Aa And The Fuel Prices

MiAAmi

Veteran
Aug 21, 2002
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www.usaviation.com
Its interesting that AA and most of the majors survived 9/11 but could now be forced into BK by major US Oil companies. The Bush oil people seem to be racking in the $$$$$$ at the expence of the American People. In my opinion the greatest theat to US security is trusting the Bush administration. Our jobs are at stake once again and this time its by domestic terrorism - Big Oil Company's and Bush. I don't see the big oil companys taking less profit in order to curtail the effects on the US economy.
 
And they won't. Bush has his Halliburton eye on that 3.00 per gallon price he's hoping for.

Anyone who votes for this republican idiot for a second term deserves what he has planned.

Plus, we're only talking a 9-12% fluctuating increase here, certainly not bankruptcy prices. Airlines could drive the price down themselves simply by cutting back on some of their routes for a couple of weeks and create a glut.
 
MiAAmi said:
For that matter we all could create a glut if we protested the major oil companys for just one day.
What??? :shock: And give up drivin my Sherman-tank-sized SUV all by myself for even one day???

You must be one a them Communistic-tree-huggin-pinko-liberal bus riders! God told Pat Robertson that you worms is goin ta HELL. :up:
 
MiAAmi said:
Its interesting that AA and most of the majors survived 9/11 but could now be forced into BK by major US Oil companies. The Bush oil people seem to be racking in the $$$$$$ at the expence of the American People. In my opinion the greatest theat to US security is trusting the Bush administration. Our jobs are at stake once again and this time its by domestic terrorism - Big Oil Company's and Bush. I don't see the big oil companys taking less profit in order to curtail the effects on the US economy.
Oil prices are being driven higher by 3 factors:

1. an increase in global demand for oil as economies around the world accelerate growth (primarily US and Asia)
2. the depreciation in the US dollar as a result of the current account deficit (buying oil is a natural short on the dollar)
3. the growing industrialization of the Chinese economy that is A. shifting to a more energy intensive structure and B. growing at a 7% annualized rate

Given the limited amount of new supply entering the market and the fact that most producers are at or near capacity, oil prices are going higher and staying higher because of the abovementioned factors.

On inflation-adjusted terms, prices are at the same level they were in the 1980's, so the price rise may be meaningful from its base level, but not historically.

Although oil companies can influence supply via reduction in capacity, it is unlikely that this pricing power would last given that jet fuel is a commodity and new entrants would arbitrage the artificially high price.

Airlines could hedge their exposure by locking a fixed rate now for x yrs into the future. That is difficult for two reasons, 1. the forward price is higher than current prices and 2. most counterparties (e.g. investment banks, energy companies or commodity trading firms) would be hesitant to enter into long-term trades with airlines given their credit profile. (There are credit risk hedging techniques, but they might consume cash from the airlines).

All in all, jet fuel prices are high for fundamental reasons outside of Exxon and Texaco engaging in ogolipolistic behavior. The oil companies will make more because they have margins that are on percentage terms and the profit in volatile markets, but that's the economic system we live in.

Eventually, a price clearing level will be reached and new supply will enter. Airlines should focus less on the price of fuel and more on things under their control.
 
This whining is funny!!! We forbid drilling in the Arctic. We forbid drilling off the Atlantic coast. We forbid drilling off Florida. We forbid an expansion of drilling off the Pacific coast. We forbid drilling in Federal Lands. And now we want to cry about the price of Gasoline? I'd say we've made our bed and now we have to lie in it!!! Get ready for 4-5 bucks a gallon cause its coming our way!!!
 
AAmech said:
This whining is funny!!! We forbid drilling in the Arctic. We forbid drilling off the Atlantic coast. We forbid drilling off Florida. We forbid an expansion of drilling off the Pacific coast. We forbid drilling in Federal Lands. And now we want to cry about the price of Gasoline? I'd say we've made our bed and now we have to lie in it!!!
A can't even lie on my bed if I wanted to. I've been drilled so much it hurts! :(

Former TWA F/A
 
AAmech said:
This whining is funny!!! We forbid drilling in the Arctic. We forbid drilling off the Atlantic coast. We forbid drilling off Florida. We forbid an expansion of drilling off the Pacific coast. We forbid drilling in Federal Lands. And now we want to cry about the price of Gasoline? I'd say we've made our bed and now we have to lie in it!!! Get ready for 4-5 bucks a gallon cause its coming our way!!!
These are are choices? Either we sacrifice our our natural habitats or pay through the nose for gas? You sound like the Oil Dynasty people of Bush and Cheney. Its not hard to decide whether I was better off 4 yrs ago or not. . The major oil companies are not losing any money right now, thats for sure.
 
AAmech said:
This whining is funny!!! We forbid drilling in the Arctic. We forbid drilling off the Atlantic coast. We forbid drilling off Florida. We forbid an expansion of drilling off the Pacific coast. We forbid drilling in Federal Lands. And now we want to cry about the price of Gasoline? I'd say we've made our bed and now we have to lie in it!!! Get ready for 4-5 bucks a gallon cause its coming our way!!!
Actually, the various bans on drilling that you mention have nothing to do with the cost of gasoline at the pump. Drilling in those locations would only have been for long-term supply in the distant future.

For that matter, the supply of crude oil doesn't have very much to do with the cost of gasoline at the pump. It's just a good excuse for raising prices. I've posted this before, but I'll do it again.

The primary controlling factor in the cost of gasoline at the pump is what the oil company's marketing department thinks you are willing to pay. And, the marketing department knows that you (and that is a generic you) are not willing to give up your gas-guzzling SUV even for national security reasons. Demand for gasoline by the American driver is what limits the production of jet fuel and thus increases the price. With a given quantity of crude oil, you can refine gasoline or you can make home heating oil, or you can make jet fuel. Gasoline, the one with the highest profit margins, gets first dibs.

How do I know? I worked for one of the 5 largest integrated oil companies for over 16 years in the Information Technology Department. I specialized in support for the Controller's and Marketing departments. Boys and girls, you have no idea how much money flows through an integrated oil company in a single year. And, it's all because you don't like to ride the bus.

The rest of the world has been paying $4+/gal for gasoline for a long time. If we have to start paying those prices, the size of vehicles will come down, the fuel efficiency will go up, and public transportation--including our beloved airline--will get more customers. When it is cheaper to fly to your vacation rather than drive, people will fly.
 
I agree with a lot of what your saying. What price you are willing to pay does affect the price. But it's impossible to discount the price per barrel right now which is insane!! When Oil was less than $20.00 a barrel the price at the pump was much lower than what is now that its over $35.00. Oil companies might TRY to raise prices but someone else would come right along and undercut them. Supply is the driving factor right now and while there is enough for everyone there is little excess. Added to that fact is the fear of terrorisim and political shakiness in Venezula and we're damn near getting a bidding war for oil.
 
Well, if you insist on trying to apply logic to gasoline prices, I can't stop you. But, gasoline is an interesting product. Crude oil is the major raw ingredient in the manufacture of gasoline, but it forms very little of the cost of producing the final product. Like the airline business, labor is a big part of the cost even though refineries are not particularly labor-intensive.

The fact that the oil companies are jacking up the prices right now is because they can get away with it. "It's not my fault. The cost of crude is up 50% this year." And, people who apply logic to the situation see the "rightness" of that argument.

The truth is that the markets expected a drop in crude price because they thought all that lovely Iraqi oil given to Halliburton would be flowing by now. Oops!
 
Don't know about the "flowing to Haliburton" but Iraqi oil is flowing at a rate greater than pre-war and its still not having much of an effect on the prices of oil.
 
People are once again complaining about high gasoline prices. But consider this:

To produce a gallon of gasoline you have to travel to often inhospitable parts of the world, drill a hole a mile deep in the ground and then pump out black, liquid sludge. That sludge then has to be placed on massive tankers and shipped halfway across the world where it is subjected to massive heat and chemical processes at a refinery costing many billions of dollars. About half of a barrel of crude becomes gasoline, which is then shipped on pipeline costing hundreds of millions of dollars to terminals, where it is then trucked to a gasoline station that cost $2 million to construct. At that gas station this gasoline is sold for $2 a gallon, of which almost 1/3 of the price is taxes.

The consumer bitches about the $2 price as he walks into the station and buys a bottle of water that is priced at over $8 a gallon.

Does that make any sense to you?
 
AAmech said:
This whining is funny!!! We forbid drilling in the Arctic. We forbid drilling off the Atlantic coast. We forbid drilling off Florida. We forbid an expansion of drilling off the Pacific coast. We forbid drilling in Federal Lands. And now we want to cry about the price of Gasoline? I'd say we've made our bed and now we have to lie in it!!! Get ready for 4-5 bucks a gallon cause its coming our way!!!
Its funny to union officials who are double dipping and can easily afford to pay $4 or $5 a gallon.

Lets see how funny it is when the gravy train ends and we go AMFA!