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Why has it taken so long for a reduction in price at the pump when crude prices have gone down, but was just the opposite when crude prices went up?
Answer:
What you are describing is typically known as the “rockets and feathers” phenomenon, which has been studied for many years. In September of 2011, the Federal Trade Commission issued a staff report with a lot of good information in it. First, is their finding that “Changes in crude oil prices have continued to be the main factor affecting gasoline price.”
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How can oil companies claim that increased gas prices are only the result of higher crude oil prices and government taxes when they continue to have record profits year after year?
Answer:
While gas prices have fluctuated, oil and natural gas earnings have remained in line with the average of other major U.S. manufacturing industries. This fact is not well understood, however, in part because reports usually focus on only half the story – the profits that are earned. Profits reflect the size of an industry, but they’re not necessarily a good reflection of financial performance. Profit margins, or earnings per dollar of sales (measured as net income divided by sales), provide one useful way to compare financial performance among industries of all sizes. The latest published data for the fourth quarter of 2011 shows the oil and natural gas industry earned 6.2 cents for every dollar of sales in comparison with all manufacturing, which earned 8.3 cents for every dollar of sales.
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Why is heating oil more expensive than gasoline?
Answer:
Heating oil and gasoline are separate products and are traded in different markets, but the price for heating oil has been historically close to the price of gasoline. This is not surprising given that both heating oil and gasoline have historically tracked the price of crude oil.
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Why are we shutting down U.S. refineries? Doesn’t that lead to less supply and higher gas prices?
Answer:
Refining is highly competitive. It has also traditionally been a low-profit margin industry faced with a heavy slate of regulations over the decades involving many billions of dollars in environmental investment and compliance costs. Because of these and other factors, some refineries – often after sustained periods of financial losses – have had to shut down. About 75 U.S. refineries have closed since 1985.
As this has happened, however, the remaining larger, more efficient facilities have expanded capacity so that total U.S. refining capacity has actually increased by 13 percent. This has allowed the sector to continue to reliably provide Americans with the fuels they need.
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Why do we have so many different blends of gasoline across the country? Would fewer boutique blends mean lower prices?
Answer:
While refineries must make large investments to meet state and federal fuel requirements, eliminating them at this point is unlikely to reduce costs significantly since the investments have already been made. New fuel standard rules could raise the cost of producing fuels, which is why we must ensure that new regulatory proposals are necessary, properly crafted, practical, and fair, allowing U.S. refiners to remain competitive, preserve good-paying refinery jobs, and ensure our energy security.
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What role do oil speculators play in determining the price of gas? Should the government regulate oil speculation?
Answer:
Market fundamentals are behind recent crude oil price increases. As the economies of the world begin to recover from the recession, global demand for crude is increasing while global excess oil production capacity is shrinking. Furthermore, buyers of crude oil are also clearly concerned about instability in major oil-producing nations in North Africa and the Middle East.
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Why are gas prices going up when the price of crude oil is going down?
Answer:
U.S. refineries are pulling out all the stops to supply U.S. markets. They produced more gasoline last year than any year in history – even though U.S. demand for gasoline was down last year, and has continued to be down this year. According to the Lundberg survey, gasoline prices have followed crude oil prices down, as crude oil prices have stabilized, and some analysts feel that: “the downward trend should continue as long as crude oil doesn't fluctuate.”
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Why is diesel fuel more expensive than gasoline when it supposedly requires less refining?
Answer:
The diesel fuel we use today is not the same as it was in the past. The investments needed to produce ultra-low-sulfur diesel means it is no longer a simpler refining process. The price of crude oil is the main factor in determining the price of diesel fuel, and fluctuations in the crude oil market may greatly influence changes in diesel prices. Short-run factors that have historically caused divergences from this correlation include supply shortages resulting from refinery outages, transportation issues, adverse weather conditions and pipeline problems. Longer-term factors that have historically been tied to variations in gasoline versus diesel prices include the different seasonal price variations for the two fuels and differing tax rates.
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Will the proposed Keystone XL pipeline be safe? What is being done to prevent spills/leaks?
Answer:
Pipelines have long been recognized as one of the safest, most reliable and well-regulated ways to transport crude oil and petroleum products. Built to the most advanced specifications and monitored and maintained by state-of-the-art technologies, the 1,661-mile Keystone XL pipeline would be no exception.
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Does the extraction and use of oil sands crude produce more greenhouse gas emissions than that of other kinds of oil?
Answer:
Oil sands extraction and processing―like all minerals development―requires energy, which results in greenhouse gas (GHG) emissions. However, on a life cycle (or well-to-wheels) basis, emissions from Canadian oil sands are comparable with other crudes refined in the United States. The average for oil sands imported into the United States is only 6 percent higher than the average crude consumed in the United States. Between 70 and 80 percent of GHG emissions come when fuel is burned.
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How important is oil sands to America’s energy future?
Answer:
Our nation needs more supplies of all energy sources―including oil and natural gas―to meet growing energy demand and provide consumers with reliable fuel supplies.
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Is it true that hydraulic fracturing will turn my tap water into a flammable substance?
Answer:
Hydraulic fracturing does not make your tap water flammable. That claim started in 2009 with the release of the anti-natural gas film Gasland, whose most memorable scene was of a Colorado man lighting his faucet on fire and blaming it on fracking. After the film was released, regulators in Colorado issued a detailed fact sheet seeking to “correct several errors” in the film—including the claim about the flammable faucet.
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Shouldn’t the federal government be more involved in regulating hydraulic fracturing?
Answer:
A comprehensive set of federal, state and local laws laws address hydraulic fracturing operations. These include well design, location, spacing, operation, water and waste management and disposal, air emissions, wildlife protection, surface impacts, and health and safety.
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How much water is used in a typical hydraulic fracturing operation?
Answer:
The drilling and hydraulic fracturing of a horizontal shale gas well typically require 2 to 4 million gallons of water. It’s worth noting that the water volume needed varies substantially between wells, and the water volume needed per foot of wellbore is decreasing as technologies and methods improve over time.
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What chemicals are used in fracking fluid?
Answer:
Hydraulic fracturing uses water pressure under tight controls to create fractures in rock that allow oil and natural gas to escape and flow up out of the ground. During this process, "fracturing fluids" are injected under high pressure into the producing formation, creating fissures that allow resources to move freely from rock pores where they are trapped. While 99.5 percent of the fluids used consist of water and sand, some chemicals are added to improve the flow. The chemicals vary from well to well, but are a mix of common industrial and household materials that millions of American consumers use every day.
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Where is hydraulic fracturing occurring and how has that impacted local communities?
Answer:
Shale gas "plays" exist throughout the Mountain West, the South and the Northeast's Appalachian Basin. These plays are geographic areas where companies are actively looking for natural gas in shale rock.
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How does hydraulic fracturing work?
Answer:
Hydraulic fracturing, or fracking, is a safe and well-regulated technology that has been used for more than 60 years in more than one million wells. In the United States, an estimated 35,000 wells are drilled using fracking each year. Fracking has safely produced more than seven billion barrels of oil and 600 trillion cubic feet of natural gas, and studies estimate that up to 80 percent of natural gas wells drilled in the next decade will require hydraulic fracturing technology.
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How does shale gas fit in to the future of America’s mix of energy sources?
Answer:
Shale gas is an important part of meeting our future energy demand. Between 2000 and 2006, natural gas production from shale formations grew by an average of 17 percent per year, and by an average of 48 percent per year from 2006 to 2010. And that is only the beginning as the EIA projects that total national gas production from shale could grow by almost threefold from 2009 to 2035.Thanks to increased domestic production, natural gas imports are also expected to shrink to 1 percent over that same time period, from roughly 12 percent today.
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How much natural gas is available in the United States?
Answer:
America’s vast proven reserves and undiscovered resources offshore include nearly 480 trillion cubic feet of natural gas, according to the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE). What does that mean? 480 trillion cubic feet of natural gas is enough to heat 10 million homes for nearly 656 years.
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What role does the U.S. tax code play in oil and natural gas industry investment in America?
Answer:
Risk is an integral part of exploring for oil and natural gas. There's no guarantee that drillers will find commercially viable amounts of energy. Before companies begin drilling, they must invest large sums of money to lease areas for development (onshore and offshore) get the needed permits, procure the rig, hire workers and assemble the necessary equipment. Sometimes they find energy, sometimes they drill a dry hole.
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What do oil company earnings have to do with energy security?
Answer:
It’s important to acknowledge that America’s oil and natural gas industry is one of the world’s largest and most capital-intensive industries. Companies routinely invest billions of dollars each quarter into exploration, research, development and technology.
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How much do oil companies make on each dollar of sales, and how does that compare with other business and industries?
Answer:
Because integrated oil and natural gas companies are large, their earnings are large. What’s not often reported is that oil and gas company earnings actually are well in line with the U.S. manufacturing industry, averaging about 7 cents for every dollar of sales. The latest published data for the first quarter of 2012 shows the oil and natural gas industry earned 7.5 cents on the dollar in comparison with all U.S. manufacturing, which earned 8.9 cents for every dollar of sales. When looking at net profit margins, the U.S. oil and natural gas industry ranks 114 out of 215 industries.
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If the industry is getting tax deductions, doesn’t that mean they aren’t paying their fair share?
Answer:
Absolutely not. The U.S. oil and natural gas industry pays more than $86 million every day to the U.S. Treasury in rents, royalties and income tax payments. That’s more than $31 billion a year. In 2011, the effective income tax rate for the oil and natural gas industry averaged 40.6 percent, compared to just 25.1 percent for other S&P Industrial companies.
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Oil company profits are very high; are they paying their fair share in taxes?
Answer:
The fact is, the oil and natural gas industry’s income tax expenses as a percentage of net income (before income taxes) averaged 40.6 percent in 2011, compared to 25.1 percent for other S&P Industrial companies. U.S. oil and natural gas companies pay approximately $86 million to the U.S. Treasury in rents, royalties and income tax payments every single day.
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Are oil companies inflating gas prices by not building new refineries?
Answer:
The short answer is ‘no.’ The longer explanation is that—first—oil companies do not set the price of gasoline. Because crude oil is the primary component in gasoline production, the price rises and falls with the cost of crude, which is set by supply and demand on the global commodities market. In addition to economic growth and geopolitical risks, other factors, including weather events, inventories, exchange rates, investments, spare capacity, production decisions, and supply growth, all figure into the price of crude oil and thus—gasoline prices. Gasoline prices can be impacted by government taxes, and taxes add an average 49.5 cents a gallon to the price. Of that, 18.4 cents goes to the federal government; the rest ends up in state and local government coffers. One reason gasoline prices vary by state is because taxes often do.
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How much do oil companies make on each dollar I spend on gas?
Answer:
The latest published data for the fourth quarter of 2011 shows the oil and natural gas industry earned 6.2 cents for every dollar of sales. These earnings are in line with the average of other major U.S. manufacturing industries, which earned 8.3 cents for every dollar of sales.
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Why do gas prices differ from station to station and state to state?
Answer:
Gasoline taxes collected by states vary widely, from just 26.4 cents per gallon in Alaska, to as much as 68 cents per gallon in Connecticut. In addition to excise taxes, other taxes can also apply, such as sales taxes; gross receipts taxes; oil inspection fees; county and local taxes; underground storage tank fees; and other miscellaneous environmental fees depending on the state.
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Is “Big Oil” driving up gasoline prices for profit?
Answer:
Oil companies do not set the price of gasoline. A number of factors go in to the price of gasoline—the largest being the price of crude oil. Crude oil is the raw ingredient gasoline and other fuels are made from and is bought and sold globally. The price of crude oil is determined by a number of factors—including supply and demand. In addition to economic growth and geopolitical risks, other factors—weather events, inventories, exchange rates, investments, spare capacity, production decisions, and supply growth—can figure into crude oil’s price and thus, gasoline prices.
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