Chevron Memo Raises Suspicion

[Robbien]

SACRAMENTO, Calif. - A Chevron memo is raising suspicion that oil executives intentionally reduced refining capacity in an effort to boost profits. The 1995 memo, obtained by Consumers Union, reads:

"If the U.S. petroleum industry doesn't reduce it's refining capacity, it will never see any substantial increase in refinery profits."

In the last 20 years, 18 of California's 32 refineries have shut down. The industry is now seeing record prices and profits at the pump.

On Friday, former oil and gas executive Joe Sparano spoke with KCRA 3 and made no apologies for continued rise in gas prices. In fact, he explained that prices are a direct result of driver demand far exceeding gas supply.

. . .

When asked when prices would come down and by how much, Sparano said he didn't know.

Sparano openly acknowledged that he is answering questions as part of a public relations campaign to educate and explain the high price of gas.

He also stressed that he is telling the truth when he said that oil companies are simply charging the price the market will pay and is not ruling out the possibility that gas could someday drop below $2 a gallon again.

http://www.msnbc.msn.com/id/12652455/

[gerrilea]

1. I'm soo glad someone else is saying this, not just me anymore!

Thank You, Thank YOU, Thank You, for posting this...

I pointed this fact out a couple of weeks ago in another posting and people were eating me alive for it...

Told you so! The current Gas "Shortage" was created...period!:yourock:

[cantstandbush]

32. So when the Rethugs talk about regulations stopping new refineries

tell them to stop lying!!! Tell that to the neocon thugh Kudlow.

[norml]

2. Leaked Oil Industry Memo Suggests Bid to Curb Refinery Output

Published on Friday, June 15, 2001 by the Associated Press

Leaked Oil Industry Memo Suggests Bid to Curb Refinery Output
by H. Josef Hebert

Even as the Bush administration cites a lack of refineries as a cause of energy shortages, oil industry documents show that five years ago companies were looking for ways to cut refinery output to raise profits.

The internal memos involving several major oil companies were released Thursday by Sen. Ron Wyden, D-Ore., whose office obtained them from a whistleblower. He said the materials did not necessarily reflect any illegal activities but said some of them "sure look very anticompetitive."

snip

The documents obtained by Wyden's office suggest that in the mid-1990s oil companies had no interest in building refineries because of low profit margins. In fact, companies were discussing the need to curtail refinery output in order to make more money, the documents suggest.

"If the U.S. petroleum industry doesn't reduce its refining capacity, it will never see any substantial increase in refinery margins (profits)," said an internal Chevron document in November 1995, citing views presented by participants at an American Petroleum Institute conference.

A year later, an official at Texaco, in a memo marked "highly confidential," called concerns about too much refinery capacity "the most critical factor" facing the refinery industry. Excess capacity is producing "very poor refining financial results," the memo said.


snip


http://www.commondreams.org/headlines01/0615-02.htm

[rodeodance]

3. Published on Friday, June 15, 2001 ---this was a while ago.

[regnaD kciN]

4. So?

The fact that a previous story had been published about this in 2001 doesn't make the current story any less LBN.

[DRoseDARs]

10. Um, yes it does. CommonDreams just posted verbatim an AP article from '01

Following your logic (and loose interpretation of the LBN rules) if CommonDreams posted an article about Nazi Germany invading Poland it would still be Late Breaking News because CommonDreams posted the old article JUST NOW. Error does not compute.

EDIT: I should note that this post refers only to this particular branch of this thread. The MSN article falls within the LBN rules. The CommonDreams article really doesn't appear to since it is a verbatim posting of a 5 year old article, not a freshly published article.

[HysteryDiagnosis]

12. 04/06/04 article.....

http://releases.usnewswire.com/GetRelease.asp?id=28449

Contact: Jamie Court, 310-392-0522, ext. 327 or Tim Hamilton, 360-495-4941, both for the Foundation for Taxpayer and Consumer Rights

SANTA MONICA, Calif., April 6 /U.S. Newswire/ -- The Foundation for Taxpayer and Consumer Rights today released internal Shell documents showing the oil refiner is set to close and demolish its Bakersfield refinery despite the fact the site had the biggest refinery margins, or profits per gallon, of any Shell refinery in the nation as of yesterday.

Shell had claimed it was not economically viable to keep the refinery open and has refused to put it up for sale. Bakersfield supplies 2 percent of the state's gasoline and only 13 refineries feed California's tight gasoline supply (down from 37 in 1983).

An April 5th internal Shell document released today by FTCR shows that Bakersfield's refining margin at $23.01 per barrel, or about 55 cents profit per gallon, topped all of Shell's refineries in the nation. That means, for example, that margins are 36 cents per gallon higher in Bakersfield than in Port Arthur, Texas. The internal document comments under the category of refinery margins "Wow."

[Keefer]

25. This one was even EARLIER!

theKCRAchannel.com
5:41 p.m. PDT May 5, 2006

SACRAMENTO, Calif. - A Chevron memo is raising suspicion that oil executives intentionally reduced refining capacity in an effort to boost profits. The ***1995 memo***, obtained by Consumers Union, reads:

[ShockediSay]

5. Time for Trust Busting

The only real remedy is to break-up the big guys so they don't have the power to eliminate competition by shutting down refineries.

[Supersedeas]

48. you mean Alberto Gonzalez might have to do his job....hahahahaha

[nicknameless]

6. Enron perfected the art of gaming the system ... and getting away with it.

Other sleazy industries are just following their lead.

[SoCalDem]

7. Is the Pope a bear? Do Catholics shit in the woods?

Nothing is beyond the pale when republican rule the roost:(

[Appalachian_American]

8. I wish I could shove this under Hannity's face and get him to respond.

I never, ever, ever watch Hannity and Colmes, but I was skipping through the channels and I paused because I could tell they were discussing oil prices and whatnot, so I thought MAYBE Hannity could possibly not be blaming liberals and Democrats. Wrong! He was blaming liberals and environmentalists for causing refineries to be shut down and new ones not being built.

[NewJeffCT]

14. And, they will say that this proves their point

Chevron will say that pressure from those radical California tree huggers forced them to close their most profitable refinery.

[Kailassa]

9. Which is why the Iraqi pipelines were all taken out

"by mistake," in the initial "shock and awe" campaign.

And Haliburton were paid a bonus for NOT mending them.

Once Iran is invaded and that supply is cut too, they should make their aim of $5 per gallon.

What's the difference between the Mafia and the Neocons?
One is a group of murdering, lying extortionists, and the other is a group of Italians.

[Onlooker]

11. This story needs a lot more attention

If that memo is for real, then it's proof that the oil companies are ethically if not cirminally corrupt.

[NewJeffCT]

13. They will blame the shutdowns on environmentalists

I'm just saying what their response will be. "Those tree huggers forced us to close down refineries!"

[HysteryDiagnosis]

15. Tree huggers mah rear..... shorting the market?? More likely....

http://releases.usnewswire.com/GetRelease.asp?id=28449

An April 5th internal Shell document released today by FTCR shows that Bakersfield's refining margin at $23.01 per barrel, or about 55 cents profit per gallon, topped all of Shell's refineries in the nation. That means, for example, that margins are 36 cents per gallon higher in Bakersfield than in Port Arthur, Texas. The internal document comments under the category of refinery margins "Wow."

"Only an oil company that wants to short the market and artificially drive up the price of gasoline would demolish a highly profitable refinery rather than sell it," said Jamie Court, president of FTCR and author of the book Corporateering (Tarcher/Putnam). " Shell has deceived the public about Bakersfield and must be forced to keep this refinery open or sell it to a competitor. This evidence should also spur a national moratorium on all further domestic refinery closures."

[NewJeffCT]

16. And what Chevron will say is

that pressure from environmentalits caused them to demolish the refinery... and, the Fox news watchers and Limbaugh listeners will believe it and spread the gospel enough to cause confusion & a reasonable doubt to others.

[HysteryDiagnosis]

18. I would think pressure from environmentalists would prompt them

to clean up their act.... a BP land rig today has the appearance of a hospital room, what with the overly done safety protocols and don't you dare spill anything on the ground much less leave trash lying about... if they can do it, so can a refinery. It's a game, and Chevron plays it well.... ooooh those evil people made us drive up the cost of our product, damn them.

[Jackpine Radical]

34. I've already heard this argument from at least one wingnut. (nt)

[NewJeffCT]

39. I've heard it from a few sources

The almighty environmentalists just snap their fingers & oil refineries are shut down.

[onehandle]

17. Condoleezza Rice was with Chevron when the memo was written.

Rice was a Chevron Director from 1991 until January 15, 2001.

She went right from swabbing the deck to the White House.

[dweller]

19. So, you want to do something about it?

"He also stressed that he is telling the truth when he said that oil companies are simply charging the price the market will pay"


:think:

dp

[tanyev]

30. "stressed that he is telling the truth"

"Now, see, this time I really am telling the truth. Not like all the other times when I was just pretending to tell the truth."

He belongs in the Bush administration.

[area51]

20. gas gouging

Well, GW Hoover said that he'd go after cos. that were gas gouging. Well, *, what about it -- here's your evidence. <crickets chirping>

[NJCher]

21. same thing with natural gas

I posted this story but the thread sank like a lead balloon. The story is important because it shows that the same people are cutting off supply to raise prices on natural gas.

Here's the link to my thread:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=115x52201

It's true the article is long and you have to really read it to understand this is what's being said. Nevertheless, it's important and not just to me because I had $500 a month bills for natural gas heating this winter.

I have to say that I think these price increases they threw at is are having a reverberation that is not yet felt. For example, I am switching to another form of heat. In the process of doing so, I am finding that I am not the only one and that business is very good for alternative heat suppliers.

Second, I went shopping for a diesel so I can burn biodiesel fuel and I find they are few and far between. EVERYONE seems to be in the market for a diesel--and for just this reason, too.

Wouldn't it just be too funny if their greed fostered a groundswell of innovation with alternative energy and people turned to these sources initially out of concern for their own wellbeing but eventually because they simply hate the tactics of the suppliers of energy?

Oh and p.s., the people who supply natural gas are the same people who supply gasoline--Chevron, Exxon, the usual suspects.




Cher

[norml]

22. Alaska sues BP, Exxon Mobil over natural gas

Alaska sues BP, Exxon Mobil over natural gas
State claims oil giants conspired to keep prices high

The Associated Press
Updated: 8:10 a.m. ET Dec. 20, 2005


JUNEAU, Alaska - An antitrust lawsuit filed against Exxon Mobil Corp. and BP PLC claims the two oil giants are restricting the nation's supply of natural gas and keeping prices at record highs.

The lawsuit, filed Monday in U.S. District Court in Fairbanks, says the two companies acted together to eliminate competition for the exploration, development and marketing of natural gas from Alaska's North Slope to U.S. markets.

"The only reason for them to collusively not to sell is to try to continue the scarcity that has driven natural gas prices to historic highs," said David Boies, the attorney for the Alaska Gasline Port Authority, which filed the lawsuit.

BP and Exxon Mobil are two of Alaska's biggest oil and gas leaseholders, and are the operators for the North Slope's largest oil and gas fields, Prudhoe Bay and Point Thomson. Alaska's North Slope is estimated to have at least 35 trillion cubic feet (1 trillion cubic meters) of natural gas reserves, which could supply 7 percent to 10 percent of the nation's natural gas, Boies said.

The January future contract for natural gas rose 41 cents Monday to settle at $14.04 per 1,000 cubic feet on the New York Mercantile Exchange. The gas contracts have reached record levels near $16 per 1,000 cubic feet in recent months.

"I don't think anybody can tell you exactly how much the prices would decline, but it's clear it would decline substantially," Boies said.


snip


http://www.msnbc.msn.com/id/10543895/from/RSS/print/1/displaymode/1098/

[NJCher]

23. yep

And just for the record, for those who didn't click the link in my previous post, 10 midwestern states are suing Exxon et al.




Cher

[reprobate]

24. There's of course a simple answer. NATIONALIZE THE ENERGY INDUSTRIES

[WePurrsevere]

26. Creating a false fuel shortage... Looks like maybe the '70's flashback

that's currently going on isn't just with styles.

This doesn't completely surprise me and I don't think the countries where we import oil from are as much the problem as the oil companies like Chevron, Exxon/Mobile, etc. Between the countries and the companies they hold all the cards and care only about making themselves and their stockholders BIG money.

I suspect that even if they were allowed to drill all over the US and pull oil out of the Earth like crazy, every now and then the oil companies would still pull a stunt or make use of some "excuse" like Katrina to drive the prices up to make a windfall before being "nice" and lowering them back down... to what is still a much higher price then before they created or "assisted" the "shortage". It's all a GAME and we're all pawns and suckers as far as they're concerned. We don't need to become independent from JUST the oil supplying foreign nations... we need to become independent from the OIL (and electric) companies as well or we'll always be subject to some type of manipulation... whether price or fear.

[Just Me]

27. NO!!!! They are charging prices people can't fucking afford,...

,...that his company doesn't need to survive and profit (thanks to Cheney's secret "energy policy" which is called, "suck the fuck out of the American people every which way possible"!!!!), and he's using economic lingo to justify abusive price gouging. It's called INTENTIONAL FRAUD AND MARKET MANIPULATION, you fucker!!!

But you evil assholes are tied directly into the executive, which, although CONSTITUTIONALLY REQUIRED to ENFORCE LAWS THAT PROTECT PEOPLE FROM PREDATORS LIKE YOU, are advancing your criminal activities!!!!

This whole damned scenario is just,...evil,...hell on earth created by evil men (mostly).

[Castilleja]

51. Right on!

:thumbsup: :thumbsup: :thumbsup: :thumbsup: :thumbsup:

[alfredo]

28. Spread far and wide.

[Initech]

29. Fuck the oil companies. Each and every one of them!

They're all evil crooks, Chevron-Texaco, ConocoPhillips, Shell, Exxon, they're all fucking idiots. I hope they all go bankrupt.

[Jose Diablo]

31. Refinery shut-downs

The Oil Industry, Gas Supply and Refinery Capacity: More Than Meets the Eye

“As observed over the last few years and as projected well into the future, the most critical
factor facing the refining industry on the West Coast is the surplus refining capacity, and the
surplus gasoline production capacity. The same situation exists for the entire U.S. refining
industry. Supply significantly exceeds demand year-round. This results in very poor refinery
margins, and very poor refinery financial results. Significant events need to occur to assist
in reducing supplies and/or increasing the demand for gasoline.”
Internal Texaco document, March 7, 1996

“A senior energy analyst at the recent API (American Petroleum Institute) convention
warned that if the U.S. petroleum industry doesn’t reduce its refining capacity, it will never
see any substantial increase in refining margins…However, refining utilization has been
rising, sustaining high levels of operations, thereby keeping prices low.”
Internal Chevron document, November 30, 1995

I'd say these memos constitute clear intentions by the American Petroleum Institute to manipulate (fix) prices by working together to reduce supply and thus raise prices contrary to the Sherman Anti-Trust law. However, I imagine Congress gave them a stay-out-of-jail card on this issue, seeing how they were doing it right out in the open. Nothing was hidden as near as I can tell.

This must have been one of Newt's Contract on America laws passed by the Republicans during Clenis's Administration.

[AbsoluteArmorer]

33. Wait until the hurricanes hit again this summer....

or war increases with Iran....

......... the GOP backed BIG CORP bastards will keep bangin' us at the pump! GRRRRRRRRRRRRRRRRRRRRRRRR

Good article though... thanks for posting it. Awareness is what we need! Boycotts should follow!

[mark11727]

35. 1980 movie "The Formula"...

Arthur Clements: (proposing that Titan Oil can raise their gasoline prices) The people will accept the 12 cents now because we can blame it on the Arabs!

Adam Steiffel, Chairman Titan Oil: Ah, Arthur, you're missing the point --- we *ARE* the Arabs.

[VegasWolf]

36. Be nice if the Bush administration fought as hard aginst corporate

corruption in this country as other things, but of course they are smack dab in the center of the corruption.

[sofa king]

37. Hurricane Katrina was a good excuse, too.

Not one chemical plant was damaged beyond easy repair. Almost all were back online within a week, with some few awaiting restoration of services.

The oil industry, on the other hand, has been completely evasive from the start about which refineries were offline, and why. No two sources will agree.

Petroleum refineries are also chemical plants, and are located throughout the exact same region with, one would assume, similar safeguards. But there is one significant difference: the chemical industry did not stand to make a profit by shutting down its operations.

[0007]

38. It doesn't take a genius to figure out that we're getting ripped off.

[Democrats_win]

40. I demand justice!!! People in refining lost their jobs to profit rich men

Is this what Americans are paying high prices to support? Neocons argue that oil companies deserve there profits just as farmers deserve their profits.

WHAT a crock! Now, do we get it? Republicans are nothing but liars and anti-American! What would we do if we really needed that refining capacity? They have harmed America. The rich are not loyal to America, or God let them worship their money!

[CONN]

41. Back in Dec 99, when gas was 97 cents, Exxon and Mobil said...

their new would not be a monopoly...
http://www.timeforkids.com/TFK/class/wr/article/0,17585,59440,00.html

[Mountainman]

42. If you reduce the supply of course the demand pushes up prices.

Here in Bakersfield Shell closed down it's refinery this year. Another company bought it and will operate it, but while saying there was increased demand, they shut down a refinery. Go figure. We need independent refineries to produce gas at a more reasonable price while we find alternatives to fossil fuels.

[Up2Late]

43. O.K., I guess someone should ask, Why is MSNBC just NOW reporting this?!?

Here are more links to this story, and the people who have been trying to get this into the MSM, not that MSNBC is actually the "MainStream Media," I mean, how many people in this country get MSNBC on their Cable, let alone actually watch it?

<http://www.consumerwatchdog.org/>

NEWS RELEASE
September 7, 2005

CONTACT: Jamie Court [phone] ext 327 or Tim Hamilton [phone]

Internal Memos Show Oil Companies Intentionally Limited Refining Capacity To Drive Up Gasoline Prices

Santa Monica, CA -- The Foundation for Taxpayer and Consumer Rights (FTCR) today exposed internal oil company memos that show how the industry intentionally reduced domestic refining capacity to drive up profits. The exposure comes in the wake of Hurricane Katrina as the oil industry blames environmental regulation for limiting number of U.S. refineries.

The three internal memos from Mobil, Chevron, and Texaco (Click here to read the memos.) show different ways the oil giants closed down refining capacity and drove independent refiners out of business. The confidential memos demonstrate a nationwide effort by American Petroleum Institute, the lobbying and research arm of the oil industry, to encourage the major refiners to close their refineries in the mid-1990s in order to raise the price at the pump.

"Large oil companies have for a decade artificially shorted the gasoline market to drive up prices," said FTCR president Jamie Court, who successfully fought" to keep Shell Oil from needlessly closing its Bakersfield, California refinery this year. Oil companies know they can make more money by making less gasoline. Katrina should be a wakeup call to America that the refiners profit widely when they keep the system running on empty."

"It's now obvious to most Americans that we have a refinery shortage," said petroleum consultant Tim Hamilton, who authored a recent report about oil company price gouging for FTCR. (Click here to read the report.) "To point to the environmental laws as the cause simply misses the fact that it was the major oil companies, not the environmental groups, that used the regulatory process to create artificial shortages and limit competition."

The memos from Mobil, Chevron and Texaco show the following:

* An internal 1996 memorandum from Mobil demonstrates the oil company's successful strategies to keep smaller refiner Powerine from reopening its California refinery. The document makes it clear that much of the hardships created by California's regulations governing refineries came at the urging of the major oil companies and not the environmental organizations blamed by the industry. The other alternative plan discussed in the event Powerine did open the refinery was "... buying all their avails and marketing it ourselves" to insure the lower price fuel didn't get into the market. Click here to read the Mobil memo.

* An internal Chevron memo states; "A senior energy analyst at the recent API convention warned that if the US petroleum industry doesn't reduce its refining capacity it will never see any substantial increase in refinery margins." It then discussed how major refiners were closing down their refineries. Click here to read the Chevron memo.

* The Texaco memo disclosed how the industry believed in the mid-1990s that "the most critical factor facing the refining industry on the West Coast is the surplus of refining capacity, and the surplus gasoline production capacity. (The same situation exists for the entire U.S. refining industry.) Supply significantly exceeds demand year-round. This results in very poor refinery margins and very poor refinery financial results. Significant events need to occur to assist in reducing supplies and/or increasing the demand for gasoline. One example of a significant event would be the elimination of mandates for oxygenate addition to gasoline. Given a choice, oxygenate usage would go down, and gasoline supplies would go down accordingly. (Much effort is being exerted to see this happen in the Pacific Northwest.)" As a result of such pressure, Washington State eliminated the ethanol mandate -- requiring greater quantities of refined supply to fill the gasoline volume occupied by ethanol. Click here to read the Texaco memo.

FTCR is nonprofit, nonpartisan consumer group. For more information visit: <http://www.consumerwatchdog.org>

<http://www.consumerwatchdog.org/energy/pr/?postId=5110>

http://www.net.org/proactive/newsroom/release.vtml?id=29028]

Refineries: What's Really Going On

September 28, 2005 • View as PDF

Washington, DC — Chairman Barton is shamelessly taking advantage of Hurricanes Katrina and Rita and record high gas prices to ram through several pro-industry proposals. One of the most flagrant examples of this are his efforts on behalf of the refinery industry. Chairman Barton claims environmental regulations have stopped construction and expansion of refineries. Nothing could be further from the truth.

Why "no one has built a new refinery in 20 years"

The reason the U.S. is facing limits on its refining capacity is because for decades the industry has been a mature, low profit-margin business. During this time it has significantly less expensive and more profitable to consolidate operations and increase the output at existing refineries than to build new refineries. According to the Department of Energy, the number of refineries has decreased from 223 in 1985 to 149 in 2004 yet production has increased by 30%.



<http://www.net.org/proactive/newsroom/release.vtml?id=29028>

(more at link)

From the PBS show NOW:

<http://www.pbs.org/now/transcript/transcriptNOW145_full.html>

11.11.05
Archive:
NOW Transcript

...SEN. RON WYDEN: There is no doubt that during the 1990s, if you just look at the oil companies' own internal documents, that yes, in fact, what they did is look at how to limit production in order to boost their profits — not my words — the words of the oil industry.

MARIA HINOJOSA: Oregon's senator Ron Wyden … who's been following this issue for years … is referring to internal industry documents that came to light during Congressional investigations and court cases.

One example, a Chevron memo from 1995, which included this warning from an energy analyst … "if the U.S. petroleum industry doesn't reduce its refining capacity, it will never see any substantial increase in refining margins …"

That's margins, as in profit margins.

Senator Wyden charges the oil companies have actually rigged the market.

You're making a charge that they're controlling that, controlling so that they can make more money?

SEN. RON WYDEN:Yes, what I'm saying is anti-competitive practices contribute significantly to the profits that the oil companies make and to the pain that our citizens are seeing.

JOHN FELMY: It's utter nonsense to make an argument that the industry has somehow tried to reduce capacity.

MARIA HINOJOSA: John Felmy is the chief economist for the oil industry's trade group in Washington, DC.

JOHN FELMY: If you look at what we have done as an industry, we've both expanded capacity, and we're planning on expanding capacity even more....

(more at link)

<http://www.pbs.org/now/transcript/transcriptNOW145_full.html>

[NJCher]

44. "Be careful: We can lower the cost of oil."

Just reported on Sixty Minutes. An ethanol entrepreneur who has had enough success to be threatened by Big Oil, revealed this threat on tonight's show.




Cher

[Imagevision]

45. The Oil companies are scewring us all with Bush&Cheney's support!!

Bush & Cheney, first and foremost are oilmen, this country has never known such corruption.

[tennlib]

46. look no further

than the secret energy policy meeting with Dick "shotgun" Cheney,the rest is just business as usual.

Yes,my republican son-in-law laid that lame "blame environmentalists" B.S. on me and I asked him how come we didn't have this during the Clinton years? He replied that the terrorists and 9-11,"changed everything",sound familiar?

[brentspeak]

47. Oil industry might very well be lying about "shortage of supply"

The other week, Occidental Oil reported record profits on record production.

Record production?

[Blue_Tires]

49. ttt for those that didn't get the message

[lavenderdiva]

50. I sent the OP's article to a friend who works at Chevron...

the following article is their reply:

link: http://www.thestreet.com/_tscs/stocks/energy/10283101.html

The Oil World's New Bullies

By Jim Jubak
MSN Money Markets Editor
5/3/2006 7:30 AM EDT

No need to feel sorry for the Exxon Mobils of the world while you're filling up your tank with $3-a-gallon gas. Who can feel sorry for a company that earned $36 billion in 2005, more than any U.S. company ever?

But as you seethe about $3 gas now and worry about $4 gas next year, remember that Big Oil isn't calling the shots anymore. Venezuela has forced Exxon Mobil to slink out of the country and has made Chevron and ConocoPhillips pay a 75% hike in royalties and a 50% increase in taxes and say, "Thank you, sir, may I please have another?"

Russia is blackmailing all of Europe by saying "Sell us your natural-gas delivery companies or no natural gas for you." Iran has thumbed its nose at the U.S. and the U.N., figuring that the world needs its oil too much to actually do anything about its nuclear weapons program. And Chad got the World Bank, the U.S. government and Exxon Mobil to cough up disputed royalties by threatening to shut its oil pipeline.

Boy, you know you're in trouble when Chad, a country of 8.1 million people living on 1.3 million square miles of desert, can push you around.

How did Russia, Iran and Venezuela get to be the new bullies of oil?

It's not simply because they export lots and lots of oil -- although that certainly doesn't hurt. In 2004, according to the U.S. Energy Information Administration, Russia was the world's second-largest oil exporter after Saudi Arabia. Iran was the second-largest oil exporter in OPEC (the Organization of Petroleum Exporting Countries) after, again, Saudi Arabia, and the fourth-largest oil exporter in the world. Venezuela came in at No. 5. (For the record, Norway rounded off the list of the top five exporters at No. 3. It's only the seventh-largest oil producer in the world, but because of its small population, the country exports almost all of what it pumps.)

The clout of these new bullies really results from their stranglehold on the world's big pools of discovered and discoverable oil.

snip:
The bullies' leverage on the world's energy supply is even greater if you consider that some of the world's biggest oil fields outside the control of the bullies or of OPEC are mature and look like they're headed into decline. While predicting a field's peak is always tricky, as since new technologies have been remarkably effective at prolonging the life of "mature" fields, most experts are predicting that production from the big oil fields of the North Sea and Alaska will peak by 2010 or 2015. So the bullies' share of global oil production will climb even higher, thanks to lower production from those fields.

The new oil bullies are showing no reluctance to throwing their weight around. Russia has threatened to cut off energy supplies or to jack up prices to force some of its neighbors to give Gazprom control of pipelines that move natural gas from Russia to European markets. Gazprom's deputy chief executive Alexander Medvedev told European Union officials the outfit would retain its export pipeline monopoly for decades.

snip:
So how do you deal with an oil bully?

Exxon Mobil has decided to take its ball home and wait for the bullies to self-destruct. In Venezuela, the company refused to renegotiate deals and simply walked away from projects. There's some evidence that in the long run Exxon Mobil's strategy will work. Production from the national oil company PDVSA is down about 60% under Chavez because of poor management in the oil fields.

snip:
Most oil companies aren't sitting on reserves the size of Exxon Mobil's, and they don't have the $29 billion cash balance that Exxon Mobil had at the end of 2005. Chevron, for example, which has been struggling to show production growth despite a raft of new discoveries, has concluded that it needs to get along with the bullies somehow. Besides agreeing to put the Kremlin's man in charge of a key pipeline, the company has entered into talks in Venezuela that will increase taxes and royalties and cut production but still keep the company in the game.

snip:
And to get angry drivers off their backs, Republicans in Congress have proposed sending out $100 checks so drivers can keep buying gas to fill their cars at the pump.

That will sure fix these bullies. Raise gas prices to $3 a gallon, huh? Well, we'll pay that. And we just dare you to raise it some more.

It's a message oil bullies -- old and new -- will certainly understand. It's just not the one that we ought to be sending.

There may be some merit to what this article states, but IMHO, I still think that the oil companies are manipulating the market to their benefit, whether its by closing refineries, or other means. Of course, my friend who works at Chevron, will hear no part of that. According to them, "While oil companies are making more money right now, we are investing tons more to find more oil and gas (natural supply and demand curve) -- and I know just how hard that is, because oil is harder to find and more difficult to extract. Reserves that we could not even contemplate developing just 2-3 years ago are now being considered as viable projects...... We're not so big, and our future is not so bright. The world is our competition, and lots of countries are looking out for themselves; the US however is not one of them. Personally, I believe folks need to start realizing that the US oil companies are not part of the problem ... they are part of the solution. In the end, the US needs to become less dependant on oil, period. Providing cheap fuel is not a way to make this happen."


Hmmmm....

[killbotfactory]

52. Wow! I only heard about this months ago!

Way to break a story, MSM!