Bush Says Drill, Drill, Drill — And Oil Drops $9!

[Eagle1855]

FWIW, you're probably both correct.

From an article on CNN.com,

"The weaker economic outlook, the inventory build all contribute," said Amanda Kurzendoerfer, commodities analyst with Summit Energy. However she warned that long-term investors may see the price decline as a buying opportunity.

"The one thing we can be sure of is that we're looking at a lot of volatility going forward," she said.

[DeepGreen]

Price of oil down about $4.50 a barrell today (as of 10:45 on Wednesday). Not sure how it will end up...but so far, it's down substantially again today.

As of 45 minutes ago:

Light, sweet crude for August delivery fell $5.10 at $133.64 a barrel in morning trading on the New York Mercantile Exchange.

[Green Mean]

Both UNTFlyer and Adman are both correct in their own sense. Yes we are a free market economy but to me that should not mean companies/industries can do as they wish and there are no rules. I have no problem with the government intervening in such situations. I think needing a strong energy plan is obvious. Why drill and drill and more drill and wait til we run out and then figure out an economic solution? Thats just horrible planning and not very wise.

[Eagle1855]

Why drill and drill and more drill and wait til we run out and then figure out an economic solution? Thats just horrible planning and not very wise.

Why not do both? Why not drill to ease prices now while simultaneously enacting a plan to get away from using oil altogether? It seems to me you can develop alternative fuels without killing us at the pump right now. Make a smooth transition.

[UNTflyer]

Energy companies are already looking at other sources. The idea that we would just drill and drill and the energy CEOs fiddle while Rome burns is kind of silly. In fact, that's more along the lines of what a government would do. If there is a market for alternative energies, someone will produce it.

Again, I'm not saying there should be zero rules, but the fact remains that domestic production is stagnant because there simply are no more places to drill. We need to drill offshore, and we need to start drilling now.

[SUMG]

Congress lifting the ban is only part of the problem. Then, you have to deal with all the environmental groups who will sue to stop whatever drilling is going to take place.

There was a city in South Dakota that recently voted to build the first refinery in the U.S.....since the 70s. All it will take is one environmentalist's lawsuit to bring that to a screeching halt.

[Baby Arm!]

Hey if you really want to kill any alternative energy sources, just let Obama, Clinton, Pelosi, et. al. pass the windfall profits tax on oil companies.

A big chunk of the record profits oil companies have been making are spent funding research and developement. That's not limited to finding more oil. R&D in the energy industry is also about exploring new and alternative energy sources. But if the WFP tax returns (and we all saw what a success it was during the Carter administration), if the tax returns the first place energy companies start to curb spending will be R&D.

While we're at it, forget the slow growth of the economy, lets raise the capital gains tax and the corporate income tax as well.... nothing like taxing investors to keep an economy growing. Afterall only rich people own stocks right? Those bastards can afford it! It's not like the average american has any money in 401k's

[UNTflyer]

A big chunk of the record profits oil companies have been making are spent funding research and developement.

No way! I thought it was all going to fat cat CEOs who eat caviar and twirl their mustache... and Bush's secret offshore accounts.

[meangreenacct]

Hey if you really want to kill any alternative energy sources, just let Obama, Clinton, Pelosi, et. al. pass the windfall profits tax on oil companies.

A big chunk of the record profits oil companies have been making are spent funding research and developement. That's not limited to finding more oil. R&D in the energy industry is also about exploring new and alternative energy sources. But if the WFP tax returns (and we all saw what a success it was during the Carter administration), if the tax returns the first place energy companies start to curb spending will be R&D.

While we're at it, forget the slow growth of the economy, lets raise the capital gains tax and the corporate income tax as well.... nothing like taxing investors to keep an economy growing. Afterall only rich people own stocks right? Those bastards can afford it! It's not like the average american has any money in 401k's

Not saying I support the WFP tax, but the proposals have all had incentives to increase development of alternative energy as well as incentives to reinvest profits in the business.

As to the other issue you posed in the bottom, I may be mistaken, but I didn't think 401K money was taxed using capital gains rates.

[UNTflyer]

As to the other issue you posed in the bottom, I may be mistaken, but I didn't think 401K money was taxed using capital gains rates.

It's not, but raising capital gains taxes means there is less money in the market to invest, which makes my 401k perform like doo-doo.

[Cerebus]

Measuring an industries success based on profit is silly, you measure it on return on investment. Oil companies are making hundreds billions because they are putting hundreds of billions into production. The ROI for oil companies (~10%-15% last I saw) is much lower than many other industries.*

It is also silly to state that oil prices have fallen because Bush said so, oil prices have fallen because demand has fallen due to the higher prices. Markets find equilibrium.

* For instance, ROI for the Scotch industry is 50%. Those are the barrel's to sell. Why do you think alcohol companies can afford to give away so many freebies?

[Baby Arm!]

It's not, but raising capital gains taxes means there is less money in the market to invest, which makes my 401k perform like doo-doo.

Thats what I was trying to inply... Raise those taxes and economic growth will slow (even more than it already has) = lousy market for us all

[UNTflyer]

Measuring an industries success based on profit is silly, you measure it on return on investment. Oil companies are making hundreds billions because they are putting hundreds of billions into production. The ROI for oil companies (~10%-15% last I saw) is much lower than many other industries.

Actually, I think Exxon-Mobil was something like 4-5%. Excellent point.

[meangreenacct]

Actually, I think Exxon-Mobil was something like 4-5%. Excellent point.

My source could be wrong, but this shows an ROI of 23.46%. THe first number is Exxon - next is industry - then Sector - then S&P 500. I've got their annual report on my computer, so I'll check their math later tonight.

5959 Las Colinas Boulevard Ticker: XOM

Irving, TX 75039 Exchange: NYSE

1-972-444-1000 Sector: Energy

Industry: Oil & Gas - Integrated

RATIO COMPARISON (As of 07/04/2008)

Company Industry Sector S&P 500

Valuation Ratios

P/E Ratio (TTM) 11.47 11.61 18.16 17.86

P/E High - Last 5 Yrs. 16.29 16.38 32.18 33.70

P/E Low - Last 5 Yrs. 10.40 10.38 11.28 13.81

Beta 0.92 1.06 1.11 1.00

Price to Sales (TTM) 1.07 1.02 3.01 2.48

Price to Book (MRQ) 3.79 3.08 4.23 3.86

Price to Tangible Book (MRQ) 3.79 3.28 5.00 8.26

Price to Cash Flow (TTM) 8.54 8.30 11.69 12.69

Price to Free Cash Flow (TTM) 13.25 26.76 32.98 28.25

% Owned Institutions 51.29 59.84 58.10 71.58

Dividends

Dividend Yield 1.81 2.02 1.71 2.70

Dividend Yield - 5 Year Avg. 1.17 2.14 1.44 1.73

Dividend 5 Year Growth Rate 8.29 10.04 13.04 14.96

Payout Ratio (TTM) 18.18 19.82 14.04 26.43

Growth Rates(%)

Sales (MRQ) vs Qtr. 1 Yr. Ago 33.97 35.30 35.01 14.76

Sales (TTM) vs TTM 1 Yr. Ago 15.51 15.84 21.24 16.63

Sales - 5 Yr. Growth Rate 14.62 17.95 24.60 15.86

EPS (MRQ) vs Qtr. 1 Yr. Ago 25.05 24.36 23.38 12.88

EPS (TTM) vs TTM 1 Yr. Ago 11.90 6.41 13.87 12.92

EPS - 5 Yr. Growth Rate 35.09 48.68 50.93 24.85

Capital Spending - 5 Yr. Growth Rate 6.11 12.93 27.42 13.54

Financial Strength

Quick Ratio (MRQ) 1.16 0.94 1.03 1.14

Current Ratio (MRQ) 1.38 1.22 1.38 1.64

LT Debt to Equity (MRQ) 0.06 0.12 0.40 0.60

Total Debt to Equity (MRQ) 0.08 0.14 0.45 0.79

Interest Coverage (TTM) 51.96 20.82 17.91 14.20

Profitability Ratios (%)

Gross Margin (TTM) 21.58 22.69 39.46 44.36

Gross Margin - 5 Yr. Avg. 21.42 21.64 36.69 43.98

EBITD Margin (TTM) 20.38 18.69 32.85 23.47

EBITD - 5 Yr. Avg. 19.44 17.62 30.27 22.87

Operating Margin (TTM) 17.18 15.05 23.16 18.33

Operating Margin - 5 Yr. Avg. 15.93 13.94 20.56 18.85

Pre-Tax Margin (TTM) 17.18 15.04 20.34 17.16

Pre-Tax Margin - 5 Yr. Avg. 15.93 13.84 19.36 18.17

Net Profit Margin (TTM) 9.72 8.35 14.42 12.24

Net Profit Margin - 5 Yr. Avg. 9.57 8.15 12.80 12.63

Effective Tax Rate (TTM) 43.41 44.60 36.06 29.98

Effective Tax Rate - 5 Yr. Avg. 39.92 40.75 34.35 30.87

Management Effectiveness (%)

Return On Assets (TTM) 17.54 14.24 12.26 9.04

Return On Assets - 5 Yr. Avg. 16.35 13.56 10.86 8.32

Return On Investment (TTM) 23.46 18.56 15.66 12.80

Return On Investment - 5 Yr. Avg. 21.56 17.35 13.69 11.90

Return On Equity (TTM) 35.59 28.52 24.48 21.47

Return On Equity - 5 Yr. Avg. 31.57 27.40 22.99 19.62

Efficiency

Revenue/Employee (TTM) 5,373,552 4,889,411 3,077,805 1,035,739

Net Income/Employee (TTM) 522,525 416,214 369,762 127,730

Receivable Turnover (TTM) 13.57 12.78 9.40 10.44

Inventory Turnover (TTM) 23.50 27.13 19.47 12.72

Asset Turnover (TTM) 1.80 1.66 1.13 1.00

[Cerebus]

Actually, I think Exxon-Mobil was something like 4-5%. Excellent point.

I was more proud of this one:

It is also silly to state that oil prices have fallen because Bush said so, oil prices have fallen because demand has fallen due to the higher prices. Markets find equilibrium.

[Censored by Laurie]

* For instance, ROI for the Scotch industry is 50%.

I've had some scotch that I'm pretty certain could fuel my car...but then I suppose you're left with a huge dilemma when filling up...lets say you get $20 bucks worth...how much actually makes it to the car?

Lot more DWI roadblocks too.

[UNTflyer]

Allow me to add some anecdotal evidence to this discussion.

I work in the energy industry and had a working lunch with some finance guys (SMU alum) on an IT project. I asked them what they thought about the drop in oil prices, and did they think Bush lifting the ban had anything to do with it. I got three different answers: Absolutely, yes. Absolutely, no. And Possibly, leaning yes. These are guys with a total of about 50 years of finance experience. I was amused by the wide range of answers.

Then I asked, "If the ban was completely lifted, what would happen to oil prices?" Come to find out, we have a company financial projection based on that very event. They said it assumes prices would almost immediately drop 15-20%, and then stabilize at $60-80 a barrel within 3-5 years, assuming foreign production remains constant.

The thing about a social science like economics is that we can't put theories to test in the lab, we have to look at history. We know when OPEC cut production in the late 70s, prices skyrocketed. And when domestic production increased, prices went back down.

[SCREAMING EAGLE-66]

Allow me to add some anecdotal evidence to this discussion.

I work in the energy industry and had a working lunch with some finance guys (SMU alum) on an IT project. I asked them what they thought about the drop in oil prices, and did they think Bush lifting the ban had anything to do with it. I got three different answers: Absolutely, yes. Absolutely, no. And Possibly, leaning yes. These are guys with a total of about 50 years of finance experience. I was amused by the wide range of answers.

Then I asked, "If the ban was completely lifted, what would happen to oil prices?" Come to find out, we have a company financial projection based on that very event. They said it assumes prices would almost immediately drop 15-20%, and then stabilize at $60-80 a barrel within 3-5 years, assuming foreign production remains constant.

The thing about a social science like economics is that we can't put theories to test in the lab, we have to look at history. We know when OPEC cut production in the late 70s, prices skyrocketed. And when domestic production increased, prices went back down.

---And Russia (USSR), China, and India were a whole lot different than today and using very little oil compared to now. It would drop some but not like then and more of the American oil supply would be gone. Much of the off-shore drilling ban we now have was put into place when Bush Sr. was President. The Florida and California governors both oppose it now... and they are members of which political party?? We had a thread blaming the other party if I remember right. Off shore in International waters does make some sense, not Alaska.

Edited July 17, 2008 by SCREAMING EAGLE-66

[Eagle1855]

Off shore in International waters does make some sense, not Alaska.

NIMBY!

But I do agree. If China and Brazil are drilling there, I don't see any reason why we'd take some moral highroad and not get in on the action ourselves.

[UNTflyer]

Off shore in International waters does make some sense, not Alaska.

Seems our government disagrees.

US to open 3.9m acres in Alaska for drilling

The US federal government on Wednesday said it would open 3.9m acres of land in a designated petroleum reserve in Alaska for drilling as a means to help curb rising petrol prices.

“This is welcome news at a time when Americans are paying record prices at the pump,” said C. Stephen Allred, assistant US Secretary for Land and Minerals. “Together with proposed new production from other offshore and onshore areas, these increased supplies will help to stabilise energy costs.’’

[SCREAMING EAGLE-66]

NIMBY!

But I do agree. If China and Brazil are drilling there, I don't see any reason why we'd take some moral highroad and not get in on the action ourselves.

Exactly.... They are out there drilling in international waters off our coast (Florida) and we don't. ... Dumb. It may have made sense when they weren't there but not now. I am not sure just how that is called the moral high road though. Alaska (Artic circle) is totally different... it is on our land, totally under our control, and unbelievably difficult to do and transport back to "civilization". --- Of course with all this Global Warming it may become the new tropical paradise....LOL... and be easy to drill.

Repeating the two governors involved, California, and Florida are members of which party again..?? Be honest and don't just blame the other party for everything you don't like...or just yell Liberal....whatever that means, since Conservative means little or no change which is what those Governors support...no change, no drilling... . .

Edited July 17, 2008 by SCREAMING EAGLE-66

[SCREAMING EAGLE-66]

Allow me to add some anecdotal evidence to this discussion.

I work in the energy industry and had a working lunch with some finance guys (SMU alum) on an IT project. I asked them what they thought about the drop in oil prices, and did they think Bush lifting the ban had anything to do with it. I got three different answers: Absolutely, yes. Absolutely, no. And Possibly, leaning yes. These are guys with a total of about 50 years of finance experience. I was amused by the wide range of answers.

Then I asked, "If the ban was completely lifted, what would happen to oil prices?" Come to find out, we have a company financial projection based on that very event. They said it assumes prices would almost immediately drop 15-20%, and then stabilize at $60-80 a barrel within 3-5 years, assuming foreign production remains constant.

The thing about a social science like economics is that we can't put theories to test in the lab, we have to look at history. We know when OPEC cut production in the late 70s, prices skyrocketed. And when domestic production increased, prices went back down.

--- The real problem is that you asked an SMU grad and expected to get a credible answer...LOL. Since oil is an international commodity with widespead use, don't expect our politicians (either party) to have much impact on oil prices. it is about supply and demand and mostly about the increased demand in Asia. Drilling off the coast of Florida may help some in prices not climbing but don't expect a noticable drop in prices.

Let me guess, the absolutely yes was from a rabid Bush supporter that thinks he walks on water.

Edited July 17, 2008 by SCREAMING EAGLE-66

[UNTflyer]

Alaska (Artic circle) is totally different... it is on our land, totally under our control, and unbelievably difficult to do and transport back to "civilization". .

No it wouldn't. ANWR is very close to the Alaskan pipeline. It would take just a 30-40 mile branch pipe to link in.

[SCREAMING EAGLE-66]

No it wouldn't. ANWR is very close to the Alaskan pipeline. It would take just a 30-40 mile branch pipe to link in.

--Ever seen the TV series "Ice Road Truckers" on the History Channel which is mostly about suppling the oil industry in the Artic?? Yes it can be done... no it is not easy..or cheap.

[yyz28]

The drop continues.

After the Bush Speech the market is up and oil prices are dropping. I'm not claiming he had a THING to do with it, but those of you who blame the down on Bush have to give him the creidt when it goes up.

I watched the Daily show last night, which I almost never do, and I was amazed at how un-informed Stewart is. He was making fun of the President's mention of how a psycology change can impact the market. Yet the proof is in the pudding. He lifted the executive ban on drilling, which does nothing in effect because the congress has to act too, and just the thought of it sent the speculators running for profit-cover. I agree with the call of the firm UNTFlyer's friends work for. ...so do most sane people and people in the business. Yet the congress refuses to let us get to drilling. ...and this isn't a party thing. Yeah, it's basically all the Dems, but it's a good number of GOP members holding up this as well.

Alaska (Artic circle) is totally different... it is on our land, totally under our control, and unbelievably difficult to do and transport back to "civilization".

DNC Talking point #756

800 Miles of pipeline already in place. ...do you really think adding an extra 50 or so miles for a feeder is that difficult?

Edited July 17, 2008 by yyz28