Try these 'Foreign Check' Bank Fees on for Size

Congress (mainly the Democrats in Congress) keeps claiming that the oil companies are price gouging through the high price of gas. Of course gasoline prices are mainly controlled by both taxes and the laws of supply and demand. While there have been claims of gouging, there has been a distinct lack of evidence to support the claims.

A while back I had documented that it is the Government who are the price gougers. On everything from taxes on tourists to Alaska, Taxes on the oil companies (ExxonMobil paid $25.8 billion in taxes the first quarter of 2006 resulting in $8.4 billion in net revenue.), to the State of Delaware that gouges every traveler driving up and down I-95.

If the Government wants to investigate an industry for gouging, then I suggest they take a look at the Banking Industry. They have to be the poster-children for gouging. I had already posted how the banks skim wire transfers through 'Intermediary Bank Fees' which of course are not disclosed to the senders and are not included in the fee when the senders pays for all charges associated with the transfer. (See: Are Banks Skimming International Money 'Wire Transfers'?)

Now lets take a look at what happens when you deposit an International Bank Draft/check at a typical US Bank:

So, out of a $100 check, you receive back less than half. This of course did not include the fee to issue the check, if any, as well as any fee to exchange the local currency into dollars for the check. At least, the fees would have been the same regardless of the amount of the check. So in effect the small clients are the ones being screwed.

The most interesting part in all of this is that the 'foreign bank' is charging a fee to cash it's own check. Pretty slick isn't it. These fees could have been avoided if the check had been payable in the US. That means that a US bank is listed on the check as the payable address. This would eliminate the local (our) bank fees and shift the foreign bank fee to the purchaser of the check/bank draft.

One problem that we have had with foreign bank drafts payable in the US is that occasionally the bank will lose the check and not credit our account. Of course the payer provides us with a copy of the front and back of the check cashed by the bank. I have yet to get a decent explanation how a bank can lose an electronic copy of a check. (They claim the chek cannot be cashed as they have misplaced the orignal. And no, that does not make this their fault.) You see, they scan these things and toss the originals. Which is a real joke explaining to a foreign customer that the yellow piece of paper is the check that he sent us that the bank will not cash for any number of reasons, the biggest being a mistake in one of the US banks, resulting in a refusal to cash the check. (I wonder if the system is flooded with fraudulent checks that results in this steady stream of valid checks being kicked out of the system.)

Amazingly, this foreign check is still cheaper than the total cost of sending a wire transfer.

You have to wonder why the international banking system is so incompetent when it comes to moving money around the planet. There is too much manual input at mid-locations. Too many errors. Lost payment details. Lost payments. Even double payments. (The bank sends the same payment twice.) Clearly it can be much better.

Take credit cards. I can travel to most countries and there at the airport is a cash machine. Pop in the credit card and out comes local cash. In most cases the fee, if any, is minimal. Then you have Western Union and Paypal, which are also valid options for making small payments.

I hope the banks clean up their act. It seems that they think that there is more profit in it for them if they keep the system slow and screwed up. That is great, as long as there are no alternate ways of making a payment. The internet is quickly changing that. Until they change, people's impression of banks is just going to stay in line with the theme of the commercial below.

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Are Banks Skimming International Money 'Wire Transfers'? - 6 April 2007

Alaska: All Your Taxes Are Belongs To Us

Note: This is written about PRE-Governor Palin who assumed the office of Governor in December, 2006. This post was written in August 2006 when Frank Murkowski was Governor. (Note added 4 Oct 2008)

If any state can lay claim to being the biggest money leech, it has to be Alaska. This is the state whose Senators manage to sucker the rest of us into paying for not one, but for two bridges to nowhere.

The only people who don't seem to pay taxes are the people who actually live there. Not only do they not pay state taxes, but the state rewards them with a piece of the oil revenue as a reward for not moving out of the state.

Despite receiving a fortune from oil revenue and tax money the rest of us sent to Washington, the residents of the state have now passed a ballot measure to tax any of us who actually bother to visit their state by cruise ship $50 each. That's $100 a couple. That's called gouging.

It doesn't end there either. They will also tax the cruise lines 33% on their gambling profits. Kind of rich isn't it.

Now don't kid yourself into thinking that anything good is going to be done with the money. They use Federal money for state programs, since they don't collect income tax. Worse, is that our taxes they do receive are completely wasted. Alaska can thank their two senators (the infamous Ted Stevens, Republican, and Daughter of the current Governor, Lisa Murkowski, Republican, appointed by the Governor) for their ability to bring pork back home.

One pork project that the Bush Administration cut, that Senator Murkowski has been whining about, is Alaska's Village Safe Water Program. (See more on that here: Alaska Screws over Rural Residents in Quest for Pork) It's not that the President has anything against Alaskans without running water, he has a problem with a program that the Government rates as "Ineffective."

The program is so ineffective, that earlier this month, the city of Hooper Bay, Alaska burned to the ground for lack of water to fight the fire with. Despite the safe water program spending millions on Hooper Bay, there is still no running water. You would think that the program would now work overtime to bring running water to the town. Well yes, and no:

As for the new school, the state's Village Safe Water program is pitching in there, Cowart said. The school was under construction and scheduled to be completed in December. The state program is now running work crews around-the-clock to get the job done sooner, he said. - adn.com

So they are working around the clock to build a school. No mention about running water. Sounds like money is being siphoned out of this program to cover expenses that should be paid by the State of Alaska directly. This would be in line with Federal audit findings:

Q: Are funds (Federal and partners') obligated in a timely manner and spent for the intended purpose? NO

Explanation: The legislative audit found many unexplainable purchases of services and equipment. (Evidence: State of Alaska legislative audit (2003))

Q: Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals? NO

Explanation: This program does not compare favorably to other regionally-focused drinking water and wastewater programs. While Alaska projects present special problems not faced by other water infrastructure programs, this program appears to have inadequate program management, which hinders its ability to track performance and ensure results.

Read the rest of the evaluation here.

So what about Hooper Bay, why does it not have running water? Well take the following from the Spring 2006 Edition of Alaska's Village Voices:

Construction on the water and sewer project will begin this summer and, while it is officially a city project, it likely would not be happening now if Sea Lion (note: a company in the city) had not strongly thrown its support behind the city to help them overcome some bureaucratic hurdles thrown after state officials sought to disqualify the Hooper Bay project due to a perceived shortfall of water payments from village households. “It seems like outside entities had a challenge and wanted to put our village safe water on hold,” Naneng says.

And this:

overseeing is the $43 million water and sewer construction project that is expected to begin this summer, although Murran notes that the State has thrown up obstacles before. “When I started this job four years ago, the state put on a condition that they will not operate a water and sewer plant if 50 percent of the villagers have not been paying the $25 fee (for use of the washeteria).” This was a problem, Raphael explains, because the homes of the 1,133 Hooper Bay residents are spread out over a large area. Many people have small cash incomes and sometimes haul in their drinking water from other sources and, as a result, many households had fallen behind, bringing the number to less than 50 percent.

“So we got together and our village corporation was willing to subsidize the fees.” Sea Lion was also able to help the city convince the State that water and sewer fees paid by it, the school, and the upcoming sub-regional clinic should also be factored in. This brought the total to above 50 percent.

“Then the state brought it up to 75 percent.” That hurdle was met as well. “Hopefully, we will complete this water and sewer - unless they come up with another lulu,” Raphael says. Raphael estimates that the project will bring 20 jobs to the city during construction, with some laborer rotating through them in two week shifts. Once it is completed, three new full-time workers, in addition to those already employed at the washeteria, will need to be hired.

“Water and sewer will be a real benefit to the people of Hooper Bay,” Raphael says. “You won’t have all this raw sewage. It will help stop the spread of disease. We will have cleaner water, and won’t have the potential of contaminated water.” The projected fee will be $85 a month per household, and households will be required to be caught up on their recent $25 washeteria fees before they can be hooked up.

From this summary above, the Federal Government might as well just cut all the funding for Alaska's Safe Water Program because these Alaskan's are never going to get affordable running water. Really, why are we sending all this money to help the rural Alaskans when the State of Alaska makes the requirements impossible for people to actually receive the aid. Really, if they can't afford $25 a month now, how are they going to afford $85? Especially since they can get water elsewhere, just not out of a faucet. Considering the comments above, do you now see the following in a different light:

Residents in 5,000 homes in rural Alaska live without running water and sewage systems. Their bathrooms are often buckets that must be hauled to landfills or a sewage lagoon. For drinking water, people go to ponds to chip ice in the winter and collect rainwater in the summer. The Bush administration's budget proposes reduced funding for the state's Village Safe Water program by 75 percent. Ashley Gross of the Alaska Public Radio Network reports. - NPR

It's a wonder that Bush didn't kill the program entirely.

Talk about biting the hand that feeds them. Tourism has to be one of the biggest employers for the state. Sure Alaska is a big draw. My wife and I have wanted to go on a cruise there but have not as it's already damn expensive. From the East Coast you can probably expect to pay over $1,000 each for an Alaskan Cruise before all the 'extras.' Think of the alternative destinations that will now be more attractive once you factor in this additional expense.

First you have the Caribbean where most of the cruise passengers end up. Many taking multiple trips there, and none to Alaska. Then you have non-cruise options. I just bought tickets to Finland for $600 each. We will be staying with family and friends, but even if we didn't we can rent a fully furnished apartment for under $300 a week. Finland not your thing, well Iceland Air has all sorts of specials to Iceland and the rest of Europe for well under $1,000. This new tax is sure to put off some tourists from visiting. (Over at a cruise message board, many people expressed that they would go, but would be sure to curtail their shore-side spending in direct proportion to the tax.)

Oh yes, the purpose of the tax? It is to ensure that the cruise companies pay their fair share for 'using' Alaska's nature and the damage they do to it. Too bad they didn't bother to calculate the benefits the cruise industry contributes to their state. Funny thing is, this tax might actually reduce the 'damage' being done to the state by reducing the flow of tourists to Alaska, but at what price? (Less tourists, resulting in less ships, and less tourist dollars)

This new cruise tax is simply Taxation without Representation. I am not sure if this tax has a name or not and I could care less what they intend to call it or what they intend to do with the money (which is vague). Lets just call it what it really is, the Alaska Fuck You Tax.

P.S.
If I had to guess, I would say that it is Alaskan Senator Ted Stevens who has placed a 'Secret Hold' on a bill for open accountability of spending on Government Projects. After all, with the amount of Government money that they receive, and the heat they are already getting, it makes sense that they would not be interested in more 'openness.'(Just a guess.)

Note: This is written about PRE-Governor Palin who assumed the office of Governor in December, 2006. This post was written in August 2006 when Frank Murkowski was Governor. (Note added 4 Oct 2008)

Detailed Information on the Alaska Native Village Water Infrastructure Assessment - ExpectMore.gov

(Title inspired by the Jawa Report)

Alaska Screws over Rural Residents in Quest for Pork - FFI 4 May 2006

Funds at Risk for Rural Alaskan Services - NPR 12 April 2006
In Alaska, a Fight Brews over Cruise Tax - NPR 21August 2006

Congress Should Investigate Short Selling Records

Congress is eager to investigate all sorts of things these days; Oil companies for gouging, ExxonMobil (XOM) for it’s high profits and the NSA for it’s efforts to catch terrorists.

At the end of the day, they most likely will find no illegal activity and the report investigating alleged gouging has already come out noting that no evidence of gouging was found. I suggest that if Congress is serious about investigating and finding criminal activity, then their chances are much better if they direct their activities to investigate the practice of short selling.

For the longest time a small minority have been on a crusade to get the Government to investigate short sale activity for potential abuses, namely the shorting of stock without actually borrowing the shares they are selling short. So far they have only received minor interest. Now however there are two new groups, one of them getting ready to take their own action; Theses groups are the corporation’s themselves (not just Overstock.com) concerned about rampant over voting and the brokerage’s hedge fund clients, the very clients that do the short selling.

Yes, this is partly about naked short selling. But a recent article by Bloomberg titled “Corporate Voting Charade” documents yet another abuse created by short selling, namely “Naked voting.”

When you purchase stock you also obtain voting rights, normally one vote per share. Shareholders vote on the appointment of directors, vote on shareholder proposals, and vote whether to accept takeover offers as well as countless other issues.

When you purchase stock on margin, your broker has the right to borrow the stock from (under) you and loan it to a short seller. (A short seller sells stock he does not own, betting that he can buy it back later at a cheaper price.) When your stock is borrowed, you lose your voting rights as that right stays with the stock. In addition, you also lose any dividend the stock pays, and instead receive a ‘dividend in kind’ (a payment equal to what you would have received as a dividend but you receive the payment from the short-seller, not the company.) The difference matters because the in-kind dividend payment is taxed at a higher rate.

While brokerages appear to be real good at borrowing stocks, they don’t seem to bother to keep track of the votes, instead sending voting material to all who hold the stock in their accounts according to the Bloomberg article. This can lead to rampant voting fraud as each share can be borrowed multiple times, being held in multiple accounts, but it still is entitled to only one vote. So 100 shares borrowed twice might result in 300+ votes. The Bloomberg article claims that brokerages are doing this on purpose because they do not want their clients to know the negative consequences of having a margin account.

Wall Street securities firms such as Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley lend shares from a central pool, and the brokerages don’t attribute loans to the accounts of particular clients. While the small print in a typical brokerage contract says a customer’s voting rights may be affected if the firm loans out stock, most brokerage customers likely don’t even notice when short sellers borrow stock because their accounts typically list the same number of shares as before. “Everybody’s reaction when they find out about this is that they can’t believe it happens,” says Anne Faulk, chairwoman of Swingvote LLC in Atlanta, which manages proxy voting for institutional investors who may own stock in thousands of companies. – Bloomberg ‘Corporate Voting Charade’ (PDF)

I am pretty surprised that they would be so careless with voting rights. Then again, it’s not too surprising, since nobody has bothered to pay attention to this in the past, and only in recent years has short selling become popular and an available trading option to most investors. After all, this is just a small loose end and it really just costs them a little for the extra annual reports. Who were they really hurting anyway? Many small shareholders never even bother to vote. It will be interesting to see if this angle gets any traction. I would think that it would not be too hard for some lawyers to come up with a good lawsuit on behalf of the corporations whose elections have been handed fraudulent votes by the brokerage houses. This must be a crime in some way.

There is another group that is considering legal action, the hedge funds who were paying for borrowed shares that they were shorting, but now believe that the shares were not actually provided at the settlement date, turning their trades into ‘naked’ shorts.

New York - Get your hankies ready: Hedge funds feel they're the newest victims.

A long-simmering issue may soon come to a boil, potentially putting Wall Street's largest firms on the hook for billions more in liabilities years after the research scandal that extracted $1.4 billion in legal fines from ten of the most influential investment banks.

This time, prime brokers face scrutiny for the fees they charge hedge fund clients, with securities lending being a particular focus.

Attorneys at plaintiffs' firm Milberg, Weiss, Bershad & Schulmanare investigating securities lending fees and other practices by the biggest prime brokers and are considering bringing a class-action lawsuit on behalf of hedge funds. - Forbes

I find it somewhat amusing that the group most responsible for the short selling mess is now complaining that the industry practices stink. This also appears to be a tacit admission that naked shorting is a fact and not the fiction Wall Street has been claiming it to be.

Securities lending is among the most lucrative of prime brokerage services to the banks, reaping some $10 billion in annual fees, and the business just keeps growing as more hedge funds pop up. But it is also among the most opaque of businesses, with plenty of opportunity for abuse, lawyers unconnected with the Milberg firm say.

Hedge funds have alleged privately for years that they are being overcharged for prime brokerage services or charged wrongly for services that haven't been performed. Most of the griping has to do with securities loaned but never delivered, the allegation being that the prime brokers are lending securities at high fees without actually having possession of the securities to lend in the first place. - Forbes

This activity might be signaling the end of short selling as a way to make a quick buck. After all, if the hedge funds are going to deliberately bring attention upon themselves (it is the hedge funds that the brokerage houses are doing this for.)

There has also been action by the NASD, which has suspended a broker for naked short trading of his own personal account.

Washington, D.C.— NASD announced today that Steven W. Norin, a broker who is currently registered with Citigroup Global Markets Inc. of New York, has been suspended for 90 days and will pay $400,000 to settle charges that he engaged in a pattern of improper short sales in his personal accounts.

NASD found that from March 2003 through November 2004, Norin executed 100 short sales in 22 different securities and improperly marked them as "long." NASD found that Norin wanted to sell certain securities in his personal accounts short because he believed they were overpriced; when he discovered that there was no available inventory or borrowable stock, he improperly marked the orders long in the firm's order entry system to defeat the system's ability to prevent improper short sales. - NASD

Makes you wonder what kind of accounting the brokerages do considering that he was doing this for over a year. You would think that they would also look at whose trades were resulting in fail to deliver at settlement time. From the looks of it, his employer either did not know what he was up to or knew and did nothing about it. I wonder, which is worse?

Then we have Former Broker John F. Mangan, Jr. who has been barred for Naked shorting:

Washington, D.C. — NASD announced today that John F. Mangan, Jr., a hedge fund manager formerly registered as a broker with Friedman, Billings, Ramsey & Co. (FBR) of Arlington, VA, has been permanently barred from associating with any NASD-registered firm and will pay a $125,000 fine to settle charges that he deceptively obtained shares in a PIPE transaction, improperly sold the shares short, and shared in profits from the shares without obtaining permission from FBR. - NASD

Looking at the NASD site, there is also the following: (Click on the link to read the whole disciplinary action statement for each firm. PDF Format.)

Dynamex Trading, LLC - NASD determined that the firm failed to show the correct execution price on brokerage order memoranda. Moreover, NASD found that the firm’s supervisory system failed to provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations, and NASD rules concerning trade reporting—Automated Confirmation Transaction Service (ACT) compliance, sales transactions— reporting accurate short sale indicators, and books and records. - May 2006

Merrill Lynch, Pierce, Fenner & Smith, Incorporated - The findings also stated that the firm failed to report the correct symbol indicating whether the firm executed transactions in eligible securities as principal, riskless principal or agent, and failed to report the correct symbol to ACT indicating whether transactions in eligible securities were “buy,” “sell,” “sell short,” “sell short exempt,” or “cross.” - May 2006

Fulcrum Global Partners LLC – The findings also included that the firm effected
short sales in a listed security below the price at which the last sale thereof, regular way, was reported pursuant to an effective transaction reporting plan, and failed to provide written notification disclosing that the transaction was executed at an average price to its customer. - April 2006

Direct Access Brokerage Services, Inc. - NASD found that the firm executed short sale transactions and failed to report them to ACT with a short sale modifier. NASD also found that the firm executed transactions based on a prior reference point in time, and failed to report each of these transactions
to ACT with a prior reference point modifier. - March 2006

Smith, Moore & Co. - Without admitting or denying the allegations, the firm consented to the described sanctions and to the entry of findings that it failed to report its short-interest positions in various securities to NASD. The findings stated that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to the applicable securities laws and regulations concerning short-interest reporting. - March 2006

Prashant Biraj Bhuyan (Registered Representative, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which he was censured, fined $5,000 and suspended from association with any NASD member in any capacity for six months. In light of Bhuyan’s financial status, the imposed fine is $5,000, and it must be paid before Bhuyan reassociates with any NASD member following the suspension, or before he requests relief from any statutory disqualification. Without admitting or denying the allegations, Bhuyan consented to the described sanctions and to the entry of findings that he executed short sale transactions in a security listed on a national securities exchange at or below the current inside bid when the current inside bid was below the preceding inside bid on the security. The findings also stated that Bhuyan executed short sale orders and failed to properly mark the order tickets for those orders as short. The findings also included that Bhuyan executed short sale orders in a security and, for each order, failed to make an affirmative determination that he would receive delivery of the security on the customer’s behalf or that he could borrow the security on the customer’s behalf for delivery by the settlement date. Bhuyan’s suspension began on March 6, 2006, and will conclude at the close of business on September 5, 2006. - March 2006

Wave Securities, LLC Without admitting or denying the allegations, the firm consented to the described sanctions and to the entry of findings that it did not make and annotate an affirmation determination prior to accepting customer short sale orders; it relied upon a document that did not meet the requirements that any hard to borrow list include securities that are restricted pursuant to Uniform Practice Code Rule 11830, and the creator of the list attest in writing that the NNM or listed security not on the list is easy to borrow or available for borrowing; and the firm did not limit its use of the list to NNM and listed securities. The findings stated that the firm incorrectly classified a hedge fund customer account as a broker-dealer account. NASD found that the firm accepted short sale orders from the hedge fund customer and failed to make/annotate an affirmative determination. In addition, NASD found that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to marking customer order tickets, bid test, prompt receipt and delivery of securities and ACT reporting. - February 2006

Ryan & Company, LP and Scott William Ryan submitted an Offer of Settlement in which Ryan was barred from association with any NASD member firm in any capacity, and the firm was expelled from NASD membership. Without admitting or denying the allegations, they consented to the described sanctions and to the entry of findings that they engaged in a scheme to create and maintain short positions in Over-the-Counter (OTC) equity securities on behalf of the firm’s client hedge funds, in that they willfully and intentionally effected short sale transactions. The findings stated that the firm failed to report option positions to NASD, and failed to report transactions and reported incorrect information to the Automated Confirmation Transaction ServiceSM (ACTSM). In addition, NASD found that the firm reported non-bona fide wash sale transactions to ACT, and failed to provide for supervision reasonably designed to detect and prevent NASD rule violations.

Are there going to be more cases like this? I am pretty sure there will be. Time will tell.

A Review of Current Securities Issues - US Senate
Corporate Voting Charade (PDF Format, but an excellent read) Bloomberg Markets
Hedge Funds: Got Kleenex? - Forbes
The Stock Market is Patently Unfair - The Street
NASD Suspends Broker for 90 Days - NASD

Are Brokers 'Screwing' Stockholders through Short Selling? - FFI 06 April 2006

Are ExxonMobil's Profits all that Bad? - Update

Once again ExxonMobil (XOM) is in the news again. This time for the 'insane' compensation given to it’s retiring CEO Lee Raymond totaling $400 million. I last visited the subject of record oil company profits in September, 2005 and pointed out that record profits are not all that bad for:

• The Government since it receives record tax payments from the Company
• The shareholders whose investment continues to grow
• The Government again from taxing dividends and capital gains made by ExxonMobil shareholders.

(By the way, the compensation came at the cost of the shareholders, if anyone, and not out of your pocket.)

Lets put a little perspective on how much ExxonMobil is earning this last quarter:

Net income (U.S. GAAP) $8.4 Billion

This comes to a net income per share of $1.38. That’s not much as there are 6.1 billion shares outstanding. Lets look at some other figures:

• Income taxes $7 billion
• Excise taxes $7.6 billion
• All other taxes $11 billion
• Total taxes $25.8 billion

So ExxonMobil paid three times in taxes what it made in profit. Who is gouging who? Each share paid over $4 in taxes to earn $1.38. Now some in Congress are demanding that even more be taken from the company and the holders of 6.1 billion shares because despite not being able to prove gouging, they simply use the fact that the company is making record profits that it must be by gouging.

In this respect, congress has been making highly deceptive and disingenuous comments, pandering to potential voters. Take Senator Dick Durbin of Illinois and his statement on Meet the Press:

SEN. DURBIN: Am I the only one of your guests here that think that profit taking is a problem? I mean, I understand the basic laws of supply and demand. I understand that if the input costs have gone up, it’s going to reduce your, your profitability. But here we have the most enormous profits in the history of the United States of America in business. The equivalent of $1,000 per household in America for profits. All of the market factors you described may suggest that the product is going to be more expensive to sell, but they don’t forgive what I think is an outrageous profit taking by this industry. - Meet the Press

Opinion Journal makes a minor error here by suggesting that "the senator complained that the high prices at the pump will cost the average household $1,000 this year" although I suspect that this is exactly the message that Senator Durbin was hoping people would get out of his statement. Well Senator, I am not surprised that America's largest company just happens to be making huge profits. As other sites have noted, it's profit is only about 9% of revenue. FAR FROM WHAT ANYONE OTHER THAN A SOCIALIST WOULD CONSIDER GOUGING.

As Joint Strike Weasel points out, the $1,000 per household averages out to $250 per American. This might be shocking if a company was making that much profit off each American, but that is not true. ExxonMobil is a global company and that total is it’s worldwide profit, not it’s profit on US operations. And imagine, all that profit was accumulated at an average of 27 cents a gallon. If the oil companies were fixing prices, you would think that they would be making more than 27 cents a gallon. ($3/gallon times 9%) Of that $250 per American, only $67 is US related revenue.

Congress neglects to mention where ExxonMobil is earning their billions from. Well here are some figures from the first quarter report:

• Upstream (Exploration, Development, Production, )
  United States $1.28 billion
  Non-U.S. $5.1 billion
• Downstream (Refining and Supply)
  United States $679 million
  Non-U.S. $592 million
• Chemical
  United States $329 million
  Non-U.S. $620 million

73% of ExxonMobil's Profit was made outside the United States.

With all the talk of the US buying everything from China, you would think that ExxonMobil would get some gratitude for being such a profitable international American Corporation.

Many are suggesting that the oil companies are fixing the price of oil, resulting in these profits. That is simply idiotic. People are just ignoring a couple of simple facts:

Demand for oil is increasing – Not only is the US increasing it’s demand for oil, but the rest of the world, especially India and China, are increasing their use of oil. Not by a little, by lots and oil companies are not able to keep up with pumping ever larger quantities out of the ground, moving the oil, refining the oil, and getting it to the final customers.

The current supply is limited - It is getting increasingly harder to replace the oil that has been pumped – Oil companies have proven reserves for pumping. Actually pumping the oil reduces the reserves. To be an ongoing business, they need to replace the reserves that they have used, otherwise the company will eventually run out of oil to pump.

Replacing the oil pumped has been getting harder recently for the oil companies, compounded by the fact that they are increasing production to meet increasing demand, which increases the amount needed to be replaced is year greater.

One way of replacing reserves is to increase the amount of oil that you can get out of existing oilfields. Another way is to go out and purchase another oil company and add their reserves to yours. While this does increase your reserves, it has no net change in the world’s proven reserves.

Falling Dollar - A declining dollar makes oil more expensive in the US compared to what other countries are willing to pay for it. As foreign countries get more dollars for the same amount of their currency, they can offer more per barrel without it costing them more money. However, a declining dollar increases the profit earned overseas as profit being sent back to the US results in more dollars even if the foreign revenue is the same.

Not for anything, but if this company is making a fortune gouging the planet, why haven't you purchased some shares?

Note: This is part 2 of 3 concerning Gasoline, Congress and ExxonMobil. Keep in mind that I am currently an owner of a small portion of exxonMobil and BP.

See part one here: "Impending Ethanol Shortage?"

Profits of Doom? - OpinionJournal
$3-a-gallon gas: Blame Washington, not Big Oil - Fortune

Are Record Oil Company Profits all that Bad? - FFI - September 2005
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Questions for 2008 Presidential Candidates - v.1

We are still a long way from the next Presidential election, yet the posturing has already begun. This got me thinking, what questions would I like to see the candidates answer? Here is draft 1. Surely current events, political antics, and 'Bush Derangement Syndrome' will bring about more questions?

Elections and Election Reform:
Did President Bush steal the 2000 election? (Florida)

Did President Bush steal the 2004 election? (Ohio)

Do you believe that the CBS 60 Minutes Bush Reserve documents are real?

Do you think that there is voter fraud?

- If so, which party benefits more from voter fraud and how?

Do you believe that Voter ID rules are equivalent to poll taxes?

- If so, how would you institute voter ID that would not disenfranchise poor voters?

Do you support a national ID?

Global War on Terrorism:
Do you believe that the Government knew of the 9/11 attacks and did nothing to stop it?

- If so, did the Clinton Administration know about the 9/11 attacks?

- If so, how did none of the Clinton Administration employees that was still serving under Bush not know about this?

Do you believe that Saddam Hussein had WMD?

- If so, do you think that they might now be buried in Syria?

Do you believe that Bush lied about the reasons to go to War against Iraq?

Do you believe that Iraq had no connections to Al-queda?

Do you believe that it is ok for the NSA to listen into international communications into - out of the US without a FISA Warrant?

- If not, how should the NSA be able to obtain these warrants in a timely fashion taking into account that there are over 200,000 suspected terrorists that the NSA wants to listen to and also taking into account that only 8,000 warrants have been issued in the last couple of years?

- If not, do you think that Customs needs a warrent to search people's belongings as they reenter the country?

Do you plan to quickly pull American Troops out of Iraq?

Do you plan to quickly pull American Troops out of Afghanistan?

Do you consider Hamas a terrorist organization?

War on Drugs:
Do you believe that Marijuana should remain illegal?

Do you believe that most drug users are only harming themselves?

Environment:
Do you think that the Kyoto Convention will retard global warming?

Domestic Issues:
Will you push to secure the borders from illegal aliens?

Do you approve of granting illegal aliens in the US a pathway to citizenship?

Do you consider a pathway to citizenship for Illegal aliens a form of amnesty?

Will you raise taxes for the rich?

At what point do you consider a person/family rich?

Do you support a flat tax?

Do you think that the ACLU is acting in the best interests of America?

Are you for opening some of the many closed areas of the US to oil drilling?

Have you ever been to the Arctic National Wildlife Reserve? (ANWR)

Do you think that it is possible to drill for oil in ANWR willout ruining the environment there?

- If not, should we stop drilling in other sensative parts of the US?

Politics:
Do you believe that Cindy Shehan is abusing the memory of her son?

Do you believe that the Mainstream Media is biased against President Bush?

Do you believe that the Mainstream Media is ignoring good news:

- In Iraq?
- In the War on Terror?
- In the economy?
- In general?

Do you think Michael Moore's movie "Fahrenheit 9/11" is more fact or fiction?

If your name is John F. Kerry, also answer this:
Will you release your full military record this time?

If your name is Joseph Biden, also answer this:
Do you think that the State of Delaware is gouging driving through high tolls?

Do you think the State of Delaware should lower tolls to provide relief to drivers from high gasoline prices?

Please feel free to add your own questions in the comments!

Decision '08 - 'Because its Never Too Early'

More Fred Fry 2008 Musings:
Feingold 2008: RIP - 17 March 2006
Kerry 2008 - 29 January 2006
Gore 2008 - Not Happening - 12 October 2005
Biden 2008? - Last Exit Before Toll - 9 October 2005
Obama 2008? Mr. Electability? - 25 July 2005

Offshore America Off-Limits to Oil Drilling

Most of America's offshore area is currently off limits to offshore oil drilling. It is simply not on the market. Everyone knows about ANWAR and that critics of ANWAR claim that drilling there will not make any difference. Well sure, not by itself, but there are many other areas that are currently off-limits to drilling. Now ANWAR is not offshore but on land in Northern Alaska which almost none of us will ever visit.

Take a look at this map. Currently, the US Government permits offshore oil exploration in the red areas:

I thought the Government wanted to reduce foreign oil reliance? They sure have a funny way of going about it.

UPDATE:

We have the following updates about politics and gas prices:

First, there is the Prince of Qatar:

Qatari Energy Minister Abdullah Bin Hamad Al Attiyah said the price of oil would drop by $15 should politicians end their expressions of concern over a halt in supplies.

Al Attiyah said the record oil prices of more than $75 per barrel was the result of fears and speculation within the market.

In other words, shut up.

Then there is the Washington Post which has a great articles about the cars taht our Congressmen and women drive:

"Since George Bush and Dick Cheney took over as president and vice president, gas prices have doubled!" charged Sen. Barbara Boxer (D-Calif.), standing at an Exxon station on Capitol Hill where regular unleaded hit $3.10. "They are too cozy with the oil industry."

She then hopped in a waiting Chrysler LHS (18 mpg) -- even though her Senate office was only a block away.

America may be addicted to oil, as President Bush puts it. But America is in the denial phase of this addiction -- as evidenced by the behavior of its lawmakers. They have proposed all kinds of solutions to high gas prices: taxes on oil companies, domestic oil drilling and releasing petroleum reserves. But they ignore the obvious: that Americans drive too much in too-big cars. - Washington Post

There is much more. Read about who is driving what in the rest of the story.

Update: 28 April 06

Rightwing Nuthouse has a dead-on parody of this whole idiotic situation.

Meantime, the Demons had a better idea (politically speaking, that is). If the Pibble party could pander to the people then the Demons could up the ante. “Let’s tax the excess profits on turnip juice,” they cried triumphantly. This had the advantage of playing to the ignorance of the people of Unis about how turnips are grown and refined while making them sound like they’re “doing something about the problem.”

Of course, all the scheming and planning by the Pibbles and the Demons did not produce one additional drop of turnip juice. So the price remained high. And the people? - RWNH

Read the whole thing. It's great!

RICKY’S FABLES (the Story of turnip juice) - rightwing Nuthouse

Going a Short Way to Make a Point - Washington Post
Qatar: Price of oil would drop $15 if politicians shut up - World Tribune

Price Gouging in Delaware - 23 April 2006
Are Record Oil Company Profits all that Bad? - 14 September 2005
How Much Gasoline do 12 Million Illegal Aliens Consume? - 26 April 2006

HOME

Price Gouging in Delaware

Once again the price of gas is on the rise and politicians are out for blood claiming that price gouging will not be tolerated and will be prosecuted. Well I have found a price gouger, but don't expect anyone to make them account for their actions as

the Price gouger is the State of Delaware.

The State of Delaware is not gouging you at the pump. No, they got you right on the highway, charging tolls going north and south on the Interstate I-95 corridor. Of that route, only 16 miles are in Delaware, but it is an expensive 16 miles.

Take the following table:

That's $9 to make a round trip through Delaware, just in tolls. To drive through NJ, it's another $9.90, but that covers 200 miles of the trip.

Per Mile we have the following:

That's 28 cents per mile in tolls for Delaware. If New Jersey charged the same rate that Delaware does, it would cost $56 to make a round trip through NJ instead of the $9.90 it currently does.

So how does this compare to the cost of gas?

Take a look at the following table showing the gasoline cost per mile:

For a car getting a lousy gas mileage of 20 miles to the gallon (highway), it would cost 15 cents a mile for gas with gas costing $3 a gallon. For cars traveling through the State of Delaware up and down I-95, the tolls are at least twice as big an expense as gas, for that portion of the trip.

There is one important difference between the two expenses. The state cannot control the price of gas. It can however control the price of the tolls. As in many states, tolls are partly used for items completely unrelated to the road and bridges that the toll-payers are riding over, in many cases going to subsidize public transportation. (It costs $1 for me to ride the bus to work in VA.)

Congressman J. Randy Forbes of Virginia has a gas price primer on his Congressional website which includes the following graphic explaining the factors determining the price of gas:

So over half of the cost of gas is related to the price of crude oil, which has been shooting through the roof. The last time I checked, the price of crude oil was controlled more by OPEC than ExxonMobil. Since Crude oil is a record prices, doesn't it make sense that gasoline would be expensive?

Blaming gas companies is just a lame, especially ExxonMobil which is trying to get as much oil onto the market as possible. Some people are even claiming that they have to go to the pawnshop to get extra money for gas. We have all seen these people interviewed on the news claiming that the price of gas is killing them, as they stand next to their NEW SUV. Exactly WHO created the financial difficulties in these households?

Just imagine what the price of gas would be if it was the Government that provided gasoline to America? As far as providing relief, how about reducing the property tax on cars? How about lowering tolls? How about lowering the tax on gasoline? How about allowing oil companies build new refineries? How about not treating oil companies like criminals in California with so many rules and prohibitions that it is nearly impossible to move oil into the state for consumers? How about making better use of oil and reducing demand by better using coal and nuclear?

Take this from Senator Biden:

WASHINGTON (AP)- Senator Joe Biden is urging President Bush to back a Senate bill designed to eliminate gasoline price-gouging.

Biden and 15 fellow Democrats, including Senate Minority Leader Harry Reid, have sent a letter to the President calling on him to support the bill. It would give states new powers to prosecute anyone who takes advantage of short supplies of gas to overcharge for it. - WBOC

The Senator is not bothering to point out that in the last price run-up after hurricane Katrina there were very few gougers in the market. This is essentially a non-issue. This is a classic case of pandering to voters. Fine, the Senator is planning to run for President so this is to be expected. So he should have some idea about what to do about the high price of oil. Why wait until he becomes President to implement it. Why not let everyone in on the secret and ride the credit right into the White House. I suspect that he has nothing. One thing I can guess, he has not problem gouging drivers that have little choice but to drive through his little state and every time we do, we are all reminded of what the whole country could be like if Biden wins the Presidency.

Congress Blowing Hot Air at Energy Crunch - California Conservative
Trivia Tidbit Of The Day: Part 318 -- Black Gold, Texas Tea. - Willisms
Stupidity of the Day - File it Under

Tolls on I-95 - I-95 Exit Information Guide
Turnpike Toll Calculator - NJ Turnpike

More Fred Fry:

Biden 2008? - Last Exit Before Toll - 09 October 2005
Are Record Oil Company Profits all that Bad? - 14 September 2005
Being Less Poor - 27 October 2005