Oil Refineries – John Malcolm

What am I paying for in the price of a gallon of gasoline? [Minus Liberal Demonization]

By Ken Cohen | January 27, 2012 | ExxonMobil Perspectives

I’m asked this question a lot. And I know a lot of drivers ask themselves this question when they pull up to the pump.

The answer is based on the economics of supply and demand and how products are manufactured and sold – along with what the government takes in taxes. Let’s take a look, based on the U.S. Energy Information Administration’s breakdown of the estimated average price of a gallon of gas in December 2011, which was $3.27.

Raw materials = $2.62

The cost of the raw materials used to make a product has a major impact on the final product price. The raw material for gasoline is crude oil. The price of crude oil is set by global markets, where buyers and sellers constantly react to supply and demand factors. Oil is just one of many commodities traded every day in the global market. Others are the corn that affects the price of food and the cotton that affects the price of clothing.

Crude oil is by far the largest factor in the price of a gallon of gasoline – accounting for 80 percent of the $3.27 average retail price per gallon in December, according to the EIA.

To put that in another way – about $2.62 of the average gallon of gas in this example is set before a refiner even touches the raw material.

Where I find many people get confused is that they assume oil companies are producing all the oil that goes into their own refineries – and therefore can control gas prices by controlling the supply chain. That’s not the case.

U.S. crude oil production in 2010 was 5.5 million barrels per day. But U.S. refineries processed 15.2 million barrels of oil per day – almost three times more oil than was produced in the U.S. That means U.S. refiners, like ExxonMobil, have to purchase millions of barrels of crude oil – at market prices – to produce gasoline and other products for American consumers. For example, in 2010, ExxonMobil spent $198 billion purchasing oil around the world for its refining operations.

Manufacturing the product

Like any product, there are costs to manufacture it – so the manufacturer tries to recover those costs, plus make a profit, when it goes to sell the product.

The refining portion of a gallon of gasoline has, on average, accounted for about 11 percent of the price in 2011, according to the EIA data through December. That means a little less than 40 cents per gallon would be due to refiners’ costs – wages, equipment, financing and others – plus their profits.

As the EIA figures show, however, refining doesn’t always produce a profit. In December, the data indicate that the U.S. market price for gasoline coming out of refineries was on average about 7 cents per gallon (-2 percent) below the refiners’ cost of crude oil alone, and before accounting for their costs of upgrading the crude into gasoline. In other words, refineries faced a market where domestic gasoline prices were very weak relative to global crude prices.

How does that happen? Refiners are “price takers” that operate on relatively low profit margins that are highly dependent on the market demand for petroleum products. That means at times, the value of a petroleum product coming out of the refinery isn’t enough to cover the costs of obtaining and refining the crude oil.

Distributing and marketing the product = $0.33

Products then have to get from the manufacturing site to the retail site. When gasoline leaves the refinery, it is shipped largely via pipelines to local terminals. There, distributors load their trucks and transport the gasoline to a service station. Naturally, each step in the distribution chain includes labor, capital equipment and other expenses that must be recovered by operators. Of course, these operators must also compete to sustain their profitability while also paying taxes.

Retailers then set the price at the pump, based on recovering these costs of getting gasoline to the service station and the costs of marketing it to consumers. They also have to generate enough money to pay their taxes and make a profit to keep their business running. And on top of that, they have to collect mandatory state and federal gasoline taxes from the consumer (which we’ll break down in the next section).

So who are the retailers setting the prices? When consumers pull into an Exxon or Mobil station, they assume it’s ExxonMobil. But we own only about 5 percent of the stations with our name on them. About 95 percent of the stations carrying the Exxon or Mobil brand are actually owned by network retailers or local business owners – not ExxonMobil.

Taxes = $0.39

So how much does the government make on a gallon of gas?

In this example, retailers collected state and federal gasoline taxes of 39 cents per gallon on average. Total gas taxes per gallon range by state – from lows of less than 30 cents per gallon to highs of more than 60 cents per gallon in places like New York and California.

How does this compare to what a company like ExxonMobil makes on a gallon of gasoline? As we saw earlier, sometimes a company or an operation may lose money. Other times, it may make money. A competitive market just provides an opportunity, not a guaranteed profit. In the first two quarters of 2011, for example, ExxonMobil made 7 cents and 8 cents a gallon , respectively, on the gasoline, diesel and other petroleum products it refined and sold in the United States.

Read the full article here.

Is Gasoline Cheaper Than Water? by Dom Armentano (postamericana.wordpress.com)
Yesterday I bought premium gas for my car and had a coronary attack (bonjupatten.com)
Crude oil tops $104 (upi.com)
Why Do Gasoline Prices Differ Across U.S. States? (wallstreetpit.com)
Gasoline Expected to Top $4 Per Gallon in May (blogs.wsj.com)
The Myth That The US Will Soon Become An Oil Exporter (businessinsider.com)
State-level retail gasoline taxes vary significantly (bespacific.com)
The Myth That the US Will Soon Become an Oil Exporter (energybulletin.net)
Chevron Follows Conoco, Exxon on Production Declines (CVX, COP, XOM) (247wallst.com)
The Myth That the US Will Soon Become an Oil Exporter (theoildrum.com)

Expert Warns: 100% Certainty of Total Catastrophic Failure of the Entire Power Infrastructure Within 3 Years [Video]

By Mac Slavo | April 20, 2012 | SHTF Plan

As smart grid metering systems expand across the developed world, many are starting to ask whether the threats posed by the new devices, which officials promise will save energy and reduce end user utility costs, outweigh their benefits. In addition to documented health concerns resulting from radiation emissions and no cost savings being apparent, opponents of the technology argue that smart meters are violative of basic privacy rights and give the government yet another digital node of unfettered access to monitor and control personal electricity consumption.

Now, an alarming new documentary suggests that security problems with the inter-connected and seemingly convenient smart grid may be so serious that they could lead to a catastrophic failure of our nation’s entire power infrastructure.

In an interview for the upcoming documentary titled Take Back Your Power, Cyber defense expert David Chalk warns that our nation is in crisis. Not only are our smart power grids susceptible to hacking, but they may very well already be infected with Trojan viruses and back doors that will ultimately lead to disastrous consequences:

(Video interview follows excerpts)

The front door is open, and there is no lock to be had.

There is not a power meter or device on the grid that is protected from hacking, if not already infected with some sort of Trojan horse than can cause it to be shut down, damaged or completely annihilated.

We can’t take a massive outage all at once.

When we say ‘it goes down,’ we’re talking about generators burning out. We’re talking about coal plants being damaged. We’re talking about destruction of equipment. This isn’t just a matter of electrons going around and shutting off the moving data.

Physical equipment can be damaged… watch some of the videos of cyber attacks on generators and other devices. You’ll see they’re actually damaged. Multi million dollar machines are hacked into.

We look at corporations. We look at the very companies like Symantec that are there to protect us having been hacked, and their code is in the public domain.

…

Bring forward a technology and I will show you that it’s penetrable. I’ll do it on national TV, I’ll do it anywhere… I can guarantee you 100% that there is nothing out there today – nothing – that can’t be penetrated.

We need safety and security, and today that does not exist in the smart grid.

—

Via Business Wire

“Unless we wake up and realize what we’re doing, there is 100% certainty of total catastrophic failure of the entire power infrastructure within 3 years,” said Chalk.

“This could actually be worse than a nuclear war, because it would happen everywhere. How governments and utilities are blindly merging the power grid with the Internet, and effectively without any protection, is insanity at its finest.”

Preview Take Back Your Power:

As Mr. Chalk points out, even the top security firms in the country have been hacked, and the head of US Cyber Security confirms that military systems are under constant attack and have been broken by hackers who have gained access to sensitive military and space agency systems (including active Jet Propulsion Labs spacecraft). Our entire drone fleet, yet another node in the ever expanding control grid, was recently compromised by a virus that was able to log access commands and passwords for high security military systems. The vulnerabilities of these systems became starkly clear when Iran’s military broke global positioning encryption and took control of a U.S. military drone over their airspace.

This is no longer about a single computer going down or file directories being accessed. Cyber conflict is moving into an entirely new realm, where rogue hackers or state-sponsored cyber operations are capable of targeting physical grid infrastructure like power, water, and oil refineries, commerce and transportation systems. According to one expert, such an attack has the potential bring down life as we know it in America in a matter of just 900 seconds.

Some would argue that we need more governance over the grid system, or stricter penalties for those who compromise it, or further yet, more monitoring and tracking so attacks can be prevented.

The other option, however, is that we take individual Americans off the traditional grid altogether by empowering them through tax credits and de-regulation, so that every one of us can have their own personal smart grid in their home, independent of intervention from government or traditional energy industry players.

Only this limited government, personal responsibility solution is capable of providing a truly impenetrable level of power grid safety and security for each and every person in the United States.

However, like all things government, the narrative seems to be to first create the problem, then move to fix it by more centralization, control and dependence. It’s a trend we see not just in our energy sector, but every aspect of our lives.

Hat tip Satori

Author: Mac Slavo
Views: 13,973 people have read this article (new feature)
Date: April 20th, 2012
Website: www.SHTFplan.com

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