and the idiots they interviewed were saying how great it is! Raise the price $1. 00, keep it there a few weeks, then drop the price $. 50 and the standard idiot will be singing the praises of the oil companies! If something is not done, I'm scared to think about what's going to happen to our country. These high fuel prices are going to trickle down to everyone eventually. Then what are they going to say?





Here's what REALLY gets my goat. Fuel prices:



Nashville: $2. 839

Springfield(20 miles north of Nashville): $2. 739

Dickson(40 miles west of Nashville): $2. 429



What's the DEAL? HOW can there be that much difference in diesel in the same basic area? These prices are an average and all the stations in these towns are very close in price. You know it all comes out of the same pipe! WHAT'S THE DEAL?



Check out this web site: http://tonto.eia.doe.gov/oog/info/twip/twip.asp if you want to get REALLY mad! Don't just look at the page that comes up, get in there and look around, look at the numbers and look at the charts.



Scott
 
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In a post further back up the thread, Mike provided info and quotes showing the Chinese adopting USA developed technology as they build a 2 Million dollar plant to convert their own coal resources into low sulphur liquid fuel.



And again I ask, with our OWN vast resources of coal deposits, and technology WE have developed, WHY are we not making greater efforts to exploit that form of energy and technology, reducing dependency on foreign oil?



WHY did we develop that technology, then essentially toss it aside as we continue doing business with OPEC? WHY does China find that technology economically beneficial, but we don't?



Could it possibly be due to the long standing back-scratching good-buddy associations involving our own government, with our own corporate oil heads and OPEC countries?



*I* would certainly NOT want to bet against that suspicion... ;)
 
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Anybody heard the latest theory that the planet makes the oil, not dead dinosaurs? I heard some guys talking about it on the radio. They said they even see evidence of it on the surface of Mars. The discussion suggested that the oil companies have known about this for some time.



Scott
 
BigPapa said:
Anybody heard the latest theory that the planet makes the oil, not dead dinosaurs? I heard some guys talking about it on the radio. They said they even see evidence of it on the surface of Mars. The discussion suggested that the oil companies have known about this for some time.



Scott



DAMN, I hope the oil guys don't find out - they'll wanna start making deals with the Martians, and importing THEIR oil too...
 
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