How things work
 

HOW THINGS WORK
Having worked in the Oil and Gas industry and the Utilities industry, I would like to clear up some misconceptions. The Oil and Gas industry does not set the price of the product. That is set by the futures market. The Utility industry uses oil and gas to produce electricity. The Utilities industry does not set the price of electricity. That is set by the regulatory commissions of states or municipalities.
When the amount of a given product is restricted and the demand for that product is increasing the price of the product will increase according to demand.
So, when the price of oil and gas goes up what happens.
Transportation costs rise.
Costs rise to ship raw materials.
Manufacturing costs rise.
Distribution costs rise.
Add the rise in costs for each step of the manufacturing process from the ground to the store and the increased costs are substantial. If you are in business, which one of you is willing to reduce your income to keep costs down. How long will you stay in business?
And if someone artificially restricts the flow of energy what happens?

Wake up before it is too late!

I have worked both industries as well. I have always played a location quiz with myself, "where would I want to live if oil hit $200 per barrel or higher?" The answer has always been where heating costs are minimized, and water, and food is grown in the area. One can survive heat with shade and water, but cold requires heat to survive. Food and protein food requires water and sunshine and the longer the growing season the better.

With capitalistic (lowest cost) optimization the colder areas, having shorter to very short growing seasons, require substantial vehicular imported food, and imported heat supply as well. These all require extra income to remain.

FL, Southern CA, HA come to mind as the best locations for these factors. Hence, a home in TV is also attractive, relative to the Northeast or other northern locations.

However, don't forget there is demand destruction as prices rise. . . demand destruction for petroleum based products will occur as prices increase. For those who have deferred big maintenance for cost, one might want to make plans to get it done sooner rather than later, especially with asphalt shingles. Maybe the ARC will become more open to longer lived metallic roofing material. If there was ever a time for the allowance, now is the time to be approving the options.

Mass generation from renewables is difficult due to the instability of production. Complimentary to petroleum based absolutely the future, but storability of electricity is difficult and somewhat dangerous, with that much energy stored in such a small space. . more research needs to be done, and there has been a lot already, which is not publicized.

So at the moment, the world could be at peak population and luxury, but the future remains uncertain. And I don't count out the creativity of humans who have exceeded the natural human capacity limits of the planet.

hopeful guy

For regional prices you may well be right, I can't say, but I can say for local prices that those are set based on local competition, and each major brand shops all the stores around it and reports current prices to headquarters who then runs the numbers and instructs the station manager what price to set for that day.

A major driving factor is also supply chain - it is "critical" that refineries be kept running a close to 100% capacity, to maximize efficiency. If the refinery is producing at 100% it has to have someplace for the output to go, tank farms, which then have to be kept "not full" by shipping the gasoline to the stations and topping them off. If the gas is not selling fast enough to keep the tank farm empty enough for the output of the refinery to keep flowing they will drop prices to stimulate buying and relieve the backup.

It's a constant balancing act to keep the gas flowing.

I worked at the retail end the pipe for 4 years.

I agree with a lot of this. And to put a number on it, we - humans - now consume more resources than the planet can replace by July this year. The chart of this page shows that in 1970 the earth was able to completely replace all consumed resources every year. Then in 1971 we began consuming more and more each year.

This means we are running out of resources, food, oil water, wood, minerals, etc. Sort of like living beyond our income. Eventually, bad things happen.

Earth Overshoot Day - Wikipedia

Gas is Expensive
 

With the stupid war going on prices are likely to go higher. The prices are already high enough that it’s worth the risk to drill and explore more places for oil.

I hope more oil pipelines open and drilling is done before the prices drive inflation up farther. I love the thought of alternative energy, but it takes more than a decade to get where other countries are (ie. Germany) and what is there number one gripe? Where will we get our oil from?

We are extremely blessed to live in a country with more than adequate resources ������

Too much information, requires more thought than, Its the fault of------------------ insert favorite 3 word villain

The Utilities industry does not set the price of electricity. That is set by the regulatory commissions of states or municipalities.

The actual companies need to submit a change or rate case to the regulatory commissions for their confederation. Many times the cost is recovered after the fact.

...it’s worth the risk to drill and explore more places for oil.

The number one threat to we humans is climate change. Covid comes along and diverts us, then the invasion of Ukraine, but these will pass whereas urgent action is needed now, and for the next 30+ years, to keep the Earth habitable for us, our children and others down the line. Drilling for more oil, just to keep short-term prices down, is totally the wrong way to go.

...it takes more than a decade to get where other countries are with renewable energy.

Sitting on our hands and saying "we can't do this" is hardly the American way. The USA has long coastlines with plentiful offshore wind, and huge tracts of land suitable for solar (including parking lots and on buildings). Yes, it takes time, but kicking that can down the road is not the solution.

Gas prices hit over $5.00 in 2008 - and yet, we survived.

And during the last quarter of 2021, Exxon Mobil, Chevron, Shell, and BP made close to $25 billion dollars in profits.

That is your opinion, and you are certainly entitled to it.

However, the current USA appetite for fossil fuels cannot be satisfied by wind, solar, hydro or tidal technology. Recall that in the 1950's and 60's, expectations were that nuclear energy would save us all. That has not gone well. We still have air travel that is totally dependent upon fossil fuels. In fact, about 80 % of all US energy is still dependent upon fossil fuels. Unless someone has an immediate solution for eliminating the need for all fossil fuels, we need to keep supplying them until they can be retired. Probably better for the US to supply its own requirements than to buy from foreign sources.

Would take several books to explore the issue of energy costs. Interesting is the fact that people being people will suggest it is anyone's fault but theirs. I've done some reading on the subject.
We talk price of a BARREL OF OIL. How many know how many gallons is in a barrel and why? I had thought it would be 55 gallons the size of a chemical drum. If, I recall, I read it a long time a ago, a barrel of oil is 42 gallons and it is based on the size of a beer barrel that they used to ship oil in. Then, what do they get out of a barrel of crude? Look that one up and you will read they get more out of the 42 gallons of crude than 42 gallons. HUH?

No longer shown on the oil pump. Roughly 1/3 of what we pay for gasoline is TAX.

.I used to drive quite a bit and burn far more gasoline. I can honestly say I use about 20% of what I used to use. The TRUTH, I am no longer working and I no longer produce anything-OOPS.

Cut your fuel use by say 10%. For most truly easy. Combine trips. Pick up for others.
Take others with you-next time they should take you.

IMHO, it's the middleman that makes all the money when it comes to supply and demand issues

just saying

I am glad to see I am not the only one who is cognizant of what is going on in the World. If only people would become informed they would be able to see through the misinformation generated by people who are manipulating the public for their own self interests or aggrandizement.

I don't know. I didn't do anything special last week. In fact, I might have used less fuel than normal. Still, gas prices skyrocketed. Not sure it's my fault.

Cut back by 10%? Will only make up about half the increase in price from last week alone!

In early February oil was at $90/bbl while today oil is 28% higher at $115/bbl and gas is up to $3.99/gal. Price of oil does not seem to be driven by supply or demand since neither have changed in the last month. The only thing that seems to be driving this increase is speculation and greed and those are certainly the fault of someone other than me.

My point is not that the USA can become 100% non-dependent on fossil fuels overnight, but that, rather than drilling for more oil, it should be finding ways to use fossil fuels more efficiently and to focus on renewables, just as many other countries have successfully done.

The country has continually avoided doing so because the coal and oil industries have so much influence over Government officials. (Why else would SUVs be allowed to be counted as trucks in order to fudge automobile fuel economy figures?)

So many people in The Villages refuse to make any changes to their lifestyle, even though most of them have children, grandchildren and great-grandchildren who are going to be the ones bearing the brunt of our continued insistence on using huge amounts of the Earth's resources and polluting the water and air.

Stop making excuses; start taking action.

Some people that what mainstream news have no idea the pipelines were shut down also.

So, what lifestyle change actions should we start? Should we all go solar, quit air conditioning, stop driving fossil fuel vehicles, eliminate air flights to see family, quit riding fossil fuel buses, trains, boats? Should I buy a Tesla and power it by solar. Should we stop using water systems and sewer systems powered by fossil fuel. Quit buying food that has been grown and delivered by the help of fossil fuel?

I get buying a car with good gas milage and not wasting cooling and heating energies. But the question is to inform us what else you would recommend that we individually should do to eliminate the dependency of using fossil fuels for 80 % of our energy needs.

It is easy to say stop making excuses and start taking actions.
Please tell us your experiences that will help us eliminate excuses.

Thanks

Oil
 

If prices continue up, look for every Bubba Gump with more than an acre sporting their own oil wells.

I can just see it now, signs “Home Pumped Oil Here/Fresh Oranges”

Or

Sun headline, “ ARC denies well drilling request again…will be reviewed “

Gen IV Nuclear
 

Agreed. We also need to increase the number of nuclear power plants to replace fossil fuels. Long lead time but at least the Gen IV reactors are significantly safer and have reduced waste.

Walmart gas went down this week by .20 a gallon. Just sayin….

It's truly unfortunate that the price of an essential commodity is determined by speculators in the futures market. They often make a large amount of money yet produce nothing! I wish their was a better way to set prices abd ensure a fair profit for the actual
producers

?? We saw $3.59 -> $3.79 -> $3.99. What price change did we miss?

'08- '16 gas prices high. '16-'20 gas prices reasonable, '21-now prices high. You do the math.

THE NUMBER ONE THREAT TO HUMANS IS NOT CLIMATE CHANGE. Look at the countries that are not too stable that have Nukes.

Drilling for more oil is not just to keep the price down. It is to be self sufficient so we don't have to consider Iran or Russia as a place to give our money because we need them.
We don't have to sit on our hands over the next decade and we are not sitting on them or kicking the can down the road. Fact is there are a lot of questions about the production and sustainability of alternatives that are being looked at and addressed right now.
In the mean time we need and will need for some time, oil and gas and fossil fuels.
We don't have a military that can recharge it's tanks or planes on wind currents or electric chargers.
Our present fuels are needed for all of our manufacturing (including making electric, solar, and wind devices) and distribution of goods . We can work on solutions but we have to live in the meantime.

Strictly speaking the price of oil does determine the price of electricity and the state utilities commissions are there to make sure that the company's remain profitable and pay their 8 to 10% dividend yearly. When the price of natural gas goes up the electrical companies have to make it up in higher rates to the consumers. The futures markets as you say work by regulating future supply and demand and offloading some potential risks for a large users such as airplane companies who can buy futures for the next one or two years for their jet fuel as it is a major component of their operating costs it's the same thing as corn futures and pig bellies if you ever watched the movie trading places you understand .
More to the point the seasonal weather has a lot to do also with gasoline prices and weather refinery switch over to making heating oil for the Northeast homes that need it to warm their housing.
Another big factor that nobody mentions is that we have a problem about 100 large refineries in the US and if one or more of these go down for maintenance there is a bump and spike in the price of gasoline. This is a huge national concern that nobody talks about is these refineries cost about a billion dollars to build and the concern is that there is a very tight relationship between gasoline refined and are supply and demand in the US through these refineries actually very closely match up to our needs so that if two or three of these are out of commission prices will definitely Spike

The number one thing that should be done is more research on how to make seller sales less expensive. If it cost me $5,000 instead of $25,000 to power my house by electricity off of my roof I guarantee you everyone would be doing it tomorrow.

When I was born back in the fifties the world population was estimated to be 3 billion. We had huge starvation in Africa and India and China. Today the world population is somewhere between 6 and 9 billion and they're still starvation but I bet there's a lot less of it. Back in the 50s we were told there would be no more oil in the '60s and '70s and 80s and yet we are pumping 200% more or 300% more than we ever have. I'm not against electric cars but I'm still waiting for these green people to say okay to nuclear energy as that's the only way to get more electricity to put into my so-called electric vehicle

Just like our social security inflation raise where we only get increases after the fact also!

According to this chart from the EIA, your dates are a bit off.

2002-2008: increasing
2008: sharp decrease
2009-2011: increasing
2011-2014: flat
2014: sharp decrease
2015-2020: relatively flat
2020: pandemic decrease
2021: increase (post-pandemic demand surge?)
2020: Putin/Ukraine increase

Buy a Tesla

Climate change has been talked about for over 100 years. These papers from scientists stated the risk of rising waters in the next few years, that was back in the 1920’s. IMO, this subject is more political than in reality.
Also, it’s not true that we are running out of a minerals. Back in the 70’s, my natural resources college class told us we will run out of oil in 10 years. What we don’t realize, any statement about mineral availability is using current technology. Back in the 70’s, they could only drill X number of feet but new technology allows us to find bigger reserves at lower depths and drill down further. This is true with other natural resources.
The cost of gas, home heating all comes down to the costs of a barrel of oil and natural gas. If oil/natural gas goes up in price, utilities are allowed to pass these new costs along with no issue. Same goes for gas.

Oil and gas
 

And everyone knows who is really the blame!!

Well said. Career geoscientist here urging everyone to MAXIMIZE their carbon footprint.

Future generations of entitled snot nose kids will be no more responsible with energy than we were.

It's them!

This conversation was way over my head. Is there a book or video on Energy for Dummies?

I heard that the US produces more oil than it consumes and that it goes into the world market, not directly into the US distribution system. So, additional oil wells will apparently not help solve our price situation if that's true.

It was, but not currently...

Totally disagree. Planes don't fly on electricity, trains don't run on electricity or wind, semis don't run on electricity or wind, etc. The climate change hoax is simply that. Over the centuries the world has gone through cycles of warming and cooling. Remember that not that long ago, time wise, the entire mid-west was covered by a glacier. When is receded, that is how the Great Lakes got formed. Today the Greenland ice mass is growing. There are as many scientist who dispute the claim of climate change as those who claim it is real. Too many manufactured reports have been written supporting the climate change philosophy, only to be proven wrong because they used made-up numbers. We can drill, produce and use fossil fuels for centuries without spending the multi-trillions of dollars being spent on something that is not imminent. Saying this, I do support making use of all energy sources, but it has to be practical and of optimal cost. Diving headlong into this development, while totally discounting fossil fuel is foolhardy and costly.

Don't forget all the petrochemical plants that produce thousands of products (not energy) from oil. All types of plastics, insect repellants, computers, paint, fertilizers, over-the-counter medicines, cleaning products, rubber, cosmetics, lubricants and asphalt. This list goes on and on, thousands and thousands of everyday items. Add that to the cost of truck diesel/gas to transport back and forth. If you think inflation is high now, just wait until these increases are passed along. Just something to think about........

Running a Business
 

Good points. Unfortunately those who have never been in business or run one have no clue how commodity prices affect their bottom line. Every thing that moves [ships] are affected by the cost of fuel. Again, those who have no clue don't understand that utilities are regulated but their costs of producing that "river of electricity" we all tap into are subject to the cost of the fuel that creates the electricity. The commodity that transmits and delivers electricity, the copper and aluminum wires, are subject to the price rises in these products. It is all connected in some way and those who don't understand running a business are ignorant of these facts. All they do is play the "blame game". There's plenty of blame to go around, but our [USA] of dealing with oil production, sending manufacturing overseas, curtailing mining, oil exploration and pipeline construction are all to blame for where we are today. Why didn't we have compressed natural gas cars years ago? Now we are shipping natural gas to Europe where they are paying 10 to 20 times what we sell it for in the US per therm. Any company that can sell their product at those rates are fools for not doing so. Do you want to pay $50 to $100 per therm of natural gas?