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Today, whenever a refinery hiccups, a pipeline ruptures, or consumers’ appetite for gasoline increases slightly more than expected, the response has been a dramatic increase in the price of gasoline. These increases are now routinely accompanied by the typical industry response that prices must go up in order to preven...
Of course, the response continues, these price increases are justified by the fundamental economic theory of supply and demand, and the resulting high profits generated by these price hikes are “healthy” for the industry. The economic implication of this latter statement is that these high profits will be reinvested in...
The industry has been content to use economic theory as a justification for the gasoline price increases we regularly witness when supply is temporarily curtailed, but the industry ignores the crucial corollary economic principle of what should be done with the exorbitant profits once they flow into the industry’s coff...
No one, not even an industry spokesperson, will deny that profits have been extraordinarily high in recent years. A review of the net income of the five major integrated multinational majors indicates record profits in recent years as shown below in Table 1. Total profits for these five companies were $83 billion in 20...
Now some will argue that a major portion of these profits has been realized by the upstream (exploration and production) stage of the industry due to high oil and gas prices which are out of the control of these companies. While we might debate the degree to which there is any control, Table 2 shows the trend in profit...
At the refinery level, refining margins have increased dramatically in recent years to record levels. According to Muse Stancil, & Co., the average refining margin for a Gulf Coast refiner in 2004 was a “healthy” $6.16 per barrel up from $2 per barrel in 2002. In 2005 that figure doubled to $12.53 and remained at about...
The corporation’s total ROCE is net income excluding the after-tax cost of financing, divided by total corporate average capital employed. The corporation has consistently applied its ROCE definition for many years and views it as the best measure of historical capital productivity in our capital-intensive, long-term i...
The other majors all use RoCE as their preferred measure of profits; as Table 3 shows, they have generated a very healthy return. In contrast, the all-industry average is generally in the range of 9 to 12 percent.
The most frequent explanations offered for the rash of gasoline price increases in recent years have been refinery outages, pipeline or other transportation disruptions, unexpected increases in gasoline demand, refinery capacity constraints and increases in crude oil prices. Of these explanations, increases in crude oi...
On the other hand, each of the other explanations reflects an imbalance between supply and demand which can lead to higher profits. Indeed, the industry rationalizes its price increases and the consequent profit increases on the basis of this imbalance, arguing that if prices did not increase by the amounts that they h...
Throughout the 1990s and into this decade, the major oil companies have continually drawn down their working inventory levels for gasoline at the same time that demand for gasoline has risen. As a general matter, gasoline prices will track the underlying costs of production plus some element for profit. However, in the...
Inventories will normally exhibit patterns typical of seasonal demand and supply fluctuations, especially for a product such as gasoline that is subject to seasonal patterns. Inventories also should provide a buffer or protection against short-term supply disruptions. The National Petroleum Council (NPC) has defined a ...
Most analysts see a causal link between gasoline inventories and wholesale and retail gasoline prices. Prior research has shown that as inventories reach low levels, prices do tend to rise and profit margins will also tend to increase. In each of the studies performed by EIA and the FTC of recent (since 2000) episodes ...
Yet the system itself is moving closer and closer to the breaking point such that any little “hiccup” in terms of a supply curtailment, even one that lasts only a couple of days, can cause precipitous price spikes. This was not the case prior to the year 2000 when the companies carried larger inventories. Refinery outa...
The industry says lower inventories save money and the savings are passed on to consumers. While this may be true, it ignores the cost to consumers of the price spikes that inevitably go along with these lower inventory levels. Since 2000, the country has averaged at least one price spike in most of the country each ye...
Our analysis of the price spikes since 2000 indicates that the average spike has lasted 3 months and cost consumers on average $0.15 per gallon. At a daily consumption level of 9 million barrels per day (or 378 million gallons per day), that is equivalent to a cost to consumers each year of $5.1 billion (378,000,000 * ...
Finally, the economic theory that the industry relies on to justify the price increases when supplies are not available, also states that in a competitive market certain companies will take advantage of future supply disruptions by carrying additional “strategic” inventories to meet the shortfall, gain market share and...
The other element of economic theory related to the justification for price increases in time of supply shortfall is that higher prices and their consequent higher profits will create an incentive for refiners to bring more supply into the market. This includes reinvestment of those profits into storage facilities (to ...
Figure 2 shows the changes in total refining capacity and inputs for each of the last three years for the five majors as a whole, both in the United States and throughout the world. As can be seen, total capacity and total input to that capacity has actually declined between 2004 and 2006. Inputs to capacity have decli...
Again, this runs counter to the economic theory that is used to justify gasoline price increases. Rather than reinvesting the high profits earned from these high prices in expanding the supply of gasoline, to the extent they have increased their investments in refining, the industry has largely directed that investment...
However, perhaps more important is the fact that the increase in the amount invested pales in comparison to the huge profits that these companies are earning. For example, in 2006, the top 5 majors earned almost $120 billion in profits, yet spent only $15 billion on refining and marketing investments. In prior years wh...
Where Have All the Profits Gone?
The plain fact of the matter is that the bulk of the increased profits the industry has been earning has gone to relatively non-productive uses and certainly do not reflect what one would expect under the economic paradigm the industry is using to justify its price increases. The companies have been able to increase di...
As can be seen, with most companies the amount used to buy back outstanding shares dwarfs the amount being reinvested in refining and marketing infrastructure which we have seen is not even going toward increasing gasoline supply. The buy-back of shares is not a productive use of these profits as it does not contribute...
Industry’s reliance on economic theory explains only half of the story of gasoline price increases. The industry has failed in two key areas to use its profits where economic theory says it should: (1) to maintain higher inventories and (2) to invest in more refining capacity. This failure results from industry’s colle...
The industry is well aware of this economic reality and thus can act opportunistically whenever a minor supply disruption occurs by raising prices precipitously, knowing that demand will not slacken much, and consumers will pay the higher price. Furthermore, as all companies carry relatively low inventories, the likely...
From a policy perspective, some action must be taken to increase investment in refining and gasoline manufacturing capacity as well as to stimulate an increase in the stocks of gasoline and other petroleum products. Some have suggested that the government move into the refining and marketing business. Others have sugge...
Where demand exceeds supply, for example due to a refinery disruption, a competitive equilibrium will result with an increase in price and the quantity sold will decline.
This term was first coined by the NPC in its 1998 report, “U.S. Petroleum Product Supply – Inventory Dynamics,” and it is also used in its updated report, “Observations on Petroleum Product Supply: A Supplement to the NPC reports,” NPC, December 2004. The Energy Information Administration of the Department of Energy a...
Demand for gasoline is about 9.3 million barrels per day; inventories of 185 million barrels is equivalent to about 20 days of supply (185/9.3).
The downstream segment of the industry is what economists term an oligopoly which means an industry with few sellers who recognize that their behavior is interdependent where the actions of one firm will impact others. Other mechanisms such as the use of exchange agreements enhance this interdependence, all of which l...
In economic theory this is what is known as the price elasticity of demand. Gasoline is considered price “inelastic” which means that large increases in price induce only small reduction in demand or consumption. Various analysts have estimated the price elasticity of demand for gasoline at approximately -.20 which me...
Some investors are trying to pull out their investment due to this predicament that we are encountering. And some oil companies today are becoming unprofitable. Conversely, the payday loans that are about to be made to the nation from the stimulus package, there is more good news on the horizon. Retail sales have stopp...
Lottery millionaires 'Moet' the lawn Jump to media player A lottery-winning couple continue to celebrate by turning their garden into an sparkling artwork.
Dog gets £5,000 Windsor Castle kennel Jump to media player A couple have spent £5,000 on the kennel for their dog Archie to celebrate the royal wedding.
The true cost of a dream Ugandan wedding Jump to media player The desire for the perfect day has led to a boom in Uganda’s wedding industry - but these events come at a cost.
The Korean innovator harnessing river power Jump to media player Entrepreneur Hyerin Park's last project ended in debt. Will her new idea for creating renewable power succeed?
Music charity 'saved my life' Jump to media player The music school, which teaches a range of people, is facing demolition.
Gamers mine cryptocurrency for charity Jump to media player Gamers have been helping Unicef raise funds for Syria by mining the Ethereum cryptocurrency.
Rachel Lapierre, from Montreal, Canada, won the lottery, with a prize of $1,000 a week for life.
Having won a fortune that most people can only dream of - she's now giving it all away, saying "It's nice to have a new car, a new home, a new everything. It can really be fun but you don't need that to be happy".
Find more stories on Money and Power here.
Over-centralisation and a lack of human interaction has led economist Amar Bhidé to conclude it is time to rewind the clock on financial markets. In the first of a video series, he talks to John Authers about his reasoning for illiquid markets and a more personalised approach to finance.
Filmed by Steve Ager and Seb Morton-Clark. Addtional material: Getty. Edited and produced by Seb Morton-Clark.
Defying calls to resign, Portsmouth businessman Jack Kimball said Thursday he will not step down as state GOP chairman.
Kimball, a self-proclaimed "tea partier," was elected to the post in January, following the Republican legislative sweep in November 2010. He said too many members of the state Republican "establishment" were unhappy with his election and want to tame the growing tea party influence in the party.
"I have pledged to unify and be the bridge between the longtime Republicans and the newer liberty-minded Republicans," Kimball said. "Those who seek to remove me from my duly-elected position must recognize that I represent a movement — a political moment — much larger than myself. I plead with them not to pick this fi...
The division is happening in full public view. Kimball's defiant decision not to resign came shortly after House Speaker William O'Brien personally asked him to do so. Requests from U.S. Sen. Kelly Ayotte and numerous other Republican political leaders were made. Ayotte and O'Brien were joined by congressmen Frank Guin...
What does this rare public fight at the state party level signify for the immediate and long-term future of the party? The diverse opinions of three Seacoast Republicans — a party activist, a former chairman and a lawmaker — offer a glimpse into a dramatically charged political environment that provided the context for...
Fergus Cullen, state party chairman from 2006 to 2008, said Kimball's wounds were largely "self-inflicted" due to a lack of political experience at that level. Cullen, who lives in Dover, said he has never seen an inter-party fight of this depth in New Hampshire.
"You always have these little civil wars and rivalries, but I've talked to others about this and nobody has any memory of anything that would lead to a recall vote," Cullen said.
For most of the summer, there had been press reports about discontent from party insiders about Kimball's fund-raising prowess and his public stature. Kimball was criticized by veterans groups in June, when, at the Hillsborough County Republican Committee Flag Day Picnic, he said soldiers killed in Iraq and Afghanistan...
Cullen said Kimball shouldn't be held accountable for two House special election losses and can't be totally blamed for the fund-raising shortfall because it's becoming more difficult for political parties to raise money at all levels. He said, in previous years, the Republican National Committee provided funding for t...
"There were malcontents, but I know a lot of people were willing to give Jack a chance. He lost the goodwill and the benefit of the doubt," Cullen said about the firing of popular state party political director Will Wrobleski and Kimball's signing of a petition to allow broader ballot access for Libertarian candidates....
Kimball said Thursday those who were "stuck in the past" were making it harder for the party to move forward. Cullen believes Kimball may have gotten more than he bargained for.
"When Jack ran for governor (in 2010), he said he wasn't a big tent Republican," Cullen said. "State party chair isn't an ideological position, and I don't think Jack understood what being chair was all about."
Portsmouth lawyer John Lyons said this public inter-party leadership squabble is little more than "inside baseball" that won't matter to Republican voters. "There's a reason why Ronald Reagan came up with his 11th commandment about Republicans not criticizing each other," Lyons said. "It's because Republicans have been...
Lyons said what matters is a united party in 2012 with the goal of defeating President Obama. "What unites us is the belief that we need a change of leadership at the top," he said. "I trust those at the top will take care of this squabble and it will be long forgotten. It won't matter at all to Republicans and indepen...
State Rep. Lee Quandt, R-Exeter, has said for months the infighting over Kimball and at the Statehouse has revealed a fault line between the old and new, between old guard Republicans and the newer influx of so-called "Free Stater" and tea party Republicans.
"This is a fight for the heart and soul of the Republican Party," Quandt said. What should matter to state Republicans in 2012, he added, is how to best minimize what he believes could be major loss to the Republican majority in the Statehouse. "They are Republicans in name only, and they've become very radicalized."
The major warning sign for him came with the attack on public employees and unions in the state. "For as long as anyone can remember, Republicans didn't have any problems (with unions) because they knew how many union members voted Republican."
Quandt, a vocal critic of Republican House leadership and a retired civil servant, believes Kimball's tea party affiliation and the attacks on old guard Republicans by "these splinter groups" has dampened fund raising.
"Let's face it," he said, "I'm part of that establishment. Nobody's going to give (Kimball) money because they don't trust where it's going. Politics in New Hampshire is a contact sport and Kimball is in way over his head. It's interesting that Jack will set two records in less than a year — the first tea partier elect...
Stormy Daniels has sued Michael Cohen for defamation in California court.
The lawsuit was filed a day after Daniels' explosive "60 Minutes" interview.
Adult-film star Stormy Daniels on Monday sued President Donald Trump's longtime lawyer Michael Cohen for defamation in a California federal court.
The lawsuit points to a February statement from Cohen claiming Daniels had made false statements about her alleged affair with Trump, which she said began at a Lake Tahoe celebrity golf tournament in 2006.
The lawsuit also seeks a jury trial in the case.
The litigation comes one day after Daniels' explosive "60 Minutes" interview, in which she publicly detailed her alleged affair with Trump and said that she was threatened in a parking lot in 2011 to leave Trump alone.
Since news of a $130,000 payment to Daniels, facilitated by Cohen, emerged in January, the scandal has only gained steam. Both Daniels and Cohen were already engaged in competing litigation against each other in federal court.
Cohen admits he made the payment to Daniels, whose real name is Stephanie Clifford, though he said he was acting on his on volition and was not reimbursed for the payment.
They’re fighting back against the red-nosed menace.
Posses of vigilante “clown hunters” have formed in England response to a global epidemic of morons-in-costume terrorizing people.
“We are trying to stop this clown craze before it gets out of hand,” a group spokesman told The Mirror Online.
The vigilantes, who described themselves as a “kind of neighborhood watch group,” have already started patrolling various English neighborhoods including Taunton, Bridgwater and Yeovil.
Over the weekend, there were at least six reports of clowns threatening people in Britain.
In Cornwall, another batch of concerned citizens are uniting to make sure their neighborhood is clown free.
Officials in the area don’t find the clown act funny either.
“We’d just like to remind people of the consequences of dressing up in costumes with the intention of frightening others,” the Avon and Somerset Constabulary wrote on Facebook.
At least six reports of people dressed like clowns threatening people in Britain, sometimes carrying a knife and following their targets, authorities there said.
The 2018-2019 scholastic wrestling season is officially in the books.
The following is a list of what I liked and disliked this season.
The list is mostly from a Shore Conference perspective.
Best new concept: Girls wrestling.
Girls wrestling was long overdue. New Jersey was the 12th state in the country to have its scholastic sports association sponsor girls wrestling. Hopefully more state scholastic sports associations will begin to sponsor the sport.
The girls who participated wrestled with enthusiasm and seemed to really enjoy being out on the mat.
Many of the girls were exciting to watch and wrestled aggressively.
It all made for a lot of fun for people to watch.
Hopefully, girls wrestling will expand to the point where in the future, the girls state tournament can become a separate entity from the boys state tournament and take place a week later at another venue besides Boardwalk Hall, Atlantic City, so it can get the complete attention from the scholastic wrestling community...
We also hope that in the near future, more schools follow the lead of programs like Kingsway, Jackson Memorial, Manalapan and Raritan and have their own girls wrestling teams so there can be more full-fledged girls dual meets during the season.
The Jackson Memorial-Manalapan dual meet held on Dec. 14 – the opening night of the winter sports season – was a great way to begin the season.
I like the fact that it looks like each weight class in the state tournament will have eight wrestlers next year instead of six. It will make for an even bracket where everyone has to wrestle the same number of bouts to win a state championship.
Shore Conference Team of the Year: Southern.
The Rams entered the season with high expectations.
However, it took until late January for Southern to kick it into high gear.
But, once Southern did kick it into high gear, it wrestled like one of the 3-4 best teams in the state and wound up winning the NJSIAA Group V championship for the second time in the last four seasons. It was Southern’s third group state championship.
After a loss to eventual Group III champion South Plainfield on Jan. 22, Southern won its final 10 matches, including an impressive regular season win over Phillipsburg and wins over Howell in the South Group V championship match and Hunterdon Central in the Group V championship match.
The win over Howell snapped the Rebels’ 78-match winning streak that dated back to Jan. 7, 2017.
Shore Conference Coach of the Year: Dave Porta, Shore Regional.
Porta gets the nod because of Shore’s breakthrough season.

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