Re: The High Price of Gasoline

jimstevens wrote:
[Default] On Wed, 06 Jun 2007 10:13:18 -0700, Islander
<nospam@xxxxxxxxxxx> wrote:

jimstevens wrote:
[Default] On Sun, 03 Jun 2007 17:05:36 -0700, Islander
<nospam@xxxxxxxxxxx> wrote:

Joe Avelon wrote:
Islander wrote:
El Castor wrote:

Here's another fairy tale for you. We haven't built an oil refinery in
this country since the 70's. Why not? Several reasons, I suppose.

1. NIMBY lawsuits.
2. Left wing environmental lawsuits.
3. Demands that the government increase ethanol production and cut gas
consumption -- in part to comply with Kyoto. You know -- the Kyoto you
want us to comply with.

Not a lot of incentive to spend a few hundred million on an oil
refinery. In fact, US refining capacity is less now than it was in
1981. If you doubt me, here's the link. http://www.nasdaq.com//aspxcontent/newsstory.aspx?textpath=20070525%5CACQDJON200705251327DOWJONESDJONLINE000783.htm&cdtime=05%2F25%2F2007%20+1%3A27PM


If I'm not mistaken, we are a net importer of refined gasoline on the
west coast, and last time I checked, crude oil future closed over $65.
Yes, there has been opposition to building more refineries in this country, but there has also been an oil industry that has been more than happy to move operations off-shore where costs are lower. You support outsourcing and globalism in other industries. Why do you blame the liberals for the same practice in the oil industry?
Liberals opposition for building more refineries forced the move offshore to meet demands.
And did liberals also force the move of much of our manufacturing industry offshore? Please explain why this is different!
I thought I answered this question yesterday. You really did not
understand the book Paul. The world is flat and traditional
boundaries of national borders, oceans, languages, and other
traditional lines of separation have no meaning for a great many
processes that were once highly localized.

Recall the example in the book about McDonalds' franchisee from
Colorado who proposed establishing a call center to handle drive thru
windows. It reduced the labor in terms of man hours and in terms of
cost as the stores didn't have to train someone for that specialized
role. It greatly reduced errors in orders. It decreased the time per
customer which increased the number of customers a store could serve
in a drive thru window per hour. That innovation took jobs from
people throughout the Western areas that began using that service.
Technology was the key that allowed such centers to be established for
a whole range of industries. These call centers for drive thru jobs
could be handled in the Philippines or other places with English
talent and could even evolve to have call takers available to service
customers in their language.

Imagine a Korean in his Kia at the drivethru window in Seattle with
minimum English skill could have someone handle his order in fluent
Korean. As the author suggested, jobs are not localized or national
any more their are global possibilities for many industries.

You did not get the point of the book Paul. Job protectionists in
power will drive down their economies in the modern flat economic
world. You did not understand what you read!
A little background. I was at DARPA in the early '80s and one of the projects that I managed was MOSIS. This integrated circuit fabrication service used the internet to allow anyone to have affordable access to semiconductor fabrication. See http://www.mosis.edu/ I also started the FAST project which was the very first electronic commerce service which also used the internet to allow anyone to order electronic components on-line. Later, while at Stanford, I organized the ACORN project which was the first totally on-line RFP for research projects. We had $1M to spend, received 65 proposals on-line, did the whole technical evaluation on-line involving people from across the country. I also started the first totally on-line technical journal. There are other similar projects that I have led or been involved in up to the time that I retired 9 years ago. I think that I understood the book!

The question is, given this technology, how does an advanced country like the US continue to maintain it's economy? How do we compete with countries that have much lower cost of living and much lower salaries? I gave a list of things that we need to be doing in another thread in this topic. I don't think that any of these were protectionist, but rather things that we need to do to continue to compete in a flat world.

Coming back to the topic at hand, the oil industry is global and it makes economic sense for them to move their refineries closer to the source of the oil. This has very little to do with NIMBYs, environmentalists, or liberals as Jeff claimed. Rather, it has to do with minimizing costs in their supply and distribution chain (a topic treated quite well in Friedman). There are political and social issues involved in this, however, and it is easier for these companies and their apologists to shift the topic than to admit that they are polluting or exploiting working conditions in third world countries. It is difficult for the consumer to address this, as they have in the clothing industry for example, because it is almost impossible to know where your gasoline is coming from, e.g. oil is fungible.

Gotta go to town now.


You pollute the issue with multiple threads. Is it polluting other
places and exploiting workers elsewhere or moving job where labor is a
resource more readily available and cheaper. I see them as two issues
and in a flat word labor at any point on the globe can compete with
us. When a worker in China can live for 20% of the cost of a worker
here, they can move the job and hire five workers in China. They are
using the same production equipment we used to make the shirt or
stereo and the worker conditions will be lower standards initially. If
you went to Taiwan in 1960 you would see very different conditions
from what workers experience today. That is normal that improvements
will be needed and will have to improve. The sharing of information
worldwide makes those delighted to have a job today, interested in
improving conditions tomorrow. That is normal and even happens here
in the US. Workers making cars in Montgomery Alabama are cheaper then
workers in Detroit. Demands will come along for those workers in
Montgomery and in China to improve. That is normal.

The point is, as you said in your other article, our workers had
better stop sitting on their asses in schools and take their lessons
seriously if they are to compete with job hungry workers world wide.

You can not protect industries and moving them overseas is not about
polluting and exploiting as you suggest. All labor is exploitation!
It is the difference in cost of living for workers that is the primary
driver. In Montgomery Alabama would you believe one could buy this
house for 299,900 bucks. Click on the picture and see what it is
like. Thus, working in Montgomery one will have a higher standard of
living and make cars compared to some labor union intensive place like
Detroit - a dying city!

http://alamls.net/MAARReports/ListitLib/report_builder.aspx?report=public_full_prop1&mls_acct=1239811&footer=494948545652&header=494948545652&maillog_id=0114674802
http://alamls.net/MAARReports/ListitLib/report_builder.aspx?report=public_full_prop1&mls_acct=1240584&footer=494948545652&header=494948545652&maillog_id=0114669641

Don't give me the stuff about who wants to live there. People do live
there and compared to many other places in the US, the cost of living
is much cheaper. Thus, Korea built a huge car plant there and the
Germans built one in another city close and it goes on.

We better learn that we can''t follow France and demand more and more
from employers and expect a job to be in our neck of the woods and our
kids better figure that they go to school to learn and not to sit on
their asses.

You are being defensive and there is no reason for it.

It is foolish for us to attempt to compete for the job that a worker in China can do for 20% of the cost. This is Friedman's point and mine. If we are to compete economically and retain our high cost standard of living, we need to be able to create high value added jobs. That means that we need to be doing all the things (and more) that I listed earlier. The kid who drops out of high school in the US today is screwed. Etc, Etc.

Now, returning to the topic once again, if you read and understood Friedman, you will begin to understand some of the issues involved in supply chain management. There are efficiencies to be had in managing your supply chain, not just from lower wages in foreign countries, but also in determining where certain activities are performed. We used to ship raw products to this country to be refined into something useful to be ultimately used in manufacturing products that people bought. Ford used to brag about bringing in iron ore at one end of his plant and shipping automobiles out the other. Today, it often makes sense to push parts of the supply chain to sites that are closer to the source of the materials. It reduces shipping costs and transfers issues of storage to your supplier, often in a region where costs are lower. This is happening in the oil industry as well. Saudi Arabia, for example, presently has the largest refinery capacity in the world. Exxon, for example just signed a $3.5B deal with Aramco and Sinopec for a new refinery tuned to process Saudi Arabian oil. There are several companies now planning to build refineries in Syria, probably expecting to tap Iraqi oil supplies and provide a safer and less expensive path to the Mediterranean and beyond.

Yes, there are also issues of low cost Pakistani oil laborers and more relaxed environmental restrictions in the Middle East. My point is still valid, however, that the high price of gasoline is not due to NIMBYs, environmentalists or liberals as Jeff claimed.
.

Relevant Pages

  • Re: Wow - What a day !!
    ... But, given the fact that not only does this country produce oil but several countries all over the world from where we get our supplies, should three or four oil refineries in the USA being out of action cause such an increase in price here? ... The fuel cost is already affecting inflation, gas and electricity will rise even higher, unless the cost of oil is brought down. ...
    (uk.people.silversurfers)
  • Re: local food cost question
    ... >> US cost with tip to Danish cost without tip. ... although monthly expenses have gone ... >>> of the city. ... > plentiful in the country:)). ...
    (rec.food.cooking)
  • Re: the real skinny on auto worker pay
    ... Big Three workers aren't making anything close ... Average hourly US cost per worker -- BENEFITS INCLUDED! ... And yet the main problem facing Detroit, overwhelmingly, is not the pay gap. ... The third category is the cost of benefits for retirees. ...
    (soc.retirement)
  • Re: Small proto boxes with LCD and buttons?
    ... isn't even in the top ten of most expensive cities worldwide. ... The trend in the US is to move away from high cost cities and back to rural settings. ... It used to be a tax'em - spend it country which is why I left. ... Instantly he dismisses the thought and moves on to the usual grunt work where he doesn't need employees. ...
    (sci.electronics.design)
  • Re: Illegal Immigration
    ... Jerry, as Connie pointed out, the cost to incarcerate them is prohibitive. ... I think that would send the message of the risk an illegal takes, when they are in this country. ... Jerry, if the wetback hasn't committed any crime other than crossing the border illegally, he can't be put in jail. ...
    (soc.retirement)