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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: edward miller who wrote (58921)	1/22/2000 1:20:00 PM
From: Harold S.	Respond to of 95453

Can someone tell me if FLC is ever going to appreciate?? Are their earnings soon or something?? I invested in FLC because I liked the long term potential, however, I thought it would start to move by now. Add more??

To: edward miller who wrote (58921)	1/22/2000 5:56:00 PM
From: Think4Yourself	Read Replies (2) \| Respond to of 95453

Edward, you have a point but it is fairly irrelevant (no disrespect intended). I omitted that facet on purpose because it significantly complicates the picture while adding almost no value to the discussion. The reason I say this is because the cost of the crude swamps all of the other costs, and the higher the crude price the more it swamps out everything else because crude is really the only significant variable cost in a stable supply/demand environment. Heres a simple way to prove it. You get 19.5 gallons of gas from a 42 gallon barrel of crude (on average). If crude is $26 a gallon then half of that by volume (about $13) would be attributable to gasoline. My argument assumes $.70 of the current cost of gasoline is not tax, so 19.5*.70=$13.65 ($13 for the crude, $.65 for EVERYTHING else). This example is highly simplified (using the price of premium gives different results one way, accounting for refinery processing gain changes the results the other way ). The point is that the cost of the crude is by far the MAJOR cost in the price of gasoline. All the costs you discussed were trivial by comparison, which is why I ignored them. Another simple way to see this is to figure out how many gallons of crude a refinery processes per day, and divide that into their daily fixed processing and transportation costs. most refineries process millions of gallons of crude a day (25K barrels is over a million gallons). Without bothering to look up the numbers it should be clear that the costs you discussed are trivial. Therefore I stand by my argument that if the cost of the crude moves up by a factor of x, then the cost of gasoline (less the taxes) will also go up by a factor of x. Also implied is that all of the other products from the barrel will go up (but possibly by a factor much less than X as the refining process for a specific product could be very expensive). Incidentally, I believe this is why tankers of oil are ferried around the world for minor fluctuations in price. The cost of the tanker is divided into the incredibly large number of barrels/gallons the tanker is carrying, making it trivial compared to the price of the oil. If it costs me $250,000 to ferry a million barrels of crude to another port, then if I can get more than an extra $.25/barrel for going to that port I make more money. In case anyone cares, there are 19.5 gallons of gasoline in a "typical" (42 gallon) barrel of oil, along with 9.2 gallons of "heating oil", 4.1 gallons of kerosene-type jet fuel, 2.3 gallons of residual fuel oils, and a host of other minor products. This is based on average 1995 yields from US refineries.