Chuck Schumer: biggest Congressional hypocrite of all time?
Schumer is such a goddamn putz. As reported today in the New York Post:
If Schumer wants to know the fundamental problem with American refineries, he need not look anywhere but a mirror. The New York Times reported two years ago that "Over the last quarter-century, the number of refineries in the United States dropped to 149, less than half the number in 1981." Worse, the United States hasn't seen a new refinery built since 1976. Every time a company would like to build one, they can't get past the hurdles that Congress, and state and local governments too, made to satisfy the tree-huggers. The blame falls mainly on Democrats, but also on "environmentally minded" Republicans who'll court any vote to win elections.
Schumer has never run a business, although one shouldn't need to in order to comprehend common sense, free market principles. Suppliers are perfectly capable of determining the natural balance of reinvesting profits and output on their own, without any need for government to "encourage" them with subsidies or state-funded studies, and certainly without government hindering them. The U.S. could import far more crude than it presently can, but refineries' capacity is a bottleneck. Well, if only oil companies could build more refineries, it's true that they'd resultingly make even higher profits, but don't forget that they'd supplying more gasoline at lower prices.
Schumer can't see any of this, whether willfully or because of ideological blindness. Under capitalism, everybody wins -- except schmucks like Schumer, whose political livelihood is based on blaming these "evil capitalists" that in fact make our lives better. He could push for legislation to allow oil companies to build more refineries, or drill in ANWR, which would cause prices to start falling now merely on the promise of increased future supplies. Most people don't see the big picture that if gas prices fell to perhaps half of current levels, their lives would be improved far more than taxing some oil CEO of, what, $10 million, then redistributing it among 300 million people? I personally don't care how much the Big Oil executives are paid. They earn every penny, as far as I'm concerned, by leading these companies that provide a critical resource that people are willing to buy via peaceful commerce.
However, when it comes to getting people to vote for you, truth just doesn't compete with creating fear, including the fear that somebody just might have more than you. So Schumer will continue to harp on "income inequality" and oil companies' supposedly obscene profits, notwithstanding that, as my friend Josh Hendrickson pointed out a while back, oil companies' profits are hardly the highest compared to other industries, when you look at the percentages.
And if Schumer is correct that oil companies are purposely "underinvesting" in refineries, then why are there entrepreneurs trying to build new ones? Or is that a lie, just like one of my friends claims that Canadians coming here for medical procedures is just a right-wing lie?
SCHUMER: REFINERIES CAN'T COPEHypocrite? Moron? Or as one of my friends suggested, "satanic rectal spawn"?
May 7, 2007 -- Sen. Charles Schumer yesterday called for a federal investigation into why large oil companies have been unable to keep pace with consumer demand for gasoline.
Schumer (D-N.Y.) said he was specifically concerned because problems at aging refineries have been instrumental in hiking gas prices, which may be on the verge of setting records.
The senator said he would be asking the Government Accountability Office to look into whether oil companies are purposely underinvesting to keep the market tight.
If Schumer wants to know the fundamental problem with American refineries, he need not look anywhere but a mirror. The New York Times reported two years ago that "Over the last quarter-century, the number of refineries in the United States dropped to 149, less than half the number in 1981." Worse, the United States hasn't seen a new refinery built since 1976. Every time a company would like to build one, they can't get past the hurdles that Congress, and state and local governments too, made to satisfy the tree-huggers. The blame falls mainly on Democrats, but also on "environmentally minded" Republicans who'll court any vote to win elections.
Schumer has never run a business, although one shouldn't need to in order to comprehend common sense, free market principles. Suppliers are perfectly capable of determining the natural balance of reinvesting profits and output on their own, without any need for government to "encourage" them with subsidies or state-funded studies, and certainly without government hindering them. The U.S. could import far more crude than it presently can, but refineries' capacity is a bottleneck. Well, if only oil companies could build more refineries, it's true that they'd resultingly make even higher profits, but don't forget that they'd supplying more gasoline at lower prices.
Schumer can't see any of this, whether willfully or because of ideological blindness. Under capitalism, everybody wins -- except schmucks like Schumer, whose political livelihood is based on blaming these "evil capitalists" that in fact make our lives better. He could push for legislation to allow oil companies to build more refineries, or drill in ANWR, which would cause prices to start falling now merely on the promise of increased future supplies. Most people don't see the big picture that if gas prices fell to perhaps half of current levels, their lives would be improved far more than taxing some oil CEO of, what, $10 million, then redistributing it among 300 million people? I personally don't care how much the Big Oil executives are paid. They earn every penny, as far as I'm concerned, by leading these companies that provide a critical resource that people are willing to buy via peaceful commerce.
However, when it comes to getting people to vote for you, truth just doesn't compete with creating fear, including the fear that somebody just might have more than you. So Schumer will continue to harp on "income inequality" and oil companies' supposedly obscene profits, notwithstanding that, as my friend Josh Hendrickson pointed out a while back, oil companies' profits are hardly the highest compared to other industries, when you look at the percentages.
And if Schumer is correct that oil companies are purposely "underinvesting" in refineries, then why are there entrepreneurs trying to build new ones? Or is that a lie, just like one of my friends claims that Canadians coming here for medical procedures is just a right-wing lie?
Labels: ANWR, Liberal hypocrisy, Myths about Big Oil
posted by Perry Eidelbus at
11:38 PM
4 Comments:
I caught this line of poor reasoning at Billy Beck's blog, but since that's all one way, I figured I'd respond at the source.
Yeah, it's all the greenies fault, oil companies have been dying to increase refining capacity... and keep their margins down.
Sure, and if you buy that, I have a nice little house in the 9th Ward to sell you, with a swimming pool... in the living room.
“As observed over the last few years and as projected well into the future, the most criticalfactor facing the refining industry on the West Coast is the surplus refining capacity, and thesurplus gasoline production capacity. The same situation exists for the entire U.S. refiningindustry. Supply significantly exceeds demand year-round. This results in very poor refinerymargins, and very poor refinery financial results. Significant events need to occur to assistin reducing supplies and/or increasing the demand for gasoline.”
Internal Texaco document, March 7, 1996
“A senior energy analyst at the recent API (American Petroleum Institute) conventionwarned that if the U.S. petroleum industry doesn’t reduce its refining capacity, it will neversee any substantial increase in refining margins…However, refining utilization has beenrising, sustaining high levels of operations, thereby keeping prices low.”
Internal Chevron document, November 30, 1995
Your idiotic "sarcasm" aside, you would do better to cite actual economics, rather than the stuff you get in e-mail from communist/socialist/Larouche know-nothings. These claims have been thrown around for years and are nothing new. Lies remain lies, no matter how long they age, no matter many mailing lists they go through.
The fact remains that no new refineries have been built in the U.S. since the year I was born, and only idiot collectivists -- such as yourself -- dare to argue that it's not about a bottleneck at the refinery level. Then the EPA mandates different blends for different seasons for different cities, further adding to production costs. Since you're in need of a clue, I'll give you a free one: costs of production are passed on to consumers, lest the company go under. And you object based on quoted-out-of-context passages from over a decade ago, when pump prices were a third of today's?
Maybe it's just me, but I'd regard someone with just a teensy little more credibility if he could spell "Captain" correctly.
"Lies remain lies, no matter how long they age, no matter many mailing lists they go through."
Are you saying that these quotes are not really internal oil company memo's from Chevron and Texaco, or are you saying that it doesn't matter?
Whatever you are trying to say, these are actual quotes from actual oil company internal memo's, and they actually say that oil companies stand to increase profits if they reduce refining supply. These companies did not deny them, they simply tried to sidestep their relevance.
The oil industry as a whole had previously maintained a 30 day+ inventory of refined gasoline, and seasonal peaks and dips were tiny. In the past decade, the amount of oil that was actually refined has declined and has been reduced to around a 22 days inventory, very close to what is considered to be the absolute bare minimum, and profit margins, on the same amount of product, has soared, just as spelled out in the oil company memo's.
I used to have a similiar opinion as yours, but perhaps I dug a little deeper than posting the sophist argument by implication that since Big Pharm has higher profit margins, oil companies can't have had any desire to reduce refining capacity in order to increase profit margins.
Red Cavaney, President and CEO of the American Petroleum Institute, in a moment of uncharacteristic candor, stated that the industry's reluctance to invest in new refinery capacity when profit margins are low and supplies are adequate was "a normal response in a commodity market."
This is not rocket science, and I am not accusing the oil companies of criminal collusion, I am simply accusing them of doing their jobs, perhaps too well. An oil company CEO has no responsibility to insure low prices and high inventories, in fact, his responsibility is only to enhance shareholder value, and meeting THAT responsibility would suggest the attempt to reverse the aforementioned equation and strive for lower inventories and higher margins.
Follow me here, Mr. Free Market. When Walmart wants to build a store, they do so because a new store will mean new profits, and they will go to GREAT lengths to overcome ANY opposition to new store. But what if building a new store meant reduced profits for Walmart? How hard would they try? Probably as hard as the oil industry has tried to build new refineries.
Regulation has not hurt Big Oil, on the contrary, it has helped big oil by forcing the small players out of the market. We all know how laws are passed, they are bought and paid for ( BOTH parties, Republicans and Republicn Lite aka Democrats). The beauty of the regulations on the industry is that the oil companies could look at proposed regulations, rewrite them to insure it would hurt the independents without hurting themselves as much as it helped them, and they could allow environmentalist pols to appear to be regulating the oil industry, while actually helping Big Oil.
The oil industry claims that market factors are the sole reason for the increase in the price of gasoline, and they are correct, the market looked at margins, decided they were too low, and reduced refining capacity, or left it stagnant until the market factor of lower inventories kicked in and created large fluctuations and consistent price increases, and of course huge increases in profit margins. Just because every big oil company recognized the same economic reality doesn't mean they were colluding, but the effect is the same to the gas buying public.
The question is not whether Big Oil intentionally created an environment where they would enjoy increasing profits, that's settled, the only question is whether you believe that they did so in a "free market" environment, in which case the free market should correct itself, or if they did it by influencing the government to make it something less than a free market, in which case it may require the same kind of intevention to reverse the effects.
"And if Schumer is correct that oil companies are purposely "underinvesting" in refineries, then why are there entrepreneurs trying to build new ones?"
There is final approval for a NEW refinery to be built in Yuma Arizona by Arizona Clean Fuels LLC. This has been an entreprenurial prject from the start, and funding was the biggest hurdle (not regulation) because US Big oil companies did not want to invest a dime (see every paragraph above). In fact, the deal ended up being funded by Saudi Aramco (yeah, that Saudi). So with all of the regulatory hurdles cleared, why wouldn't Big Oil want to invest in more refineries? (see every paragraph above) This may the beginning of the market correcting itself, at the EXPENSE of Big Oil, and against the desires of Big Oil. By the way, it took 8 years to clear the regulatory hurdles, and considering it can take 3 years to build a Walmart, so 8 years doesn't seem insurmountable.
Do you really think that you have a clear understanding of what is happening in the business of refining oil into gasoline? You may want to think again.
Oh, and by the way, I liked the name Captain Sarcastic, but it was taken in Yahoo mail (10 years ago when I got it), so I settled for Captin. People that don't immediately hate me for disagreeing with them often find it to be clever. Not clever like Eidelblog, but clever nonetheless.
Cheers
"Are you saying that these quotes are not really internal oil company memo's from Chevron and Texaco, or are you saying that it doesn't matter?"
Both. Either. Your pick.
The fact remains that this is over a decade later, with oil supplies and refinery capacity at very different ratios. Another fact remains that, though you think they already make "too much" profit, oil companies could make even more of a killing.
Here's a free clue for you. There's a very basic concept in economics called elasticity. Because crude prices are still relatively high from various states of unrest from Venezuela to Nigeria to Iraq, additional refinery capacity would not cause prices to plummet. Yet oil companies would have much more gas to sell -- see how they'd make more profit?
"In the past decade, the amount of oil that was actually refined has declined and has been reduced to around a 22 days inventory"
Assuming your numbers are true (such a statement in a serious class would earn a C at best without actual numbers and sources), so what? What are you intimating, that the refinery breakdowns are part of some global Big Oil collusion? Rather than falling into socialist conspiracy theory, try looking at real-world economics. A decade ago, 30 days was a glut. Profit margins were so low that hardly anyone wanted to invest in new drilling, let alone new refineries. Today, the market (mostly free, for all the environmental and other encumbrance government has created) has determined that the balance is at 22 days. Don't like it? Don't buy it.
"I used to have a similiar opinion as yours"
You mean that you once had a modicum of sensible thought, until you bought into socialist nonsense?
"Red Cavaney, President and CEO of the American Petroleum Institute, in a moment of uncharacteristic candor, stated that the industry's reluctance to invest in new refinery capacity when profit margins are low and supplies are adequate was 'a normal response in a commodity market.'"
Which was the case in the 1990s. If you're quoting his speech at the API from this March, you're quoting it more out of context than mainstream media misquotes Bush. However, if you're right and it's one big conspiracy, then why are entrepreneurs still trying (and failing) to build new refineries? The simple answer, to repeat what I already said: because profit margins are much higher, and though greater supply will drop prices, higher sales overall yield more profit. If you ever ran a retail business, you would know that there's that optimal point of sales versus price where profit is maximized. Yet what happens if the government restricts you from producing more?
That's what I just don't get: why are you so apologetic for Chuck the Schmuck and his ilk, and placing the blame on the victims?
"This is not rocket science, and I am not accusing the oil companies of criminal collusion, I am simply accusing them of doing their jobs, perhaps too well. An oil company CEO has no responsibility to insure low prices and high inventories, in fact, his responsibility is only to enhance shareholder value, and meeting THAT responsibility would suggest the attempt to reverse the aforementioned equation and strive for lower inventories and higher margins."
That's nice of you to claim, but come now, it doesn't suit you to hedge your socialist-conspiratorial rhetoric. The plain fact is that they're not intentionally cutting back on refinery capacity. It doesn't make sense from a perspective of profit maximization, nor when we consider the circumstances of the real world as opposed to your fantasies.
"Follow me here, Mr. Free Market. When Walmart wants to build a store, they do so because a new store will mean new profits, and they will go to GREAT lengths to overcome ANY opposition to new store. But what if building a new store meant reduced profits for Walmart? How hard would they try? Probably as hard as the oil industry has tried to build new refineries."
Your logical fallacy here is to state that's what holds for one situation must therefore apply to a completely different one. For one, two Wal-Marts (please get the name right? That would give you some credibility) side by side would create very little increase in sales, if any. That's because customers go to Wal-Mart, unlike refineries that ship their product anywhere. Build an identical refinery next door, or expand an existing one by 100%, and you double your production.
"Regulation has not hurt Big Oil, on the contrary, it has helped big oil by forcing the small players out of the market. We all know how laws are passed, they are bought and paid for ( BOTH parties, Republicans and Republicn Lite aka Democrats)."
If you bothered to check around my blog, you'll see that I assail protectionism and rent-seeking in any form, and that I attack both Republicans and Democrats for giving other people's money to special interests. I oppose subsidies for oil companies and sugar farmers just as I oppose subsidies for people (i.e. welfare).
But the fact remains that the cycle begins with government, which created the market-hindering regulations in the first place. So of course the oil companies will do what they can to compete in what is already a corrupt system.
"The oil industry claims that market factors are the sole reason for the increase in the price of gasoline, and they are correct, the market looked at margins, decided they were too low, and reduced refining capacity, or left it stagnant until the market factor of lower inventories kicked in and created large fluctuations and consistent price increases, and of course huge increases in profit margins. Just because every big oil company recognized the same economic reality doesn't mean they were colluding, but the effect is the same to the gas buying public."
Again, you're assuming the cutback in refinery capacity is intentional.
"The question is not whether Big Oil intentionally created an environment where they would enjoy increasing profits, that's settled,"
Straw-man argument. You state this as if to say "I'm correct," when in fact this is not contested. What business does not like higher profits?
"the only question is whether you believe that they did so in a "free market" environment, in which case the free market should correct itself, or if they did it by influencing the government to make it something less than a free market, in which case it may require the same kind of intevention to reverse the effects."
It's only as free-market as the government has permitted.
"because US Big oil companies did not want to invest a dime (see every paragraph above). In fact, the deal ended up being funded by Saudi Aramco (yeah, that Saudi)."
True economics does not believe in political borders, so as long as someone's willing to make the investment, it's still competition. Isn't it wonderful? Americans don't want it, but the Saudis see the opportunity to make higher profits despite selling at lower prices. You deride the free market, but I'm sure you won't complain the next time you fill up.
"This may the beginning of the market correcting itself, at the EXPENSE of Big Oil, and against the desires of Big Oil."
It's at the expense of most because of the market entry by one, which is precisely how the free market works. That's how competition is spurred.
"By the way, it took 8 years to clear the regulatory hurdles, and considering it can take 3 years to build a Walmart, so 8 years doesn't seem insurmountable."
Did you really dismiss begging government and spending resources for eight years as "doesn't seem insurmountable"?
Three years to build versus eight. Which do you think we'll have more of? And what is the bottleneck? That's right: begging government for permission. The bottom line, and this was my point along, is that it's zayin-faced putzes like Chuck Schumer who are responsible for the artificial restrictions on refinery capacity. It doesn't matter whether it's a rent-seeking competitor or environmentalist whackjobs, but it's by far and large the latter.
"Do you really think that you have a clear understanding of what is happening in the business of refining oil into gasoline? You may want to think again."
You may want to try saying that to the mirror sometime.
"Oh, and by the way, I liked the name Captain Sarcastic, but it was taken in Yahoo mail (10 years ago when I got it), so I settled for Captin. People that don't immediately hate me for disagreeing with them often find it to be clever. Not clever like Eidelblog, but clever nonetheless."
I don't hate you. I just think you're an idiot.
Free advice to conclude the free lesson: clever would have been "Keptin" a la Walter Koenig's Chekov accent.
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