Wall Street does it again to oil prices

[henderson]

Originally Posted by ljr

I'm sorry but you are incorrect. The folks at the commodity exchanges never actually take possession or even see the commodity they are trading. You can call it gambling if you want but they are buying contracts at future prices thus assuming some of the risk that would otherwise fall to the producers.

Maybe not the trader sitting behind the desk, but his customers do. Large consumers of the products also buy on the commodity market to hedge against major increases. They do take ownership of the product. Many refineries hedge the price of oil on the futures market.

[Perry White]

And they only pay 15% on the profits.

[ljr]

Originally Posted by henderson

Maybe not the trader sitting behind the desk, but his customers do. Large consumers of the products also buy on the commodity market to hedge against major increases. They do take ownership of the product. Many refineries hedge the price of oil on the futures market.

Not so much refineries but crude oil producers, otherwise you are exactly correct. That's the whole point of the system.

[ljr]

Originally Posted by Perry White

And they only pay 15% on the profits.

Then, if the income originated outside the US, it is taxed again by the other country. (US is the only country that does that). Then they pay corporate income tax, at what was until recently the 2nd highest corporate income tax rate in the world. Its now the highest since Japan lowered theirs.

Then the owners of the corporation (us) are taxed again when they get their share. Then we pay state and federal tax at the pump. Allegedly the fed portion goes into the transportation trust fund which, like all the other trust funds in DC, has had every dime stolen for decades. Then we borrow money from China to pay back the trust fund when we need money for transportation.

...and all of that is done in US dollars which have been steadily declining in value for almost a century.

Gee, I wonder why its so expensive?

[henderson]

Originally Posted by ljr

Then, if the income originated outside the US, it is taxed again by the other country. (US is the only country that does that). Then they pay corporate income tax, at what was until recently the 2nd highest corporate income tax rate in the world. Its now the highest since Japan lowered theirs.

Then the owners of the corporation (us) are taxed again when they get their share. Then we pay state and federal tax at the pump. Allegedly the fed portion goes into the transportation trust fund which, like all the other trust funds in DC, has had every dime stolen for decades. Then we borrow money from China to pay back the trust fund when we need money for transportation.

...and all of that is done in US dollars which have been steadily declining in value for almost a century.

Gee, I wonder why its so expensive?

Unless I'm mistaken then foreign taxes are offset on their US taxes which are corporate income taxes. So that's 1 tax. then the owners(stock holders are taxed on the distributed income @ 15%) We, all of us pay the pump taxes. All world currencies are going down in value due to inflation, so whats the point?

[ljr]

Originally Posted by henderson

Unless I'm mistaken then foreign taxes are offset on their US taxes which are corporate income taxes. So that's 1 tax. then the owners(stock holders are taxed on the distributed income @ 15%) We, all of us pay the pump taxes. All world currencies are going down in value due to inflation, so whats the point?

You are incorrect. Foreign income on US corporations that returns to the US is taxed by both the US and the foreign country. Under the latest proposal, that will apply to all income whether it returns to the US or not.

The international oil market does all transactions in US dollars, for now at least. With respect to crude oil ours is the only currency that matters. Our per-capita debt is the largest in the world so our debt monetization has the farthest to go.

Getting lost in the details of market economics probably isn't productive here. Those that aren't already familiar won't know what to believe anyway. My original plea was that people avoid jumping at every potential bogey man they hear about on TV. These things really require some thought that goes far beyond who you believe in a forum discussion. Ill defined buzz words like "wall street" and "speculator" don't serve that thought well.

[henderson]

Originally Posted by ljr

You are incorrect. Foreign income on US corporations that returns to the US is taxed by both the US and the foreign country. Under the latest proposal, that will apply to all income whether it returns to the US or not.

The international oil market does all transactions in US dollars, for now at least. With respect to crude oil ours is the only currency that matters. Our per-capita debt is the largest in the world so our debt monetization has the farthest to go.

Getting lost in the details of market economics probably isn't productive here. Those that aren't already familiar won't know what to believe anyway. My original plea was that people avoid jumping at every potential bogey man they hear about on TV. These things really require some thought that goes far beyond who you believe in a forum discussion. Ill defined buzz words like "wall street" and "speculator" don't serve that thought well.

Quoted from the IRS "
What is the Corporate Foreign Tax Credit?
The corporate foreign tax credit is a set of provisions designed by Congress to eliminate potential double taxation on the foreign-source income of U.S. corporations. Double taxation occurs when an item of income is taxed by both the United States, as the corporation's country of residence, as well as by the country where the income was generated. The current provisions allow U.S. businesses to credit their foreign taxes paid, accrued, or deemed paid against their U.S. income tax liability, subject to limitations that prevent taxpayers from using taxes paid in a country with a higher tax rate than the U.S. to offset their tax liability on U.S. income. Corporations are required to calculate this credit separately for different income categories to prevent taxpayers from combining income that is traditionally taxed at low rates, such as dividend or interest income, with income that is typically taxed at higher rates, such as active business income. The corporate foreign tax credit is reported on Form 1118, Foreign Tax Credit - Corporations."

[ljr]

Originally Posted by henderson

Quoted from the IRS "
What is the Corporate Foreign Tax Credit?
The corporate foreign tax credit is a set of provisions designed by Congress to eliminate potential double taxation on the foreign-source income of U.S. corporations. Double taxation occurs when an item of income is taxed by both the United States, as the corporation's country of residence, as well as by the country where the income was generated. The current provisions allow U.S. businesses to credit their foreign taxes paid, accrued, or deemed paid against their U.S. income tax liability, subject to limitations that prevent taxpayers from using taxes paid in a country with a higher tax rate than the U.S. to offset their tax liability on U.S. income. Corporations are required to calculate this credit separately for different income categories to prevent taxpayers from combining income that is traditionally taxed at low rates, such as dividend or interest income, with income that is typically taxed at higher rates, such as active business income. The corporate foreign tax credit is reported on Form 1118, Foreign Tax Credit - Corporations."

You are correct. I surrender.

[Ramblin]

Originally Posted by golfpro

well, maybe we should not shipping our oil to china and start using it here at home.

Problem is, it's not 'our oil'. There is no separate domestic oil market that I'm aware of. If there was, it would likely track right along side of the world market with regards to per-barrel prices, unless government subsidized it.

Here's a hypothetical:
The government has mandated a new domestic oil market be created so that domestically produced oil can positively impact fuel prices here, and help wean us from the import nipple.

I break the piggy bank, and buy the stuff to put up an oil well on my property. I manage to pump 100 barrels a day from my well. These barrels can be sold on the world market @ $100/bbl, OR it can be sold on the domestic market @ $50/bbl. Where do I sell my oil?

Answer: I sell my oil on the world market because it doubles my profit.

Unless the government gets into the oil business, and creates a domestic market to keep fuel prices down, more wells will make no difference.

[CLIFFTALL]

Originally Posted by Ramblin

Problem is, it's not 'our oil'. There is no separate domestic oil market that I'm aware of. If there was, it would likely track right along side of the world market with regards to per-barrel prices, unless government subsidized it.

Here's a hypothetical:
The government has mandated a new domestic oil market be created so that domestically produced oil can positively impact fuel prices here, and help wean us from the import nipple.

I break the piggy bank, and buy the stuff to put up an oil well on my property. I manage to pump 100 barrels a day from my well. These barrels can be sold on the world market @ $100/bbl, OR it can be sold on the domestic market @ $50/bbl. Where do I sell my oil?

Answer: I sell my oil on the world market because it doubles my profit.

Unless the government gets into the oil business, and creates a domestic market to keep fuel prices down, more wells will make no difference.

Exactly my thoughts. Thanks for spelling it out.

[raycon9]

Originally Posted by Ramblin

Problem is, it's not 'our oil'. There is no separate domestic oil market that I'm aware of. If there was, it would likely track right along side of the world market with regards to per-barrel prices, unless government subsidized it.

Here's a hypothetical:
The government has mandated a new domestic oil market be created so that domestically produced oil can positively impact fuel prices here, and help wean us from the import nipple.

I break the piggy bank, and buy the stuff to put up an oil well on my property. I manage to pump 100 barrels a day from my well. These barrels can be sold on the world market @ $100/bbl, OR it can be sold on the domestic market @ $50/bbl. Where do I sell my oil?

Answer: I sell my oil on the world market because it doubles my profit.

Unless the government gets into the oil business, and creates a domestic market to keep fuel prices down, more wells will make no difference.

You are forgetting that every oil well pumps less today than it did yesterday. So we need NEW wells just to stay Even.

[jzick]

I break the piggy bank, and buy the stuff to put up an oil well on my property. I manage to pump 100 barrels a day from my well. These barrels can be sold on the world market @ $100/bbl, OR it can be sold on the domestic market @ $50/bbl. Where do I sell my oil?

Answer: I sell my oil on the world market because it doubles my profit.]

But then you would be guilty of the dreaded "corporate greed" and everyone would hate you. Everyone knows you make too much money off the backs of the poor working man.

[Tyler6357]

Originally Posted by Ramblin

Answer: I sell my oil on the world market because it doubles my profit.

Unless the government gets into the oil business, and creates a domestic market to keep fuel prices down, more wells will make no difference.

I respectfully disagree. This assumes that an increase in domestic oil production doesn't affect world prices which is totally unrealistic. If America were pumping more oil then America would be increasing the world supply of oil thus putting downward pressure on the price of oil on world markets. If America was flooding the market with oil then those speculators would be speculating that the price is going to drop instead of rise and prices would come down quickly. The Saudis cut and increase supply to affect the price of oil all the time. Why do you think OPEC was formed? The answer is to control the price of oil by limiting production. The truth is, speculation is based on supply and demand. When supply increases at a quicker rate than the demand increases prices go down, when it doesn't they go up, plain and simple.

[palehorse89]

Originally Posted by Tyler6357

I respectfully disagree. This assumes that an increase in domestic oil production doesn't affect world prices which is totally unrealistic. If America were pumping more oil then America would be increasing the world supply of oil thus putting downward pressure on the price of oil on world markets. If America was flooding the market with oil then those speculators would be speculating that the price is going to drop instead of rise and prices would come down quickly. The Saudis cut and increase supply to affect the price of oil all the time. Why do you think OPEC was formed? The answer is to control the price of oil by limiting production. The truth is, speculation is based on supply and demand. When supply increases at a quicker rate than the demand increases prices go down, when it doesn't they go up, plain and simple.

you just nailed it right on the head! again the # 1 export in 2011 was finished oil products. I work in a 70,000 bpd refinery in pa. and we cannot keep a level in our tanks, selling everything we make. gas just jumped 15 cents yesterday i think