Comment: BIG OIL



Bill Phillips spent nearly 50 years in the US oil and gas industry; most
of his career was with the Phillips Petroleum Company. Bill is a
descendant of Frank Phillips. Frank Phillips, along with his brother Lee
Eldas (L.E.) Phillips, Sr., founded the original Phillips Petroleum
Company in 1917 in Bartlesville, OK. Do you remember Phillips 66 gas
stations? Phillips Petroleum Company merged with Conoco, Inc. in 2002 to
form the current ConocoPhillips oil company.





So, when Bill talks about oil and gas issues, I tend to listen - very
closely. I think that you will find Bill's thoughts and facts very
revealing, very compelling and very difficult to argue with.





As you prepare to cast your crucial ballots this Fall, please think long
and hard about the far-reaching, cumulative effects of the US political
philosophies, policies and legislation that have contributed to the
current and future US oil supply situation.




May 28, 2008



"Big Oil"
Did you know that the United States does NOT have any big oil companies.
It's true: the largest American oil company, Exxon Mobil, is only the 14th
largest in the world, and is dwarfed by the really big oil companies--all
owned by foreign governments or government-sponsored monopolies--that
dominate the world's oil supply.



This graph below tells the story; you can barely see the American oil
companies as minor players on the right side of the chart in gray. The
chart was presented to the House committee last week by Chevron.



With 94% of the world's oil supply locked up by foreign governments, most
of which are hostile to the United States, the relatively puny American
oil companies do not have access to enough crude oil to significantly
affect the market and help bring prices down. Thus, ExxonMobil, a "small"
oil company, buys 90% of the crude oil that it refines for the U.S. market
from the big players, i.e, mostly-hostile foreign governments. The price
at the U.S. pump is rising because the price the big oil companies charge
ExxonMobil and the other small American companies for crude oil is going
up as the value of the American dollar goes down. They will eventually
bleed this country into printing even more money and we will go into
runway inflation once again as we did under the Carter Democratic reign.



This is obviously a tough situation for the American consumer. The irony
is that it doesn't have to be that way. The United States--unlike, say,
France--actually has vast petroleum reserves. It would be possible for
American oil companies to develop those reserves, play a far bigger role
in international markets, and deliver gas at the pump to American
consumers at a much lower price, while creating many thousands of jobs for
Americans. This would be infinitely preferable to shipping endless
billions of dollars to Saudi Arabia, Russia and Venezuela to be used in
propping up their economies.



So, why doesn't it happen? Because the Democrat Party--aided, sadly, by a
handful of Republicans--deliberately keeps gas prices high and our
domestic oil companies small by putting most of our reserves off limits to
development. China is now drilling in the Caribbean, off Cuba but our own
companies are barred by law from developing large oil fields off the
coasts of Florida and California. Enor mous oil-shale deposits in the
Rocky Mountain states could go a long way toward supplying American
consumers' needs, but the Democratic Congress won't allow those resources
to be developed. ANWR contains vast petroleum reserves, but we don't know
how vast, because Congress, not wanting the American people to know how
badly its policies are hurting our economy, has made it illegal to explore
and map those reserves, let alone develop them.



In short, all Americans are paying a terrible price for the Democratic
Party's perverse energy policies. I own some small interests in tiny, 4
barrel-per-day oil wells in Wyoming. We have 14 agencies that have
iron-hand jurisdiction over us. If we drop any oil on the ground when
the refinery truck comes to pick up oil from our holding tanks, we are
fined. Yet down the road the state will spray thousands of gallons of
used oil on a dirt road to control dirt. When it rains that oil runs into
rivers and creeks. Yet a cup of oil on the ground at our wellhead is a
$50,000 EPA fine plus additional fines from state regulating agencies.
They treat oil as if it were plutonium that has the potential to leak into
the environment. We are fined if our dirt burms are not high enough
around a holding tank, yet the truck that picks up our oil runs down the
road at 60 mph with no burm around it. People wonder why there is no more
exploration in this country. It's because of the regulators; people who
have lived their whole lives doing nothing but imposing fines on small
operators like us for doing mostly nothing.



So, America enjoy your $4.00 per gallon gasoline. Your dollar is now
worth 0.62 Euro-Cents. The lack of American production of GNP, the
massive trade deficit (as labor markets have moved overseas to fight
insanely high union imposed labor costs in America) and the run away
printing of money (backed by nothing of value here in America) has caused
the dollar to become more worthless on the international market. And
that's where our oil comes from. It's paid for with dollars that become
more worthless everyday. If we had just kept par with the Euro we'd be
paying $62 dollars per barrel for oil (42 gallons) or about $1.50 instead
of $2.50 a gallon for crude oil.



What the US government also does not tell you is that it is the
leaseholder and royalty recipient of most oil production and receives 25%
of the gross oil sales before we pay for electricity to lift the oil,
propane to keep the oil-water separators from freezing in the winters. We
pay a pumper to visit each well everyday plus we have equipment failures
all the time. We pay for that out of our 75% of gross sales. The
government does not share in any expenses to run any production well.
So, if the Big Oil Companies are making record profits, then so is the
federal government from it's 25% tax on every molecule of oil sold to a
refinery in this country. Why isn't the government on the stand for
"Record" profits? What you don't see is this 25% of the sales price of
crude oil being siphoned away by the government. That money plus the
road taxes, state taxes, etc. amounts to over $1 per gallon of gasoline
you are buying while the governments only admit to about 50 cents per
gallon.



To all you Democrats, when you go vote for your candidate, a blazing
liberal like Barrack Hussein Obama just keep in mind that their liberal
spending habits will further decrease the value of the American dollar on
the world market and your gasoline costs will hike even higher. As they
introduce more give-away programs, raise taxes on everyone to pay people
not to produce or work, your dollar will continue to dwindle on the world
market and you will be paying $10.00 per gallon at the next election.
Cheap hydrocarbon fuel is all over. Enjoy! Enjoy the fruits of your
decision to elect these folks when you are there in that voting booth and
you stab your pin through a Democrat's name.



William "Bill" Phillips

Just in case you've forgotten that his middle name is the same as a former Islamic despot. And his last name is sort of similar to that of a terrorist.

__________________
For when the One Great Scorer comes to write against your name,
He marks not that you won or lost, but whether you covered the spread.

Hmmm, the Democratic Party has had control of Congress for what, a year and a half? And yet, prices have been rising steadily for the last three years... How could that be happening? Well, it must be the Democrats fault somehow!

See, you've actually hit on the root of the cause here, but it's a lot harder to blame Democrats for the dollar's slide in value.

He apparently forgot who he's comparing the dollar against. I thought European countries had tax-and-spend socialist economies. So, if we have one of those too, the dollar's value will fall in relation to the euro? But the euro's value will stay high? Phew... it's hard to think like a Republican.

__________________
"Don't try to confuse me with the facts!"
Phil Hartman, as Bill McNeil

Surely, if the world is running out of oil, keeping US oil in the ground for later is a smart thing to do?

That made me laugh. How do they justify calling Exxon-Mobil, the world's largest company in terms of revenue, "small"? After Googling a little, apparently Exxon-Mobil ranks 14th in terms of oil and gas holdings. But first in terms of net income and overall revenue. And "It is also the largest publicly held corporation by market capitalization, at $501.17 billion on April 18, 2008." The Financial Times calls ExxonMobil "the world’s largest listed integrated oil company and arguably its most successful," though I'm not sure what they mean by "integrated."

The graph the OP is referring to probably looks a lot like this one, from the above-linked opinion piece by Steve Forbes:




By an odd coincidence, 94% of the world's land is locked up by foreign governments. Whether or not they're hostile to the United States probably depends largely on whether the United States has as belligerent an attitude as this guy seems to.

Well, as you found yourself, Exxon is 14th in terms of oil and gas holdings, and since oil companies are valued partly on the basis of their reserves, by some measures Exxon is 'small'. You also missed a key word, 'listed' - meaning that all the statistics about Exxon's revenue etc. being the highest are only in comparison to other publicly traded companies - there are larger, state run companies. Finally, Exxon's total production of world oil is small - less than 5% of world oil production. There is no denying Exxon is a very large company, but it is a very large company in a massively large industry, so it may not be inaccurate to call it 'small' relative to the size of the business they are in.

Integrated, when referring to oil companies, means that the company is involved in both upstream and downstream oil businesses - that is, the company produces oil (from the ground), ships it, refines it, and markets it. An example of a non-integrated company is Valero, who only refine and market crude oil, or some state companies that produce crude oil but do not refine it.

Ok, this is mostly bunk and exaggeration. The EPA allows for spraying oil on roads under pretty strict guidelines. First, the oil can have no hazard except flammability. There must be no known toxic chemicals present in the oil. Since almost all oil has benzene that takes the pool of possible oil to almost nothing. Second, If the oil can be recycled, it can't be used. Third, it can only be used in states that have their own Environmental Department, and only by permit by the state. Wyoming's Deparment of Environmental Quality says that it is always illegal to put oil on roads for dust suppression.

The Berms and such at a site are for secondary containment. There is a high potential in loading and unloading a truck for a spill. A truck going down the road has to meet DOT guidlines and be inspected regularly for any leak, and have a recovery plan in case of an accident.

As far as getting a $50,000 fine for spilling a cup of oil on the ground, Oil has a reportable quantity of 10 pounds released into the ground, or a visible sheen on water before contacting the National Recovery Center. If you have the proper berms, you shouldn't get oil in the water. However, Crude oil has an exemption on the reportable quantity under certain production circumstances.

Yeah, see, the regulations are there because of operators like you that did something. Take a trip to Times Beach, Missouri, or Love Canal and get back with us on the importance of regulations.

__________________
"I am somehow less interested in the weight and convolutions of Einstein's brain than in the near certainty that people of equal talent have lived and died in cotton fields and sweatshops." - Stephen Jay Gould

At this point, I know Bill is living in the distant past. While used motor oil was once sprayed on dirt roads to hold down the dust, this is no longer done.

According to Fortune Magazine, the biggest corporations in the world last year were:

If we are judging solely on profit, then ExxonMobil is clearly a huge company:

__________________
For when the One Great Scorer comes to write against your name,
He marks not that you won or lost, but whether you covered the spread.

Yet it's obviously large relative to the sizes of other companies in the same business, which is the relevant comparison. Mount Everest is small in comparison to the planet it's on, but large compared to other mountains.

And so the rhetorical question "do you know the United States does NOT have any big oil companies" is laughable.

The problem is Exxon isn't large compared to some of the companies in the business: "The "FT's Non-Public 150" by the Financial Times and McKinsey - the study of the world’s largest unlisted companies - found that Saudi Aramco is worth an estimated $781 billion USD, dwarfing the $454 billion USD market capitalisation of its rival ExxonMobil (published: December 2006).[8][9]"

Exxon is the largest publicly traded corporation in the world, but there are larger corporations, that are not publicly traded, especially in the oil business, where Exxon is not even in the top 10. That is all I was trying to say.

The oil majors now control less than 10 percent of world resources of gas and oil, against 70 percent in the 1970s, according to figures released by the office of Ernst and Young at the World Petroleum Congress in Madrid.

As a result they are being forced to explore in increasingly extreme conditions.

http://news.yahoo.com/s/afp/20080706...rgycommodities

You're misinterpreting data and making some factual errors, including some of the same errors as the article in the OP. Here is a list of the Financial Times Top 150 Non-Public Companies.

As you can see, Oil and Gas companies make up 12 of the top 13 biggest non-public companies, and like you say, the #1 company is Saudi Aramco worth $781 billion. What is in the #2 spot? Pemex, worth $415 billion. Smaller than Exxon, at least as of 2006. The weak dollar could put Exxon lower, but not nearly low enough to justify your statements.

Exxon not even in the top 10? The number 10 private oil company is only worth $103 billion. Many of these companies control more actual oil reserves, but they don't generate nearly as much revenue, for a variety of reasons.

For the record, in the business world, when one company is less than double the size of its next competitor, it does not "dwarf" it. Thats beyond hyperbole. Did you really think that there would be over 10 different oil companies all within the relatively narrow 40% margin between Saudi Aramco and Exxon? Its just not a realistic distribution.

Exxon is a massive company, and even in the huge oil sector, its one of the very biggest.

For the record, in the oil business, when one company has over 30 times the reserves of another, it dwarfs it. I think we may be judging by different measures here - market cap, revenue, reserves. I think that in the OP the claim is made to make people realize that the US, and US corporations, don't control much of the world oil supply. I think its a valid point, in that in the next 30 years, money and power may be more and more centered on the oil resource owners, and the IOCs will be structured more along the lines of service companies. People are already concerned about how much of our money goes to foreign countries to buy oil, what that means for our security and economy. And since even the biggest US company is only a small player it is only going to get worse. The OP presents this as a reason to increase domestic production and develop alternatives such as oil shale, and I think that is along the right lines but only as a stopgap measure, along with increases in efficiency, while we develop renewable alternatives.

In terms of oil and gas holdings, yes. As an oil company, no. Exxon does a lot of oil and gas business by developing and distributing holdings controlled by other countries. Thats like saying that McDonalds "dwarfs" Exxon and then later justifying the statement by saying that you're measuring solely in terms of french fries sold rather than revenue.

Except in the post where I was responding to your use of the term, you specifically defined your terms. And I quote:

Thats fine. I'm not going to object to that aspect of the OP. It just so happens that the stuff you were saying contained critical factual errors, and your incorrect post was the one I was responding to, not the other point made by the OP.