Friday, February 6, 2009

Texas tea

The negative headline reads like so many others we’ve seen lately.

“Martin Petroleum files layoff notice, just in case.”

The Pompano Beach company has filed notice with Florida that it may soon lay off 207 employees in March.

Across the country, many smaller and mid-size fuel-related oil companies are hurting less than a year after some companies posted record profits.

Flying J seems poised to shut down its Big West refinery in Bakersfield, CA, for good, just months after it prepared for a major expansion. Such a closure will mean hundreds of jobs lost. The Land Line story is available here.

One industry insider told me the Hook got caught with “wet barrels,” an industry term for oil bought for a price considerably higher than its current worth.

As 2008’s dramatic rise and fall of oil prices has taught us, prices we pay at the pump are set by many variables, including the futures market and manipulation by oil producers at the spigot, like OPEC.

Who knows what the coming year’s diesel/fuel prices will bring. Supply and demand will be closely tied to the economy, as will prices.

For Flying J and others, jobs will depend on it.

2 comments:

  1. It appears that companies such as Flying J, Martin, etc. goofed up on futures pricing. That is a very real hazard of playing in the futures market betting that the price will continue to rise and your contract will then sell at a good profit. It does not always work that way.
    What did these companies do with the big money they made working up the futures contracts when the price was rising so fast? Did they not put money away for the lesser profit days or did they just hide it somewhere in bonuses, etc.
    Life and business has its ups and downs. History tells that. If they got caught with their pants down, pull the pants up, be wiser, and get going.
    Darrell Hicks, Tulare, CA Life member

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  2. As always Charlie, you show differing aspects that pertain to our industry. The oil industry affects all walks of life and industries.

    Yes, speculators pocketed money but it has turned the other way and refineries, oil companies, drilling companies, trucking companies, construction companies, etc, etc, are all affected by this slow down. And that hits Uncle Sam, state and local municipalities hard in decreased spending AND taxes.

    And this coming into the season of change, increased tax and spend with decreased employment and wages. New jobs won't replace old jobs especially with these spnding provisions. It's like going out to eat when you have a good job but when you are layed off, going out to eat when you can't afford it doesn't make sense. And that is how the gov't works. And entitlements takes away integrity, pride and dedication to hard work.

    The oil industry drives economies still in producing countries and untill smart investing in our future with increased production profits, we will have less and pay more for it.

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