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This is my effort to share my thoughts with readers about concerns facing our country today.  I believe there is a good chance my grandchildren may be the first generation in the history of this great country not to have a better standard of living than their parents. If so, our generation is to blame. The clock is running out for damage control. .

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« Wasted Gasoline | Main | Yet Another Bad Idea from Congress »
Wednesday
Jul092008

The Oil Business

I spent most of my working life in the oil business. I have a pretty good perspective of how the business works, a perspective that allows me to realize how little most Americans understand about the business, especially congress. 

Congress is succeeding in sending Big Oil packing. They are making small announcements. Basically, they have had enough of American politics and this country means very little to them since they are global. There are many places in the world where their resources are welcome. When they leave, they will be missed down the road.

Both BP and Exxon are selling all their retail assets in the U.S. This is step one. Next, they will sell refineries, pipelines, and terminals. Those assets will be purchased. In pieces. And, by buyers with less capital. Capital that needs to be used for maintenance and upgrades. The buyers will milk the assets. 

The petroleum refining, distribution, and marketing system in the U.S. is the most efficient of any in the world. Crude and finished products flow all over the U.S. by pipeline, barge, and through product exchanges. This keep costs down. Ethanol must be subsidized because it can't be shipped in this system. It must be trucked everywhere. Shipping petroleum products by truck is very expensive. When the big boys leave, all this efficiency will leave with them.

Obama will make this go faster with windfall profits tax.

The major oils have the best people and technology in the world to find and deliver crude oil. Mexico and Iraq understand this and they are working hard to get them to help them with old tired fields. Here, we want them out.

At some point in time when we are so deep in the quagmire of energy depression, we will be begging them to come back and help us out of the mess congress put us into. They may be busy. Westinghouse had the same assets when it came to building nuclear power plants. The best people and the best technology. When we stopped nuclear plants here, they sold that to a Japanese company. Can't get it back. 

Gasoline retailers are going out of business at the same rates they did in the 70's . The cost of credit on $100 fill-ups, margin squeeze, and drive offs are killing them. What does this mean? You will find it less convenient to buy gasoline. You will drive further. You will need to plan ahead.

Once again, the very people who have kept us in energy with band aids despite congress putting up obstacle after obstacle to make it harder are throwing in the towel. They won't be alone. Nor are they the first. We have run a lot of businesses out of this country with actions from Washington. Our attitude toward business has gone from friendly to hostile. From taxes to regulations to requirements we have made this a bad place to do business. 

When Big Oil leaves they too will be missed. Supply reliability and cost will suffer. Drilling in hostile places with environmental conscience will suffer. Just remember, no one in congress can produce a barrel of oil, make a gallon of gasoline, run a retail outlet, or put it all together to do it in an integrated cost efficient way. Congress won't be missed.

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