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Dr. Bob is Robert Hsiung, MD,
bob@dr-bob.orgShown: posts 1 to 25 of 59. This is the beginning of the thread.
Posted by Bobby on August 9, 2006, at 18:21:34
does letting you equipment break down lead to bigger profits
Posted by AuntieMel on August 10, 2006, at 9:46:58
In reply to only in the oil business, posted by Bobby on August 9, 2006, at 18:21:34
No - it leads to higher prices. Those on the wrong side of the pipeline break aren't making much money.
The other partners in that play are just livid.
And - be forewarned - the oil biz is dear to my heart, so if I take one of your glib remarks too seriously, just smack me back into irreverence, ok?
Posted by Bobby on August 10, 2006, at 19:12:42
In reply to Re: only in the oil business » Bobby, posted by AuntieMel on August 10, 2006, at 9:46:58
sorry auntie mel. don't mean to ruffle feathers. I remember the oil companies latest earnings report where they showed record profits at a time when so many average joe's were suffering. Was I misled by them or myself? I don't want to lose my lone ally on this board. I know it's capitalism but... I'll bite my lip and move on to a different subject. :)
Posted by AuntieMel on August 11, 2006, at 16:59:54
In reply to Re: only in the oil business » AuntieMel, posted by Bobby on August 10, 2006, at 19:12:42
Well, I doubt if I'm your only ally.
Yes, there are huge profits, but it's more a scale thing than an obscene profits thing.
The business are so big, that the numbers look big.
The return on investment, though, is not that great. Percentage wise, coca-cola does much better. I believe that when the headlines came out about Exxon's billions one quarter, it was actally only about 10-12% ROI - and the stock dropped.
It costs millions to drill one well. They only get drilled when the price looks to stay up over 20-30bbl (which sounds low now, but that's recent news.)
And worse than that, it's not a stable business. I love working in it, but I wouldn't advise my kids to go into it.
I know there are people who suffer from the price of gas (BTW - check out how much of that is taxes) but, you know, back in the 80s when half a million of us lost jobs no one cared. Those jobs are lost forever, too. My hubby and I were both out of work at the same time just hoping to make the house payments.
Also look at how much your current gallon of gas is ethanol related. Talk about a boondoggle - there's tariffs on ethanol and the farmers get subsidies. Imagine if anyone in the oil biz suggested a subsidy when the price was below 10bbl?
There was a bumber sticker - Please, God, give me one more boom. I promise not to "f" it up this time.
Sorry for the jumbledness of this - my cut and paste isn't working...
Posted by Bobby on August 11, 2006, at 19:24:43
In reply to Re: only in the oil business » Bobby, posted by AuntieMel on August 11, 2006, at 16:59:54
Thanks for the enlightenment. I'm not too savvy on the oil business--ignorance i suppose. I just know the price of gas keeps climbing and I guess it's just a knee-jerk reaction. I certainly don't wish you any hardships.
p.s. i've gotten a lot more free cokes than gallons of gas. :)
Posted by Meri-Tuuli on August 12, 2006, at 15:28:04
In reply to Re: only in the oil business » Bobby, posted by AuntieMel on August 11, 2006, at 16:59:54
You're not a geologist by any chance are you? Me and my bf are (and loads of our friends).
Well I very very nearly went to work for shell - ha! Not sure if that was a good move or not. Anyway I didn't go into the oil industry because I just couldn't do - I'm not entirely sure why.
Kind regards
Meri
Posted by AuntieMel on August 15, 2006, at 13:02:51
In reply to Re: only in the oil business » AuntieMel, posted by Meri-Tuuli on August 12, 2006, at 15:28:04
Not a geologist, but I write geophysical software.
Posted by AuntieMel on August 15, 2006, at 13:04:33
In reply to Re: only in the oil business » AuntieMel, posted by Bobby on August 11, 2006, at 19:24:43
No problem.
The oil business has a worse PR record than Israel, methinks.
I'm always happy for a chance to help others understand.
Ever watch the discovery channel? They have a really good show about life on the rigs.
Posted by Dinah on August 15, 2006, at 15:35:55
In reply to Re: only in the oil business » Bobby, posted by AuntieMel on August 15, 2006, at 13:04:33
You can count me in as a friend of the oil business. Especially the individuals in it. I know what a risky business it can be, in so many ways.
Daddy was an oil company geologist at one time. Well, I guess he never quit being a geologist. :) He loved it. But talk about ups and downs...
Posted by AuntieMel on August 15, 2006, at 16:55:27
In reply to Re: only in the oil business » AuntieMel, posted by Dinah on August 15, 2006, at 15:35:55
Ups and downs indeed.
But once it gets in your blood - well it stays there.
Posted by Jost on August 15, 2006, at 20:10:35
In reply to Re: only in the oil business » Dinah, posted by AuntieMel on August 15, 2006, at 16:55:27
Are you two friends of Big Oil???
The people on the rigs and the geologists, etc-- are amazing.
The companies as entities, well---- okay, maybe I'm all wrong, but I have a few problems with them.
(But what do I know, I'm one of them there nurthurnurs.) :)
Jost
Posted by AuntieMel on August 16, 2006, at 8:41:14
In reply to Re: only in the oil business, posted by Jost on August 15, 2006, at 20:10:35
What would you have the companies do different?
Considering that they have stockholders to answer to, too.
Posted by Dinah on August 16, 2006, at 10:32:07
In reply to Re: only in the oil business, posted by Jost on August 15, 2006, at 20:10:35
I don't see they're any different from other companies.
There are environmental accidents from time to time, but I don't know the companies are negligent. The oil rigs are hotbeds of sea life. If you go deep sea fishing, the first place you head is the rigs.
We have a tremendous demand for oil. They attempt to fill a demand.
I suppose if I had my wish, it would be that oil prices weren't set by the same gambling instinct that drives the stock market. Rumors and the price shoots up. And of course, it is noted what the market will bear, I guess.
But like drug companies, oil companies take pretty big risks. Drilling is getting deeper and deeper all the time. Drilling is expensive. Dry holes aren't uncommon. There are risks in weather, the price of oil, environmental costs, etc. And as Mel pointed out, the reward as a percent of sales really isn't huge. And that's how businesses determine profitability. Not earnings, per se, but earnings expressed as a return on investment, or a percent of gross sales.
Gas sure is expensive now. I hate having to fill my tank. My brother has to travel to his job, and his weekly gas costs take up a pretty big percentage of his net pay. I feel sorry for him.
But I recall visiting the UK in the nineties and thinking the same thing about gas prices there.
Posted by Jost on August 16, 2006, at 12:21:48
In reply to Re: only in the oil business » Jost, posted by Dinah on August 16, 2006, at 10:32:07
I don't have any greater problem with oil companies than other extremely large, somewhat aggressive companies.
There have been some rather egregious practices, as in California--which led to undue profits to the oil companies through manipulation of markets. Manipulation of spot oil markets, etc, to raise prices, a particular feature of the oil economy-- and the closeness of the oil industry to what used to be public utilities. I only commented on oil companies because it was the immediate subject. There's tremendous amount of wasteful greed, and short-term thinking in many corporations, in all industries, I think.
But world demand not USA demand drives oil prices-which is why the problem looks particularly insoluble, with the growing economic and population development of India and China, among others.
Certainly at the moment, the prevailing theory of corporate accountability uses shareholder profits as the sole the benchmark Director and CEO performance. But I think this is a narrow view, although certainly it has an appeal, because it's easily quanitifiable.
There are other values, such as jobs, community stability, and welfare, R&D, etc-- which can reduce pure profitability, and raise problems with the current model-- but that's a long, discussion--it's more what I was thinking of as opposed to Oil Companies per se.
Jost
Posted by AuntieMel on August 16, 2006, at 13:22:17
In reply to Re: only in the oil business, posted by Jost on August 16, 2006, at 12:21:48
Unfortunately, R&D, exploration and drilling costs are considered capital expenses. They don't come off the bottom line, they get amortized.
But they need to be spent. And they are - by the billions. What I do is considered R&D.
We're finding petroleum products (oil and gas) where it wasn't possible to look just 10 years ago. But deep-water rigs and floating platforms are very, very expensive.
I'm not sure I sould call that short sighted.
The price of oil is not as up-and-down as the news says. Most is sold on long term contracts. What they are quoting in the news is oil futures, which are traded on the commodities market like pork bellies.
As for California? I agree there was no excuse for manipulating the market, and heads did roll for it. Poor Arthur Anderson (the accounting firm) was found not guilty of any wrongdoing - but they are out of business anyway.
On the other hand, they had a lot to do with putting themselves in that postion. When energy was deregulated, they made it illegal to have long term contracts. Gas was cheap at the time, so they made it a requirement to buy on the spot market. Talk about shortsighted!
For the most part, though, there isn't anything like that going on. Geez - they get investigated by congress every election year.
If people had really been interested in stable prices, instead of demanding low prices, they should put a floor on the price of oil. If that had happened in the 80s hundreds (thousands?) of wells that weren't profitible at $8.00bbl would't have been closed in.
Posted by AuntieMel on August 16, 2006, at 13:22:48
In reply to only in the oil business, posted by Bobby on August 9, 2006, at 18:21:34
Posted by Jost on August 16, 2006, at 14:28:09
In reply to Re: only in the oil business » Jost, posted by AuntieMel on August 16, 2006, at 13:22:17
Auntie Mel, I'm glad Bobby started this, because it's interesting--- For me, this is friendly discussion-- with a slight edge, because we might disagree, at least for the moment. (I'm persuadable on all sorts of points, even if I come on strong-- it's more a debate style, and a bit of a personal style-- but I'm an equivocater and seeing-both-sides-er underneath.)
But maybe I'm interrupting your work!
So we can continue later this evening. I'm interested in following up-- I'm wondering if there wasn't some lobbying on the part of the Oil companies in Ca that led to the change in policy. Not that the decision by the legislature wasn't awful. But it's an interesting case.
The R&D point was more about Pharmaceutical Cos., who I believe have transferred an inordinate amount of money to advertising, and are somewhat neglecting R&D-- not completely, of course. But that always has been the justification for the high price of drugs-- that R &D took so much money, and often didn't lead to profits, because of negative results, etc.
I'm so interested in your work. It sounds fascinating.
Anything I can learn from you and Dinah in this area is of great interest. I'm sure you both know tons more than I do about many facets of the industry.
I, by the way, entirely agree about the floor on oil prices-- it's short-sighted to have wanted cheap gas when the overall trend was inevitably toward depletion of known reserves.
Jost
Posted by AuntieMel on August 16, 2006, at 17:19:46
In reply to Re: only in the oil business » AuntieMel, posted by Jost on August 16, 2006, at 14:28:09
I'd love to continue - but I'm pretty booked up this evening. I love this type of discussion.
It doesn't much interrupt my work - it get some 'dead' time while waiting for things to run...
I agree - somewhat - about drug adverising. It does take a lot of money to develop new stuff, so advertising generates revenue, right? And - my best performing mutual fund is in the health care sector, so I hate to complain too much about profits.
And I doubt if it was oil co. lobbying that led to that decision. It was so good for them I doubt if even *they* could have dreamt it up.
Posted by Jost on August 16, 2006, at 20:11:07
In reply to Re: only in the oil business » Jost, posted by AuntieMel on August 16, 2006, at 17:19:46
One minor point, though about drug companies is that their fraction of their budgets devoted to R&D is not very great, especially considering their profitability. Enough so as to raise questions about whether this is best way to encourage R&D.
But drug prices are largely determined by the power of insurers and other groups (like Medicaid and Medicare) to bargain effectively to keep prices low for members of the group. Problem with the new Medicaid program is that government gave up right to bargain with the drug companies for Medicaid drugs, which had been one way that drug prices for Medicaid recipients were held down.
So it could be that at least for those on Medicaid, drug prices will rise substantially in future years.
I did check on the California situation, which had more to do with suppliers of electricity than oil companies. There was a lot of manipulation of the market by energy suppliers and sophisticated traders (such as Enron), supported by the unacceptable accounting practices used by Arthur Anderson (the firm, not the person, who died in the 1970's). It was the Houston office of Anderson that carried out the fraudulent accounting, but that's not the oil company's fault. Whole other kettle of fish, having nothing to do with oil companies either--
Probably just overzealous free=market thinking, without understanding consequences of deregulating wholesale market without deregulating retail market, in the presence of a small group of powerful energy supply firms, who had a controlling market share. This opened the way for market manipulation, which unfortunately, occurred.
So perhaps the oil companies have an undeservedly bad reputation-- and it's really the government's unwillingness to tax gasoline, to raise the price and therefore to reduce demand (through conservation), without giving all the profit to the oil companies. At the moment, the sole vehicle for affecting the market is level of prices set by oil companies, so as to condition demand to supply.
Jost
Posted by laima on August 18, 2006, at 1:14:31
In reply to Re: only in the oil business » Jost, posted by Dinah on August 16, 2006, at 10:32:07
My brother is big in the oil business, too. He's a phd engineer, looking to improve safety and efficiency issues around the world for his company. I used to grill him about windmills and such, but the bottom line came down to consumers were not willing to pay the prices. He and his collegues swore that they'd look more into alternative fuels if the economics ever added up. And guess who were the first people I knew to buy Priuses? The oil company engineers...more interested in and excited about innovative engines than in gass guzzlers. How's that for some irony?
Posted by Meri-Tuuli on August 18, 2006, at 8:12:33
In reply to Re: only in the oil business, posted by laima on August 18, 2006, at 1:14:31
You might want to check him out.
Also, American's complaining about gas prices. Well I won't say anything to keep civil (why do you drive such big cars then?).
Try paying what we do here in the UK.....its like £1.20/litre, ummmm, which is around £4.50/US gallon and £4.50 is around $9, so we pay $9/US gallon.
What do you pay?? $3/US gallon??
So you folks in America pay 1/3 of what we do here. So don't complain please!! :o)
Posted by Jost on August 18, 2006, at 10:36:24
In reply to Jeremy Leggett, posted by Meri-Tuuli on August 18, 2006, at 8:12:33
Is there a tax on gasoline in Britain?
Jost
Posted by laima on August 18, 2006, at 11:05:14
In reply to Jeremy Leggett, posted by Meri-Tuuli on August 18, 2006, at 8:12:33
I've got no gas price complaints, and no car! I get around by walking, my bike or public transport-for my values and for the bonus of fitness. If I do ever get a car, you can count on it being a light and tiny little thing.Believe me, not everyone in the US is into large inefficient vehicles, and I could say something uncivil about how I feel about them, pollution, asthma, the "bigger is better" notion, driving one block to go to the store, and the rising gas prices, etc, etc, etc- but I won't do that here. I'd even say something about how I feel about the people in cars who don't like sharing the road with bikes but then wonder why they are getting out of shape and traffic is getting so congested. And parking spots so hard to find...since many of the cars are so big, there is obviously less space available for parallel parking. I wish urban biking wasn't so dangerous here, but growing numbers of people do it anyway... I'll leave it all to your imagination...
Do my brother and I have conflict because he feels oil is unlimited if we can just keep the technology moving (Ie, oil sands in Canada, recycling industrial by-products, and the like.), and I disagree? Yes...but we don't discuss the topic much more in favor of not causing a family schism.
> Also, American's complaining about gas prices. Well I won't say anything to keep civil (why do you drive such big cars then?).
> So you folks in America pay 1/3 of what we do here. So don't complain please!! :o)--I agree!!! Not everyone here in America is alike, and some of us really cringe with shame and frustration when lumped up as a group.
Posted by Meri-Tuuli on August 18, 2006, at 11:35:29
In reply to Re: Jeremy Leggett » Meri-Tuuli, posted by Jost on August 18, 2006, at 10:36:24
Yes, it is heavily taxed I think. I'm not entirely certain what the % is through. At least 17.5% I expect, probably more like 25%, if not more.
> Is there a tax on gasoline in Britain?
>
> Jost
Posted by Meri-Tuuli on August 18, 2006, at 11:41:02
In reply to Re: Jeremy Leggett » Meri-Tuuli, posted by laima on August 18, 2006, at 11:05:14
Hey
I'm sorry I said that, I didn't mean to lump Americans into one group, I know there are differing opinions etc.
I wish more people were like you!
I can't drive, let alone own a car! I grew up without a car, the hikes back from the supermarket 1.5 miles away were certainly good for my fitness!
I know an American PhD student, in earth sciences actually and she tried to tell me that America is the most environmentally friendly country in the world. Her supervisor laughed and er, corrected her. I mean, this is the opinion of an *educated* American, and one who is supposedly studying *earth sciences*. You'd think she'd have a clue!
Anyway.
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