Kerry is a Flip Flopper

[Nyarlathotep]

Ugh. No, not one or two links which discuss all of that -- I'm an investor in the energy sector so I know some of this by osmosis. I might be able to help if there's a specific area or two (the SPR capacity, for example -- it's gonna go up. Part of the energy bill was to take it to a billion bbls). Sorry about that.

That's cool. I was more curious than anything. I'll probably read up on this when I get home. I'll probably pester you with questions if I hit things I don't understand, if you don't mind.

 

[wastepanel]

Nah. Mark went away, so we can talk about this like intelligent people acting in good faith.

The reserve is statutorially full. The president, by law, may not buy any more. But it's not actually full (in fact, even when it is "full" it's not "full full" because it has physical storage capacity of somewhere in the 725 mm bbl area, as Tricky said. But we can safely ignore that for now).

Specifically, there's about 12 mm barrels of product out on loan. Those loans were to refiners and oil companies and pipeline companies to mitigate the disruption caused by Katrina and Rita.

What's the difference? The loans are of barrels, not dollars. So the 12 mm bbls which are to be replaced are not subject to price risk.

What the president ordered is that the repayment of 10 mm of those 12 mm barrels be delayed until the fall. He did this at exactly the same time he waived some of the federal gas-mixing rules which were scheduled to be mandatory tomorrow because of a feared shortage of ethanol. Because Congress (and the President) failed to pass an MTBE liability protection package last fall, no one will take gas with MTBE this year. That's the equilivent of taking three small or one mega refiner off the market.

So what we've got is domestic-based supply disruptions caused by two identifiable, short-term reasons. First is the lag of building ethanol plants to replace the lost MTBE (which the remaining producers are now exporting(!)) and getting it to market (another meaty discussion which I'll defer unless anyone cares). Second is the ongoing reduction of capacity in the refinery business because of the aftermath of Katrina and Rita. The industry is only running at ~89% of capacity because of outages, whereas at this time of the season they're normally going full out and when margins are this high they would normall be going more than full out.

The purpose of the SPR, besides providing during times of war, is precisely to mitigate these kinds of short-term, non-price-based supply disruptions. It absolutely makes sense to defer those loan paybacks. Not because it can reasonably be expected to lower prices (though there seems to have been at least a modest psychological effect) but because it can reasonably be expected to mitigate shortages; i.e. no gas available at any price.

Your explanation seems to be very sound in its basis. However, lest we forget that Enron had "rolling blackouts" in California to make more profits?

 

[jj]

there are only three answers possible: more, less, or same.

You did not answer the question. But I didn't think you would.

There is always 'I don't know'.

You are guilty of a fallacy of exclusion.

 

[Manny]

That's cool. I was more curious than anything. I'll probably read up on this when I get home. I'll probably pester you with questions if I hit things I don't understand, if you don't mind.

I'll do my best. To get you started, here's an article about the Transportation Department thinking about allowing truckers to drive more hours per day to get ethanol from the midwest to the refiners. Basically, ethanol has to be added further downstream on account of it mixes poorly with gasoline and tends to evaporate from the mix over time. It also can't be transported by pipelines (currently) because it absorbs water and other impurities found inside the pipes.

Your explanation seems to be very sound in its basis. However, lest we forget that Enron had "rolling blackouts" in California to make more profits?

Yep. The people who deregulated electricity had no idea of the difference between that and other markets. The biggest one is that electricity is ephemeral. It can't be stored in large quantities for any appreciable time. It's there, then it's gone. You can't design a "battery farm" which holds the kinds of quantites which can be stored in a petroleum tank farm. But that's a whole 'nother thread.

 

[wastepanel]

Nah. Mark went away, so we can talk about this like intelligent people acting in good faith.

The reserve is statutorially full. The president, by law, may not buy any more. But it's not actually full (in fact, even when it is "full" it's not "full full" because it has physical storage capacity of somewhere in the 725 mm bbl area, as Tricky said. But we can safely ignore that for now).

Specifically, there's about 12 mm barrels of product out on loan. Those loans were to refiners and oil companies and pipeline companies to mitigate the disruption caused by Katrina and Rita.

What's the difference? The loans are of barrels, not dollars. So the 12 mm bbls which are to be replaced are not subject to price risk.

What the president ordered is that the repayment of 10 mm of those 12 mm barrels be delayed until the fall. He did this at exactly the same time he waived some of the federal gas-mixing rules which were scheduled to be mandatory tomorrow because of a feared shortage of ethanol. Because Congress (and the President) failed to pass an MTBE liability protection package last fall, no one will take gas with MTBE this year. That's the equilivent of taking three small or one mega refiner off the market.

So what we've got is domestic-based supply disruptions caused by two identifiable, short-term reasons. First is the lag of building ethanol plants to replace the lost MTBE (which the remaining producers are now exporting(!)) and getting it to market (another meaty discussion which I'll defer unless anyone cares). Second is the ongoing reduction of capacity in the refinery business because of the aftermath of Katrina and Rita. The industry is only running at ~89% of capacity because of outages, whereas at this time of the season they're normally going full out and when margins are this high they would normall be going more than full out.

The purpose of the SPR, besides providing during times of war, is precisely to mitigate these kinds of short-term, non-price-based supply disruptions. It absolutely makes sense to defer those loan paybacks. Not because it can reasonably be expected to lower prices (though there seems to have been at least a modest psychological effect) but because it can reasonably be expected to mitigate shortages; i.e. no gas available at any price.

So the logic is:

You guys are making too much profits, so you don't have to pay off these loans that are due now?

Hell, why don't we just forgive the loans, have the companies pick that up as income, and collect the tax on it?

I see how it is supposed to work. However, I'm still sticking with the argument as to why the oil companies do not release their financials with a breakdown of the expenses. All I can see filed are "Gross Sales", "Expenses", "Net Profits", and filler. It's not hard to imagine that there might be something hidden in these.

 

[wastepanel]

Yep. The people who deregulated electricity had no idea of the difference between that and other markets. The biggest one is that electricity is ephemeral. It can't be stored in large quantities for any appreciable time. It's there, then it's gone. You can't design a "battery farm" which holds the kinds of quantites which can be stored in a petroleum tank farm. But that's a whole 'nother thread.

I don't understand the answer to this question. Enron execs closed down certain stations, then negotiated their own prices, then sold it for twice what it was worth. I don't see how you can't look at both situations and not see a hint of impropriety that could exist.

 

[Ziggurat]

I don't understand the answer to this question. Enron execs closed down certain stations, then negotiated their own prices, then sold it for twice what it was worth. I don't see how you can't look at both situations and not see a hint of impropriety that could exist.

The point is, consumers of oil can stockpile oil to protect themselves against sudden supply shortages. If oil has a short-term supply shortage, customers can dip into their reserves, dropping short-term demand considerably, so prices don't increase dramatically. So oil producers don't have a strong incentive to create short-term supply shortages, because they can't really profit from them significantly.

Electricity is different. You can't store it, so customers can't stockpile it. Temporary shortages mean prices spike dramatically, since demand cannot drop correspondingly without a stockpile. This created the incentive to make short-term supply shortages, and incentive which doesn't exist in almost any other market, including oil.

 

[Manny]

All I can see filed are "Gross Sales", "Expenses", "Net Profits", and filler. It's not hard to imagine that there might be something hidden in these.

Then you've never seen one.

 

[Mycroft]

I love it when conservatives feel threatened...they immediately resort to childish name calling. I'll ask you the same question:

What in Bush's comment said or implied that the level of reserves determined whether or not it was bad policy to tap into them?

I don't understand.

From the OP, the oil reserves have not been tapped into. Rather contributions to them have stopped. I think that's a significant difference.

 

[Rob Lister]

Then you've never seen one.

Concur. Or any business disclosure.

 

[Mark]

I don't understand.

From the OP, the oil reserves have not been tapped into. Rather contributions to them have stopped. I think that's a significant difference.

Well, diverting oil from being added to the reserves rather than taking it directly out seems a fairly subtle distinction. Diverting water from Mono Lake sources had the same result as directly draining the lake would have.

Btw, thanks for the civil response; it is appreciated.

 

[Mark]

Except that the "new information" that caused Kerry to change his mind was poll data.

You know that for a fact, do you? Would you mind providing your evidence?

 

[Mark]

I think what you may be missing (or ignoring, I don't know which) is that nobody really gave a rat's ass about Kerry changing his position. Nobody wants a President who refuses to re-evaluate a given situation as time passes and new information comes in. Sure, people like that stick-to-your-guns attitude, but that's not what we're looking for in a President.

How odd that no one cared about it. Then why did so many people bring it up, I wonder?

http://www.google.com/search?hl=en&q=Kerry+flip-flop&btnG=Google+Search

 

[Manny]

Well, diverting oil from being added to the reserves rather than taking it directly out seems a fairly subtle distinction.

Legally, it's an extremely large distinction.

 

[BPSCG]

Well, diverting oil from being added to the reserves rather than taking it directly out seems a fairly subtle distinction.

If you believe that, try this experiment:

1. On June 1, check the balance of your bank savings account. Make a note of it.
2. Stop depositing money into your savings account for the entire month of June.
3. On the last day of June, check the balance of your bank savings account. Make a note of it.
4. Check the result from step 3 with the result from step 1. Do you notice a difference?
5. On July 1, continue as above, making no deposits, but now start withdrawing $10.00 a day.
6. Continue withdrawing $10.00 a day through the end of July.
7. On the last day of July, check the balance of your bank savings account. Make a note of it.
8. Check the result from step 3 with the result from step 7. Do you notice a difference?

If this is still unclear to you, please send me the URL for your bank's online services, your logon ID, password, and your Social Security number so I can demonstrate for you.

 

[wastepanel]

Concur. Or any business disclosure.

Thanks for the insults both of you. But I have checked Edgar, and I have looked at Exxon-Mobile's 10-k. Guess what? It's a consolidated financial statement only detailing bare minimum information (I'm an accountant). If you could possibly point me in a direction to get these numbers, then I'll admit I'm wrong. In fact, I believe that is what Congress is peeved about too as they asked the IRS for Exxon's tax return. For some reason, executive salary is not available on their financials.

 

[wastepanel]

Just to make you both feel better, I have gone back and reviewed the financial statements issued for the year 2005. No breakdown of operating expenses. I found this information here: http://ir.exxonmobil.com/phoenix.zhtml?c=115024&p=irol-irhome

If you can find any major breakdown of expenses, go for it.

 

[Mark]

If you believe that, try this experiment:

1. On June 1, check the balance of your bank savings account. Make a note of it.
2. Stop depositing money into your savings account for the entire month of June.
3. On the last day of June, check the balance of your bank savings account. Make a note of it.
4. Check the result from step 3 with the result from step 1. Do you notice a difference?
5. On July 1, continue as above, making no deposits, but now start withdrawing $10.00 a day.
6. Continue withdrawing $10.00 a day through the end of July.
7. On the last day of July, check the balance of your bank savings account. Make a note of it.
8. Check the result from step 3 with the result from step 7. Do you notice a difference?

If this is still unclear to you, please send me the URL for your bank's online services, your logon ID, password, and your Social Security number so I can demonstrate for you.

Are you suggesting oil accrues interest?

 

[Mark]

Legally, it's an extremely large distinction.

So in your view this makes Bush less of a hypocrite? Why? His original complaint against Clinton/Gore did not make that distinction.

 

[BPSCG]

Are you suggesting oil accrues interest?

You forgot to send the URL for your bank's online services, your logon ID, password, and your Social Security number. You can PM them if you're concerned about security.