Benjichang wrote: I remember seeing something like this will drop prices by $.02. In 25 years. Can't back that up right now though.

Yeah, the whole "its a supply and demand issue" goes right out the window. It is so much more complicated than just more drilling. However, it is a bank by the government that the public is stupid enough to believe it would be good.

blackdog144 wrote: either way, i think we need to start drilling offshore...who knows what would happen to prices.

The analysts have a pretty good guess. Which is why they say we won't see a price drop because of it. However, it works to increase our dependence on oil. Maybe not foreign oil, but still oil.

Da Hui wrote: Dune, did I misread your post or did you just say something to the effect of "supply and demand does not matter" in relation to gas prices?

I'm not saying supply and demand have no effect. However, as demand has actually dropped in the US by 5% with no effect on oil prices (which any large country dropping demand tends to lower world prices in an international market), there is more to it. The weak dollar has brought in investors hedging their investments within oil companies, boosting prices. Speculation is also a large possibility, as claiming prices will be over a certain amount can be a self-fufilling prophecy for international markets. In addition, OPEC has their little game they like to play. Calling it supply vs. demand paints a black and white picture which it is not. Demand in China is definitely up, but drilling in the US will not produce enough barrels to drop prices by tomorrow. Like I stated, it may help to reduce our dependence on foreign oil, but will not increase supply to match domestic demand and level off or reduce our prices significantly.

brihard wrote: You guys missed Carl saying something smart. He is correct in identifying that refining capacity is part of the current fuel price crisis. All the oil in the world does you no good until it is rendered into usable distillate products.

Definitely true. Although I definitely do not know enough about refinery capabilities and technology.

pntbl freak wrote:   The biggest thing right now that would help lower prices would be a government cut on gas taxes.

Not exactly...  If gas prices suddenly dropped by a buck, what would happen?  Why people would buy more gasoline, which would drive prices up...by maybe a dollar.  The price drop would be very, very shortlived.  McCain's "gas tax holiday" is idiotic pandering, and any economist will tell you so.

Inexact, to be sure, and it wouldn't even out that nicely, but taxes on commodities do not really impract prices so much as they impact the demand.  This holds true in the relatively low rate of taxation that we are talking about here, anyway.  It you added a $10/gallon gas tax, that would be pretty much guaranteed to raise gas prices, but fifty cents here or there on a four dollar commodity is not a price determinant.

As to refining capacity, here is a thought:  Building more refineries might be uneconomical.  Oil prices could very well keep increasing for some time, but gas prices have a natural cap, and we are getting close to that cap - as evidenced by how we are actually (suddenly) driving less.  At some point increased gas prices lead directly to reduced volume.

Refineries rely on buying crude oil at $X and selling gasoline (or whatever) at $Y, where Y>X by a margin big enough to pay for the construction/financing/operation of the refinery, plus a reasonable profit.  It takes several years to develop/build a refinery, and then you lock in financing for 10+ years.

So to make a refinery economically worthwhile, you need to have great confidence that Y>X will remain true for the next 10-15 years, and by a large enough margin to pay off the debt, operate the facility, and make a profit.

Opening a new oil extraction operation, however, is relatively easy (although still subject to the same financing/profit calculation), and most major oil companies have reserves that have break-even points well below current oil prices.  And with the oil field, you only have to worry about oil prices, not gasoline prices.

So if you are an oil company, and you have $500,000,000 to spend on development this year, would you rather invest in new oil fields, or a new refinery?

rockerdoode wrote: t_hop wrote: One of the biggest problems are the idiotic people that won't let us drill in places like remote Alaska or anywhere else in our direct domain. WHY? why can't we drill in these places so close to home? because it will kill a frog. And I don't have the facts down perfectly but I have heard that the oil companies are only drilling on a fraction of the land that the government has granted them to drill on. whats up with that? Well, last time I checked there were a lot more polar bears than frogs in Alaska, and Polar Bears are endangered. I find the extinction of an amazingly interesting species a pretty good reason to not drill in one place when theres plenty of other places to drill. Go read a book.

I was only trying to put in perspective, I hope you know I wasn't saying that people were crying about frogs in Alaska. I would think the assumption that drilling in Alaska would indanger polar bears is a bit overstated seeing that there are 586,412 square miles in Alaska and only a fraction of which would become open to oil drilling. This certainly wouldn't bring about the extinction of the polar bear. I mean think about how big Alaska is.

check this out: http://patriotroom.com/?p=531 - http://patriotroom.com/?p=531

This guy is really dry but thats the simple fact of the matter, I don't see the effects of drilling on wildlife there. Oh wait its a wasteland and the caribou aren't bothered at all.

thanks for the book comment  I'm currently reading Enders Game

Pictures are pretty, but it is always dangerous to take one person's word for anything - particularly when that one person (a) is obviously partisan, and (b) has no particular knowledge on the subject matter at hand.

In this age of the internets, it is really inexusable to accept the uneducated and unsupported conclusion of a pundit without doing at least a little bit of research.

Three minutes on Google yielded this: http://arctic.fws.gov/ecoregions.htm - http://arctic.fws.gov/ecoregions.htm  - An authoritative source explaining at least some of the features that make this particular area somewhat special.  Whether that is enough to prohibit drilling is a more complex question, but a position on that subject ought to at a minimum be made with a teensy weensy bit of knowledge.

jmac3 wrote: I don't know how refineries work, but wouldn't building new ones make for more profits in the end because more fuel could be refined from oil? I am just wondering Rambino because what would a new refinery actually achieve if not that?

It's about choices.  You can invest your half-billion in a refinery or two, and face net returns of 5%-6%, or you can invest that same half-billion in oil fields, and get double-digit returns (numbers are made up).

Both are probably money-makers, but one investment is better than the other.  Even oil companies do not have limitless spending money - every investment has to be weighed against other potential investments, and you can only spend each dollar once.

Building and owning a refinery is a risky and expensive business with relatively poor returns.  Therefore, most people with that kind of money choose to spend it elsewhere.