...take the time to obtain an annual report from any of the major integrated oil companies; foreign or domestic, it doesn't matter. If you don't own stock in the company, simply contact them and they'll send one. They print a few thousand extra every year.
Then, take the time to see how much oil companies make on gasoline sales, and you will be amazed. Rarely does it rise above 7% of earnings.
They make their money on oil sales. They make an incredible amount of money on oil sales. They pay an amazing amount of taxes and royalties on oil sales.
If you follow the market, you will note that Marathon just split their E&P and R&M into two separate companies last year. Conoco-Phillips is preparing to do the same thing. Exxon-Mobil no longer owns any of their gas stations and wouldn't mind getting out of the gasoline business entirely.
That trend is going to continue because of practical, political, and financial reasons, and while I don't see it causing major increases in the price of gasoline, it will not lend itself to any declines in price. Cheap gasoline is gone and it's not coming back.
So keep these in mind:
1. The price of oil is set by the global marketplace and major markets in London, Hong Kong, Chicago, Sydney, etc. The oil companies do not set the price of oil.
2. If you bid $100 on a barrel of oil and some guy in Shanghai bids $105, the oil is going to Shanghai.
3. Instead of building refineries, we are shutting them down because the old ones are losing money. Make it easier to build refineries or it will get worse.
4. Refineries require routine shutdowns for cleanout and making changes to the refining configuration for government mandated seasonal blends. By law, the various companies that refine oil cannot coordinate their shut-down schedules. Get a few doing a cleanout at the same time and the unstoppable law of supply and demand rears its head.
5. The strategic oil reserve is just that - a STRATEGIC reserve, for use in times of national emergency. It's not there to release oil because the price of gasoline is cutting into your beer money. As much as I despise Obama, I applaud him for not releasing oil out of the SPR.
6. That said, his policies and attitude toward the petroleum industry are contributing substantially to the world markets getting quite comfortable with $100 oil.
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