Can you feel their pain?? BP profits soar on record oil price - Think they care about our pain at the pump??

Biggest U.S. refiner, Valero's profit falls 67%
Posted Jul 29th 2008 9:29AM by Peter Cohan
Filed under: Earnings reports, Valero Energy (VLO)

Reuters reports that Valero Energy (NYSE: VLO), the biggest publicly-owned oil refiner in the U.S., suffered a 67% decline in net income. Its bad news was that the price of its input -- crude oil -- doubled to an average $125 a barrel in the second quarter, while its product, gasoline, increased a mere 25% in price.

There is good news here for investors. Analysts expected it to earn $1.35 per share, but Valero beat estimates by two cents. Not only that but its revenues rose 51%. Reuters quotes Valero's CEO who expects gasoline margins to be weak and industry-wide refinery utilization rates to drop through the end of 2009. In simple terms, refineries have the ability to produce more gasoline than people in the U.S. want to consume.

The stronger part of Valero's business is what it calls distillates -- diesel fuel, jet fuel and heating oil -- which seem to have much more stable demand in the face of rising prices. That stronger demand translates into higher utilization rates and higher profit margins through 2009. If that demand starts to fall off, however, Valero could be in even more trouble.

"Re: Can you feel their pain?? BP profits soar on record oil price - or do they care about ours??"

Our what?

Believe it or not, there's a Valero station near me that is selling regular gas for $3.73/gal. This is 10 cents cheaper than the Shell or Exxon stations near the Valero station.
Go figure....

Only this "old" info, Mike, from back when gas was 3 bucks a gallon in MAY (originally published in March.)

[link to money.cnn.com]

Who gets rich off $3 gas - who doesn't

The guy running the service station makes just a few cents, while crude oil producers take the biggest chunk.

By Steve Hargreaves, CNNMoney.com staff writer

Last Updated: March 19, 2008: 10:25 AM EDT

NEW YORK (CNNMoney.com) -- Motorists may fume when forking over $3 a gallon at the local service station, but as it turns out, your local filling spot makes chump change from a gallon of gas.

So exactly who is getting rich?

Oil traders: While often blamed for pushing up prices, traders don't necessarily benefit from the high price of crude or gasoline; they profit from how much the price changes. Traders can get rich - as long as they bet correctly on whether prices will rise or fall.

For example, an investment bank that makes a bet that the price of oil will rise makes money when oil prices go from $95 to $100 a barrel - or $100 to $95 if it bet the price will fall - not on the difference between production cost and trading price.

"If you wanna keep your job, you gotta be more right than wrong," said John Kilduff, an energy analyst at the trading firm MF Global in New York, explaining how traders make their money.

Gas stations: A surprisingly small amount goes to the guy who runs the station.

Most service stations are independently owned and operated and take in between 7 and 10 cents for every gallon they sell, according to the U.S. Energy Information Administration.

That 7 to 10 cents going to the gas station isn't even profit. Out of that, station owners still have to pay leases, workers, and other expenses - leaving them with a profit of just a few cents. For the service stations, most profit comes from selling coffee, cigarettes, food and other amenities.

These calculations are based off of EIA's most recent numbers, when gas was $3.04 a gallon. Gasoline hit another record nationwide average of $3.27 a gallon Thursday.

Taxes: The government takes about 40 cents right off the top, with about 18 cents going to the feds. State taxes vary widely, but the national average is about 22 cents a gallon. Most of this money is used to build and maintain roads.

Transportation: Getting the gas from refineries to service stations via trucks or pipelines - and the cost of storing it in large tanks - eats up another 23 to 26 cents per gallon.

Refining: About 24 cents a gallon goes to refining companies like Valero (VLO, Fortune 500), Sunoco (SUN, Fortune 500) or Frontier (FTO, Fortune 500) that specialize in turning crude oil into gas. Some companies like ExxonMobil (XOM, Fortune 500), Chevron (CVX, Fortune 500) and ConocoPhillips (COP, Fortune 500) also have refining operations.

Profits for refiners have been squeezed lately because the price they pay for oil has risen so much faster than the price they can sell the gas for. This helps explain why Big Oil companies -like Exxon, which actually buys more crude oil than it produces - haven't seen their profits rise as much as the price of oil.

Crude oil: This is the most expensive part of a gallon of gas. Of every gallon of gas $2.07 from every gallon of gas goes to producers of crude like Chevron (CVX, Fortune 500), BP (BP), and smaller outfits like Anadarko (APC, Fortune 500) and Marathon (MRO, Fortune 500), or national oil companies controlled by countries like Saudi Arabia, Mexico or Venezuela.

Crude currently trades around $110 a barrel, but breaking down the money in that barrel of oil is tough. Exploration and production costs, royalty payments - all a big part of $110 a barrel oil - vary widely country by country and project by project.

"It's difficult to generalize; there's a whole spectrum of costs," said Ron Planting, an economist with the American Petroleum Institute, an industry trade group.

They can range from $1 a barrel to produce crude in Saudi Arabia to over $70 a barrel to find, develop and pump oil in the deep water Gulf of Mexico or off the coast of Algeria, said Ann-Louise Hittle, an oil analyst with the energy consultants Wood Mackenzie.

EIA estimates it costs U.S. oil companies an average of about $24 a barrel to find, develop and produce oil worldwide, but that doesn't include costs like transportation, administration, or income taxes - which can be substantial. While Exxon made $40 billion in 2007, a 60% increase from 2004, it paid $100 billion in taxes and royalties.

Nonetheless, $40 billion - or any of the record profits seen by most oil companies over the last few years - is certainly a lot of money, and it has put Big Oil in lawmaker's cross hairs.

Rep. Edward Markey, D-Mass., has called the chief executives of the five biggest oil companies to testify on the industry's record profits on April 1st. Markey's office swears it's no April fool's joke.

Have you lost your job, your business or your home? Are you raiding retirement accounts to pay the bills? We want to hear from you. Tell us how you're being affected by the weakening economy and you could be profiled in an upcoming story.

Send emails to [email protected].

First Published: March 13, 2008: 2:12 PM EDT

Pain at the pump is one thing.
I can change my habits to reduce my gasoline consumption.

This winter, when people are being found frozen to death in their homes, because they can't pay the two hundred bucks
per week to stay warm, that's when the real crisis will be.

Valero is the cheapest in my area too, that's why they always get my business.

Amen, Ikaika.

As we have changed our habits, too.

I hope what I see by my imagination for this winter is nothing more than a bogus nightmare.

They care nothing about their poor little cattle (us)! blah...:(

OILY SPECULATIONS
by James Surowiecki New YorkerJULY 7, 2008


When bad things happen, it's always nice to have a scapegoat. So, with Americans furious about soaring oil prices, Congress has gone in search of someone to blame. There are a number of usual suspects to choose from, depending on your politics: OPEC, greedy oil companies, lily-livered environmentalists opposed to oil drilling-but now Congress has seized on another set of villains: commodity speculators. "Excessive market speculation," in the words of Senator Joseph Lieberman, has supposedly inflated the price of oil and other commodities beyond reason. Curb speculation, as a raft of proposed laws intend to do, and oil prices will soon return to earth.

Speculation has been a favorite target of politicians looking to mollify anxious voters since the time of ancient Greece, when the orator Lysias protested that wheat traders had reduced Athens to a "state of siege." Even in market-friendly America, there is a long tradition of denouncing speculators as dishonest, unproductive parasites; the nineteenth-century preacher Henry Ward Beecher decried their "cool, calculating, essential spirit of concentrated avaricious selfishness." And not unreasonably: the past century is full of examples of avaricious selfishness leading to the manipulation and corruption of markets. In the twenties, speculators banded together in "stock pools," trading a particular stock among themselves to create the illusion that its value was rising-in March, 1929, a stock pool succeeded in pushing up RCA's stock price by almost fifty per cent in less than two weeks-and then dumping the stock when outside investors bought in.
In the late seventies, a speculators'
pool led by the Hunt brothers mounted an attempt to corner the world's silver market, and at one point controlled an amount equivalent to an entire year's global production.

Given this history, and the fact that recent years have seen a huge flood of speculative money entering the commodity markets-assets in commodity indexes, by some calculations, increased twentyfold between 2003 and the spring of this year-it's not unreasonable to wonder if there might be something nefarious behind the sharp run-up in oil prices. But there's little convincing evidence that the oil market is being significantly manipulated. Whatever chicanery is occurring-and we can assume there is some-has only a marginal effect on prices at the pump.

Congress is not, though, just attacking illegal market manipulation; it's also taking aim at perfectly legal speculation, namely the buying and selling of futures contracts, which are effectively bets that oil prices will go up (or down). Futures contracts can be used by oil sellers (like OPEC ) or oil buyers (like the airlines) to hedge their risks by agreeing to sell or buy oil in the future at a set price. Speculators, by contrast, mostly use futures contracts to gamble on oil prices, and have no interest in buying or selling real barrels of oil. These gambles can be tremendously lucrative, but they don't directly determine the real (or "spot") price of oil. That's set by the people who are buying and selling actual barrels of petroleum. Although speculators could directly distort oil prices by turning their futures contracts into oil and then taking it off the market to drive up prices, a look at oil inventories shows no sign that this is happening.

If speculators aren't at fault, why have oil prices spiked so high?
Fundamental reasons aren't hard to find. Between 2000 and 2007, world demand for petroleum rose by nearly nine million barrels a day, but OPEC has been consistently unable, or unwilling, to significantly increase supply, and production by non-OPEC members has risen by just four million barrels a day.
The prospect of military action against Iran, which would disrupt global supply, seems greater than it did a few years ago. And the plunging value of the dollar has meant that the cost of oil has jumped more in the U.S. in the past year than it has in countries with healthier currencies.

But there's also something else at work, which the oil guru Daniel Yergin calls a "shortage psychology." The price of oil-more than that of many other commodities-isn't based solely on current supply and demand. It's also based on people's expectations about future supply and demand, because those expectations determine whether it makes sense for oil producers to sell their oil now or leave it in the ground and sell it later. Currently, the market is assuming that oil will become scarcer, and that global demand will keep rising, especially in rapidly developing countries like China and India. As a result, producers are asking very high prices to pump their oil.
Now, it could be that these assumptions are all wrong-that the supply of oil will not be constricted going forward, that concerns about the Middle East are exaggerated, and that higher prices will lead people to cut back on energy consumption, shrinking demand. In that case, oil would turn out to have been hugely overpriced.
But that won't be because of sinister speculators; it will be because oil producers and oil users collectively misread the future.

The difficulty for Congress, of course, is that none of the problems that have driven up the price of oil lend themselves to a quick fix, and most, like the boom in global demand and the inaccessibility of certain oil fields, aren't under our control at all. That's what makes speculators a perfect target: by going after them, Congress can demonstrate to voters that it understands their pain, and at the same time avoid doing anything that might require real sacrifice from Americans. Our dependence on foreign oil, together with the fiscal fecklessness that has helped reduce the value of the dollar, means that there is no easy way out of where we are. But in an election year that's hardly a message that anyone in Washington is going to deliver.

You be the judge as to why our gasoline prices are high.
===========================================

Some factual information to digest regarding the evil American oil companies.

May 21, 2008

Earlier today, the Senate Judiciary Committee summoned top executives from the petroleum industry for what Chairman Pat Leahy thought would be a politically profitable inquisition. Leahy and his comrades showed up ready to blame American oil companies for the high price of gasoline, but the event wasn't as satisfactory as the Democrats had hoped.

The industry lineup was formidable:
• Robert Malone, Chairman and President of BP America, Inc.;
• John Hofmeister, President, Shell Oil Company;
• Peter Robertson, Vice Chairman of the Board, Chevron Corporation;
• John Lowe, Executive Vice President, Conoco Philips Company; and
• Stephen Simon, Senior Vice President, Exxon Mobil Corporation.

Not surprisingly, the petroleum executives stole the show, as they were far smarter, infinitely better informed, and much more public-spirited than the Senate Democrats.

One theme that emerged from the hearing was the surprisingly small role played by American oil companies in the global petroleum market.

John Lowe pointed out:

I cannot overemphasize the access issue. Access to resources is severely restricted in the United States and abroad, and the American oil industry must compete with national oil companies who are often much larger and have the support of their governments.

We can only compete directly for 7 percent of the world's available reserves while about 75 percent is completely controlled by national oil companies and is not accessible.

Stephen Simon amplified:

Exxon Mobil is the largest U.S. oil and gas company, but we account for only 2 percent of global energy production, only 3 percent of global oil production, only 6 percent of global refining capacity, and only 1 percent of global petroleum reserves. With respect to petroleum reserves, we rank 14th. Government-owned national oil companies dominate the top spots. For an American company to succeed in this competitive landscape and go head to head with huge government-backed national oil companies, it needs financial strength and scale to execute massive complex energy projects requiring enormous long-term investments.

To simply maintain our current operations and make needed capital investments, Exxon Mobil spends nearly $1 billion each day.

Because foreign companies and governments control the overwhelming majority of the world's oil, most of the price you pay at the pump is the cost paid by the American oil company to acquire crude oil from someone else.

Last year, the average price in the United States of a gallon of regular unleaded gasoline was around $2.80. On average in 2007, approximately 58 percent of the price reflected the amount paid for crude oil. Consumers pay for that crude oil, and so do we.

Of the 2 million barrels per day Exxon Mobil refined in 2007 here in the United States, 90 percent were purchased from others.

Another theme of the day's testimony was that, if anyone is 'gouging' consumers through the high price of gasoline, it is federal and state governments, not American oil companies. On the average, 15% percent of the cost of gasoline at the pump goes for taxes, while only 4% represents oil company profits. These figures were repeated several times, but, strangely, not a single Democratic Senator proposed relieving consumers' anxieties about gas prices by reducing taxes.

The last theme that was sounded repeatedly was Congress's responsibility for the fact that American companies have access to so little petroleum.

Shell's John Hofmeister explained, eloquently:
While all oil-importing nations buy oil at global prices, some, notably India and China, subsidize the cost of oil products to their nation's consumers, feeding the demand for more oil despite record prices. They do this to speed economic growth and to ensure a competitive advantage relative to other nations.

Meanwhile, in the United States, access to our own oil and gas resources has been limited for the last 30 years, prohibiting companies such as Shell from exploring and developing resources for the benefit of the American people.

Senator Sessions, I agree, it is not a free market.

According to the Department of the Interior, 62 percent of all on-shore federal lands are off limits to oil and gas developments, with restrictions applying to 92 percent of all federal lands. We have an outer continental shelf moratorium on the Atlantic Ocean, an outer continental shelf moratorium on the Pacific Ocean, an outer continental shelf moratorium on the eastern Gulf of Mexico, congressional bans on on-shore oil and gas activities in specific areas of the Rockies and Alaska, and even a congressional ban on doing an analysis of the resource potential for oil and gas in the Atlantic, Pacific and eastern Gulf of Mexico.

The Argonne National Laboratory did a report in 2004 that identified 40 specific federal policy areas that halt, limit, delay or restrict natural gas projects. I urge you to review it. It is a long list. If I may, I offer it today if you would like to include it in the record.

When many of these policies were implemented, oil was selling in the single digits, not the triple digits we see now. The cumulative effect of these policies has been to discourage U.S. investment and send U.S. companies outside the United States to produce new supplies.

As a result, U.S. production has declined so much that nearly 60 percent of daily consumption comes from foreign sources.
The problem of access can be solved in this country by the same government that has prohibited it. Congress could have chosen to lift some or all of the current restrictions on exploration and production of oil and gas. Congress could provide national policy to reverse the persistent decline of domestically secure natural resource development.

Later in the hearing, Senator Orrin Hatch walked Hofmeister through the Democrats' latest efforts to block energy independence:

HATCH: I want to get into that. In other words, we're talking about Utah, Colorado and Wyoming. It's fair to say that they're not considered part of America's $22 billion of proven reserves.

HOFMEISTER: Not at all.

HATCH: No, but experts agree that there's between 800 billion to almost 2 trillion barrels of oil that could be recoverable there, and that's good oil, isn't it?

HOFMEISTER: That's correct.

HATCH: It could be recovered at somewhere between $30 and $40 a barrel?

HOFMEISTER: I think those costs are probably a bit dated now, based upon what we've seen in the inflation...

HATCH: Well, somewhere in that area.

HOFMEISTER: I don't know what the exact cost would be, but, you know, if there is more supply, I think inflation in the oil industry would be cracked. And we are facing severe inflation because of the limited amount of supply against the demand.

HATCH: I guess what I'm saying, though, is that if we started to develop the oil shale in those three states we could do it within this framework of over $100 a barrel and make a profit.

HOFMEISTER: I believe we could.

HATCH: And we could help our country alleviate its oil pressures.

HOFMEISTER: Yes.

HATCH: But they're stopping us from doing that right here, as we sit here. We just had a hearing last week where Democrats had stopped the ability to do that, in at least Colorado.

HOFMEISTER: Well, as I said in my opening statement, I think the public policy constraints on the supply side in this country are a disservice to the American consumer.

The committee's Democrats attempted no response. They know that they are largely responsible for the current high price of gasoline, and they want the price to rise even further. Consequently, they have no intention of permitting the development of domestic oil and gas reserves that would both increase this country's energy independence and give consumers a break from constantly increasing energy costs.

Every once in a while, Congressional hearings turn out to be informative.