graybeard

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  • Gas Is Actually a Bargain at $3.56
    @echotoall: your "economy of scale" argument isn't valid in this case. It is a world-wide market with price set by the global supply/demand balance. There are relatively small differences in the wholesale price from one country to the next, based mainly on transportation costs. Traders will move large volumes of gasoline around the globe whenever in trader lingo, "the arb is open", meaning the price difference between two markets is larger than transportation costs. Usually in the summer, the arb is open from Europe to the US for gasoline, meaning European gasoline is cheaper than in the US by enough that traders make money moving marine cargos of European gasoline to the US east coast at a lower delivered cost than gasoline moving up the pipelines from the US refineries in the Gulf coast. This trading action keeps wholesale gasoline prices around the world in a tight, highly correlated range.

    The big differences in prices at the pump are driven almost completely by taxes. Over the long term, these different tax policies have had a huge impact on driving habits in the US vs. Europe.
    For a really good summary of what really drives gasoline consumption, including interesting correlations between price and demand, see pdf.wri.org/automobile... It shows that higher historical prices in Europe have driven consumers to both buy smaller cars and drive them less.
    May 08 09:20 am |Rating: 0 0 |Link to Comment |View article
  • Cleantech "Power 10" Ranking (Vol. I)
    not a pure play, but Corning (GLW) has many tentacles in the green world. If AMAT's thin-film on glass process takes off, that could mean huge volumes for Corning, which already is a leader in the similar LCD TV glass market. Plus Corning owns 50% of Dow-Corning, which sells multiple products to the photo-voltaic industry, in addition to owning 63% of Hemlock Semiconductor (polycrystalline silicon supplier). Finally, Corning has a big position in vehicle pollution control, especially latest diesel system. One disappointment: although Corning would seem to be ideally positioned to be a leader in the concentrated solar power market, so far they seem to be standing on the sidelines while the original poster's #10 pick Schott leads the growth of that market.
    May 07 11:13 am |Rating: 0 0 |Link to Comment |View article
  • Why Exxon Still Denies Peak Oil
    The original poster mentioned the possible influence of stock options on executive decision making, and many others point to this as being a driver of Exxon's decision to have large share buybacks instead of either bigger dividends or bigger capital investments. I can't completely discount that, but I personally don't believe the share buybacks have much to do with executive compensation. For one thing, Exxon hasn't given it's executives any stock options since 2001, when they switched to restricted stock. So the incentive for them to favor stock buybacks vs. dividends is much lower now than it used to be. I believe the main reason they continue to favor buybacks vs. dividends is the tax advantage that buybacks give to shareholders, who only get exposed to tax when they sell their shares and take a capital gain. Any finance textbook will tell you that dividends and buybacks are equivalent financially in the absence of taxes. But under present tax law buybacks are better for shareholders. Another reason for Exxon to favor buybacks is that they are proud of their long record of continuously raising the dividend, and given the boom-bust nature of the oil industry, they don't want to increase the dividend to the point that it becomes unsustainable. Despite current $120 oil, most of the leadership of Exxon well remember sub $20 oil, so their modest dividend ensures they will have cash available for investments without cutting the dividend even if prices crash. So my conclusion is that the Exxon buyback/dividend program is very reasonable. Shareholders who want a 4% dividend can just sell a couple % of their shares each year -- or just buy BP.

    btw... did anyone else notice that the biggest difference between XOM vs the BP and Shell results was the FIFO vs. LIFO inventory accounting? both BP and Shell use FIFO, and they showed huge positive effects (about 10%) from the effect of using FIFO accounting during a period of rising crude prices. XOM uses LIFO, so they didn't enjoy the same bump. That factor alone accounts for most of the perceived gap in performance of XOM vs the others in 1Q. Wait until we have a quarter with falling prices and you'll see the reverse. To be fair to BP and Shell, their press releases clearly showed the "current cost of sales" & "replacement cost" adjustments, but almost all the coverage I've read just glosses over that, and compares the FIFO apples to the LIFO oranges.
    May 06 09:30 am |Rating: 0 0 |Link to Comment |View article

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