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Re: E-M:/ Oil Indusrty Profits Soaring Through the Roof



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Enviro-Mich message from Tom Leonard <wmeactl@bigplanet.com>
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An interesting article in today's New York Times describes how the pending
summer shortage of gasoline and increasing prices have resulted in part from
profit-taking over the winter, and the ensuing failure to build a seasonal
inventory.

View the article at http://www.nytimes.com/2001/04/25/business/25GAS.html.

*********************************************
Tom Leonard, Executive Director
West Michigan Environmental Action Council
1514 Wealthy SE, Suite 280
Grand Rapids, MI 49506
Phone: 616-451-3051
Fax: 616-451-3054
wmeactl@bigplanet.com
********************************************


> From: Rane Curl <ranecurl@engin.umich.edu>
> Reply-To: Rane Curl <ranecurl@engin.umich.edu>
> Date: Wed, 25 Apr 2001 02:58:40 -0400 (EDT)
> To: enviro-mich <enviro-mich@great-lakes.net>
> Subject: Re: E-M:/ Oil Indusrty Profits Soaring Through the Roof
> 
> -------------------------------------------------------------------------
> Enviro-Mich message from Rane Curl <ranecurl@engin.umich.edu>
> -------------------------------------------------------------------------
> 
> 
> I don't know enough about the inner workings of the industry now to
> provide any answers, except to observe, from my experience in the oil
> industry (I worked for Shell at one time), matters are very complicated,
> are international, involve parallel vertically integrated monopolies that
> do connive - up to a point. In regard to just a couple of points in
> William Tobler's message:
> 
> On Tue, 24 Apr 2001, William Tobler wrote:
> 
>> 1) First of all, last year the big bubble in price increase occurred later
>> in the year, more like June and July.  If it was tied to switching over, I
>> would think that would be at the same time of year.
> 
> We haven't finished seeing the top of the "big bubble". It may still
> occur in June and July, when summer travel compounds with the other
> factors.
> 
>> 3) I don't believe that the laws of supply and demand are very effective
>> with regard to short term gasoline prices.  I don't have much discretionary
>> consumption for tomorrow or next week, even if they double or triple the
>> price.  If there were true shortages, then gasoline stations would be
>> closed.  Last year, that was only for a matter of hours, or never, and then
>> supposedly because of the pipeline break.
> 
> I think the laws of supply and demand are *most* effective for short term
> gasoline prices. The system does not have much storage capacity compared
> to the consumption rate. If everyone quit buying gasoline for a week, the
> price would tumble, as then the glut would work back through the system
> and force the refineries to reduce processing, which is *very* expensive.
> The problem Bill describes is an inflexibility in demand, not in the
> sensitivity of the system to supply and demand. Demand is our fault.
> 
>> 4) Reformulation supposedly costs only a few cents per gallon.  How does
>> this justify 40 to 60 cent increases that last for months?
> 
> It costs only a few cents per gallon in production, but the change over
> interrupts processing. This causes a momentary drop in supply - and the
> system is very sensitive (as I am claiming) to that, because the demand is
> inflexible.
> 
>> 5) I read today that the oil companies have huge increases in profits.
>> Don't get me wrong, I believe in capitalism, but I also believe in calling
>> the shots the way they are.
> 
> Reduce your demand and they'll come around.
> 
> --Rane
> 
> 
> 
> 
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