Blame it on Markman's Myopia or The Day They Burned Ol' Dixie Down - A "Peak Oil" Commentary
From todays Market Soapbox: "Prior to this blogs existence, after 9/11; I told friends that the patent corporate and government excuse for the next 4 years would be "because of the terrorists", in other words, instead of "blaming it on bad weather or the locusts or killer cicidas", blame it on the terrorists."
"I fully expect "because of Katrina" or "post Nawleans" to supplant the terrorists as corporate America and the governments favourite excuse for incompetence and mismanagement, i.e. blame it on Mother Nature or the Big Easy is in for the next 4 years."
The media has fully hopped on the "Blame it on Katrina" or "After the Big Easy" or "Post Nawleans" bandwagon pronto, today on MSN, Who is Really to Blame for $4 Gas? by Jon Markman is an absolutely splendid example of the media myopia that is going to shoved down our pie holes for the next four years.
Mr. Markman's missive has a very nice discussion of crack spreads; mentions the supply glut "Right now there is plenty of crude oil in the world’s pipeline, but a scarcity of gasoline." and current refining constraints "You can have all the oil in the world and still run short of gasoline, however, if major refineries are out of action."
But, ultimately goes on to blame the increase in gasoline costs on "The “gougers,” if there are any, are thus not the oil companies but local guys who are exploiting a short-term supply disruption to make some extra profits in a generally low-margin business."
And to enhance Mr. Markman's Myopia he attempts to blame a full year of pump price increases on poor Katrina. "The reason that gasoline costs $1 or more per gallon today than a year ago is simple: Hurricane Katrina kicked our supply lines down a crooked staircase, and a painful kink emerged in the commodity’s complex worldwide distribution system."
Yes, we agree that refining capacity has been reduced due to Katrina, but we beg to differ with Mr. Markman's Myopia. Mr. Markman neglects to mention that Crude Oil was already at $69 per barrel well before Katrina was ever a blip on the radar.
Adding insult to injury and digressing to the reality of the situation, Mr. Markman continues; "A couple of years ago, many oil producers were delighted to be able to sell two full years of production at $30-$35. That looked like a good idea at the time, and allowed them to make a lot of money if their production costs were closer to $10." So that means margins were $20-$25 per barrel at the time.
"But those old hedges are expiring, and companies can now turn around and sell their current and future production for $60 to $70 even though their production costs are still a fraction of that." Really? a fraction, still you say?
Pouring salt on the wound and digging a hole that he and Punxsutawney Phil can't get out of; Mr. Markman continues; "a good example is Plains Exploration & Production... Plains has told investors that it will produce about 65,000 barrels a day in 2006, and that because of hedging it’ll probably earn no less than $55 per barrel." You don't say, because of hedging, no less than $55 per barrel!!!
"if oil stays in the $65-to-$70 range, P/E is actually more like 5. Yet even if oil falls all the way back to $40 per barrel, P/E is still at 10, which is cheap."
Alrighty then, Mr. Markman just made it obvious that the margin or cost per BOE (barrel of oil equivalent) for Plains E&P was around $8 a barrel and probably has gone up to $15 a barrel at the most, $5 of which will probably be offset by "profitable" hedging activities on the part of Plains themselves.
Oh yes , oil companies write off "bad" market hedges against their production costs, and include "profitable" hedges in the profit margin. I.e. they are encouraged through current tax legislation and accounting practices to engage in speculation which effects the market pricing of their end product.
Geez, I wonder what would happen to the price of a barrel of oil, if they all got together and agreed on the hedges they were going to place in the market??? Nah, they would never do that, would they?
Lets review Mr. Markmans facts: $10 - $15 costs with a market price of $65-$70 and a profit margin that has increased from $20-$25 to $55 per barrel with ACTIVE SPECULATION on their own end product.
Alrighty then, the bottom line is Mr. Markman blames the poor stiff distributor for the gouging, yet makes the best case in the world for blaming not OPEC, and not the local distributor, but the oil producers themselves. This pissed me off so much that I took a look at the EIA website, and its a good thing I did.
Even I was previously fooled by the production conundrum, until I looked at the EIA data and discovered that, what Mr. Markman and others neglect to mention is the fact that according to the EIA, world wide distillation or refining capacity has INCREASED 100% since 1970.
From 47 Million barrels per day in 1970 to 73 Million barrels per day in 1990, to 82.795 Million barrels per day in 2005. That's right folks, simply amazing, a 12.3% increase in the last 15 years and a 100% increase in the last 35 years.
Thank you Mr. Markman for your myopia, without it I would not have made these wonderful discoveries.
I stand corrected, before Katrina there was NO refining capacity issue, it is another industry and media CANARD, and any effect that Katrina has will be TEMPORARY.
Also, we thank you for the validation that the oil market and its pricing is truly ruled by the oil producers themselves through hedging and speculation.
If you want a look at some other incriminating evidence go to the EIA statistical website. If you take the time, you will find some real doosies there.
$130 Oil Justified? No Way
Oil Price Redux
OIL: Demand, Production and Speculation
Peak Oil - The Myth, The Legend, The Fraud
Spreading "Peak Oil" Crack
"Peking" Oil, the Saudis and China
Peak Oil? Not!
Peak Oil? Not! Part Deux
Peak Oil? Not! - Update
Peak Oil Redux Part I
Peak Oil Redux - Part II
Peak Oil Redux Part III
Peak Oil Redux Part IV
Peak Oil Redux Part V
Peak Oil Redux Part VI
Peak Oil Redux Part VII
Peak Oil Redux Part VIII
The Blame for $135 a Barrel Oil
Blame it on Markman's Myopia or The Day They Burned Ol' Dixie Down - A "Peak Oil" Commentary
Another Peak Oil Cufuffle Series
"I fully expect "because of Katrina" or "post Nawleans" to supplant the terrorists as corporate America and the governments favourite excuse for incompetence and mismanagement, i.e. blame it on Mother Nature or the Big Easy is in for the next 4 years."
The media has fully hopped on the "Blame it on Katrina" or "After the Big Easy" or "Post Nawleans" bandwagon pronto, today on MSN, Who is Really to Blame for $4 Gas? by Jon Markman is an absolutely splendid example of the media myopia that is going to shoved down our pie holes for the next four years.
Mr. Markman's missive has a very nice discussion of crack spreads; mentions the supply glut "Right now there is plenty of crude oil in the world’s pipeline, but a scarcity of gasoline." and current refining constraints "You can have all the oil in the world and still run short of gasoline, however, if major refineries are out of action."
But, ultimately goes on to blame the increase in gasoline costs on "The “gougers,” if there are any, are thus not the oil companies but local guys who are exploiting a short-term supply disruption to make some extra profits in a generally low-margin business."
And to enhance Mr. Markman's Myopia he attempts to blame a full year of pump price increases on poor Katrina. "The reason that gasoline costs $1 or more per gallon today than a year ago is simple: Hurricane Katrina kicked our supply lines down a crooked staircase, and a painful kink emerged in the commodity’s complex worldwide distribution system."
Yes, we agree that refining capacity has been reduced due to Katrina, but we beg to differ with Mr. Markman's Myopia. Mr. Markman neglects to mention that Crude Oil was already at $69 per barrel well before Katrina was ever a blip on the radar.
Adding insult to injury and digressing to the reality of the situation, Mr. Markman continues; "A couple of years ago, many oil producers were delighted to be able to sell two full years of production at $30-$35. That looked like a good idea at the time, and allowed them to make a lot of money if their production costs were closer to $10." So that means margins were $20-$25 per barrel at the time.
"But those old hedges are expiring, and companies can now turn around and sell their current and future production for $60 to $70 even though their production costs are still a fraction of that." Really? a fraction, still you say?
Pouring salt on the wound and digging a hole that he and Punxsutawney Phil can't get out of; Mr. Markman continues; "a good example is Plains Exploration & Production... Plains has told investors that it will produce about 65,000 barrels a day in 2006, and that because of hedging it’ll probably earn no less than $55 per barrel." You don't say, because of hedging, no less than $55 per barrel!!!
"if oil stays in the $65-to-$70 range, P/E is actually more like 5. Yet even if oil falls all the way back to $40 per barrel, P/E is still at 10, which is cheap."
Alrighty then, Mr. Markman just made it obvious that the margin or cost per BOE (barrel of oil equivalent) for Plains E&P was around $8 a barrel and probably has gone up to $15 a barrel at the most, $5 of which will probably be offset by "profitable" hedging activities on the part of Plains themselves.
Oh yes , oil companies write off "bad" market hedges against their production costs, and include "profitable" hedges in the profit margin. I.e. they are encouraged through current tax legislation and accounting practices to engage in speculation which effects the market pricing of their end product.
Geez, I wonder what would happen to the price of a barrel of oil, if they all got together and agreed on the hedges they were going to place in the market??? Nah, they would never do that, would they?
Lets review Mr. Markmans facts: $10 - $15 costs with a market price of $65-$70 and a profit margin that has increased from $20-$25 to $55 per barrel with ACTIVE SPECULATION on their own end product.
Alrighty then, the bottom line is Mr. Markman blames the poor stiff distributor for the gouging, yet makes the best case in the world for blaming not OPEC, and not the local distributor, but the oil producers themselves. This pissed me off so much that I took a look at the EIA website, and its a good thing I did.
Even I was previously fooled by the production conundrum, until I looked at the EIA data and discovered that, what Mr. Markman and others neglect to mention is the fact that according to the EIA, world wide distillation or refining capacity has INCREASED 100% since 1970.
From 47 Million barrels per day in 1970 to 73 Million barrels per day in 1990, to 82.795 Million barrels per day in 2005. That's right folks, simply amazing, a 12.3% increase in the last 15 years and a 100% increase in the last 35 years.
Thank you Mr. Markman for your myopia, without it I would not have made these wonderful discoveries.
I stand corrected, before Katrina there was NO refining capacity issue, it is another industry and media CANARD, and any effect that Katrina has will be TEMPORARY.
Also, we thank you for the validation that the oil market and its pricing is truly ruled by the oil producers themselves through hedging and speculation.
If you want a look at some other incriminating evidence go to the EIA statistical website. If you take the time, you will find some real doosies there.
$130 Oil Justified? No Way
Oil Price Redux
OIL: Demand, Production and Speculation
Peak Oil - The Myth, The Legend, The Fraud
Spreading "Peak Oil" Crack
"Peking" Oil, the Saudis and China
Peak Oil? Not!
Peak Oil? Not! Part Deux
Peak Oil? Not! - Update
Peak Oil Redux Part I
Peak Oil Redux - Part II
Peak Oil Redux Part III
Peak Oil Redux Part IV
Peak Oil Redux Part V
Peak Oil Redux Part VI
Peak Oil Redux Part VII
Peak Oil Redux Part VIII
The Blame for $135 a Barrel Oil
Blame it on Markman's Myopia or The Day They Burned Ol' Dixie Down - A "Peak Oil" Commentary
Another Peak Oil Cufuffle Series
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