Bob van der Valk

Energy Trends: Crude Oil, Products and the Refining Sector

Your article does leave out the political anti-capatalist atmosphere running rampant in this country as a factor on the future trends in the petroleum industry. They have been painted with a broad brush by the current administration as being greedy and not out for the public good. Alternative energy is being taunted as the panacea to have the US become energy independent by 2020. It will become so with federal support and the carbon cap and trade tax being placed on the refiners. That does not give an incentive to build or improve refineries with the downside being that their products may not have a market. Presiden Obama expects to have that in place by 2012—and he's got high expectations. Obama's administration projects that $645 billion in cap and trade revenue from the likes of oil and electric companies would flow in over the next ten years. That cost cannot be absorbed by the oil refiners and will be passed along to the consumer in higher fuel prices depressing demand even more.

Why the FCC Wants to Smash Open the iPhone

The following email was sent to Randall Stephenson, CEO of AT & T, and Tim Cook, Acting CEO of Apple:

I moved to Montana from Washington in May 2009 and AT & T notified me on July 2, 2009 that they will be cancelling my service as I am in violation of my contract with them. I use my iPhone for business and travel to other parts of the country but apparently Montana is one of the states AT & T which they cannot service iPhone data economically. It was explained to me by your representatives that the cost for access to other carriers exceeds what I pay on the AT & T flat rate data program.

AT & T cell service in Terry, Montana is about the same as Verizon Wireless. Dropped calls, not receiving calls and voice mail messages not received are the rigor with my iPhone. I had great service in Seattle, Washington where I purchased the phone in September 2008.

An email to each of you resulted in a call back from a representative in the Office of the President of AT & T and Apple. But all I received was sympathy and lots of apologies with no solution. The first customer service representative I contacted offered to switch my account to Verizon for me and suggested buying a Blackberry phone. I have just done so without her help and am waving AT & T goodbye.

The following article from Bloomberg tells the story on how exclusive arrangements like the one between AT & T and Apple is good for you but not good for the consumers is being investigated by the FCC.

“IPhone Probe to Focus on Markets Without Service, FCC Head Says
By Todd Shields
July 31 (Bloomberg) — U.S. regulators probing wireless- phone contracts will focus on markets where Apple Inc.’s iPhone and Palm Inc.’s Pre aren’t available to consumers, the chairman of the Federal Communications Commission said.
“There are markets in the country where if you wanted an iPhone, if you wanted a Pre, you just couldn’t get it — from anyone,” Julius Genachowski said in an interview yesterday. “So one question is, is that consistent with broad consumer interests?”
The agency also will consider if innovation is promoted or hindered by exclusive arrangements such as those that limit the iPhone to customers of AT&T Inc. and the Pre to Sprint Nextel Corp. subscribers, Genachowski said.
Genachowski, 46, declined to say what the next steps will be in the investigation, which the agency announced last month after four U.S. senators asked it to examine the exclusive deals. An AT&T executive told a June 17 hearing the deals spur innovation and help lower prices. Verizon Wireless said this month that new deals with handset makers will last no longer than six months, down from one to two years for most contracts.
“Promoting competition is absolutely a main function of the FCC,” said Genachowski.
He took office June 29 as the Obama administration’s choice to head the independent agency that sets rules for telephone, cable and broadcast companies.
Fostering high-speed Internet connections, or broadband, is a priority for the FCC, Genachowski said.
“There’s absolutely a sense of urgency in Congress, the White House, here at the agency, that we need to make sure that the United States communications infrastructure is appropriate for the 21st century,” he said.
Preparing Broadband Plan
Genachowski declined to say whether the agency would seek to write new rules to ensure that Web companies treat content providers equally as it readies a national broadband plan that is due to Congress by February.
The FCC last year censured Comcast Corp. after concluding the largest U.S. cable company had interfered with subscribers’ Web traffic. A lawsuit by Comcast seeking to overturn the decision awaits oral arguments in the U.S. Court of Appeals in Washington.
“We expect to prevail,” Genachowski said.
“There shouldn’t be any doubt that the FCC will enforce non-discrimination,” he said. “The Internet needs to remain open.”
Genachowski said he has devoted time to meeting with FCC staff.
“My visits around the agency have convinced me that the agency needs to be retooled and revitalized, and that that’s not a controversial proposition inside the FCC,” Genachowski said.
‘Shortchanged’ Consumers
At Genachowski’s June 16 nomination hearing, West Virginia Senator Jay Rockefeller, the Democrat who heads the Commerce Committee that oversees the FCC, said the agency has “shortchanged” consumers. Rockefeller told Genachowski to “fix” the agency.
Genachowski said yesterday that he didn’t want to comment “on where the agency has been.”
In December, congressional Democrats said his predecessor, Kevin Martin, a Republican, abused his powers and created a “climate of fear” at the agency. Martin followed the same procedures by Democratic and Republican chairman alike, an FCC spokesman said at the time.
Genachowski attended Harvard Law School with President Barack Obama and helped shape his technology agenda. He was an adviser to IAC/InterActiveCorp Chief Executive Officer Barry Diller, and earlier served as an attorney at the FCC and a Supreme Court clerk.”

Last Thursday while I was in Billings dropping off my daughter at the airport I checked with the Best Buy store in Billings on iPhone availability in Montana. After the clerk told me that their store was not allowed to carry the iPhone he proudly told me that he has a family member in town who had obtained one by using his cousin’s Denver home address to get one and sign up with AT & T. So it’s legal to own and wear a gun on your hip in Montana but AT & T forbids you to use the iPhone there!

Hello Blackberry Storm, goodbye Apple iPhone.

AT&T: The iPhone's Achilles' Heel

This article and the one previously written by MG Siegler were very timely. I too have been having issues with my wireless service from AT & T but not for the same reasons. In fact not receiving my phone messages is the least of my problems although I now have my home phone set up as my base for doing business.

I wrote the following email to Randall Stephenson, CEO of AT & T, after contacting their customer service as well as posting my laments on their networking web site:

"Mr. Stephenson:

I am contacting you direct since I have been unable to obtain satisfactory answers to my question about the lack of service in the area to which I recently moved.

It seems like my wife and I, both of us own iPhones, have entered Dark Territory insofar AT & T is concerned. We purchased our cell phone in Issaquah, Washington back in August and Septermber 2008 after receiving satisfactory service from your company in Las Vegas, Portland - OR, and Seattle since November 2006. We especially liked the fact that you offer roll-over minutes on your program. Verizon had been our carrier for twenty years prior and did not respond to my inquiry as to why did not offer a similar rate program for their cell service.

My complaint with your company is that your customer service is more interested in telling me chapter and verse according to AT & T policy rather than dealing with me as a valued customer. Both customer representatives, whom I am copying with this email, kept apologizing profusely for not being able to help me keep AT & T as my carrier in Montana. The policy and the contract I signed was explained to me in every detail, something your sales people at the your store neglected to do, and offered to set up an account for us with Verizon Wireless. I objected to that only because it will make my iPhone useless other than as a mini-laptop with no access to email etc.

My real complaint is that your marketing strategy has only now become very obvious to me. You are only interested in providing service in areas where you are a direct carrier. The hardware used towards that purpose has become secondary and as your exclusive with Apple is expiring soon will not be your main driving force to obtain profit for your stockholders.

Thanks for listening to me and would appreciate a response (hopefully positive) back from you as soon as possible.

Bob van der Valk
Terry, MT 59349
[phone] cell (this number might be cut off any day by AT & T)"

I received a call back almost immediately from Justin K. (last name withheld) in the Office of the President. He was able to get me the answer I was looking for within two days after calling their customer service department several times. When you violate your agreement with AT & T, they will give you 90 days from date of notification to either get your act together or change carriers. They will allow you to cancel without penalty but you are not allowed to keep the phone number.

I asked Justin to convey a message to Mr. Stehenson from my wife and myself. Put up a sign at each border crossing into Montana with a drop box next to it that says "iPhones are not allowed in Montana. Please drop them in the box. They will be returned on your way back home". I also have a new slogan for the State of Montana "Big Sky Country" they can use "No iPhone Country" instead. Good bye from Montana where it is legal to carry a gun on your hip but iPhones are outlawed by AT & T.

Forget the Feds, Apple Is Doing Just Fine Wrecking the Wireless Business

Updated, 12:01 p.m 7-15-09: Per the Los Angeles Times - The expiration date of the exclusive iPhone deal between Apple and AT&T has not been officially released, but in April the Wall Street Journal cited anonymous sources saying AT&T is hoping to extend the deal into 2011.

Forget the Feds, Apple Is Doing Just Fine Wrecking the Wireless Business

I received a call from Justin K., Office of the President, yesterday afternoon responding to my complaint in the email I sent earlier that day to Randall Stephenson, the AT & T CEO, which reads:

"Mr. Stephenson:

I am contacting you direct since I have been unable to obtain satisfactory answers to my question about the lack of service in the area to which I recently moved.

It seems like my wife and I, both of us own iPhones, have entered Dark Territory insofar AT & T is concerned. We purchased our cell phone in Issaquah, Washington back in August and Septermber 2008 after receiving satisfactory service from your company in Las Vegas, Portland - OR, and Seattle since November 2006. We especially liked the fact that you offer roll-over minutes on your program. Verizon had been our carrier for twenty years prior and did not respond to my inquiry as to why did not offer a similar rate program for their cell service.

My complaint with your company is that your customer service is more interested in telling me chapter and verse according to AT & T policy rather than dealing with me as a valued customer. Both customer representatives, whom I am copying with this email, kept apologizing profusely for not being able to help me keep AT & T as my carrier in Montana. The policy and the contract I signed was explained to me in every detail, something your sales people at the your store neglected to do, and offered to set up an account for us with Verizon Wireless. I objected to that only because it will make my iPhone useless other than as a mini-laptop with no access to email etc.

My real complaint is that your marketing strategy has become very obvious to me. You are only interested in providing service in areas where you are a direct carrier. The hardware used towards that purpose has become secondary and as your exclusive with Apple is expiring soon will not be your main driving force to obtain profit for your stockholders.

Thanks for listening to me and would appreciate a response (hopefully positive) back from you as soon as possible.

Bob van der Valk"

Justin said that he would look into my complaint and get back with me today. I will post his response to this comment section as soon as it received.

Forget the Feds, Apple Is Doing Just Fine Wrecking the Wireless Business

Larry Dignan - Your article is very timely in view of my personal experience since moving to Terry, Montana from Seattle, Washington. Upon our arrival I was happy to find out that all of my iPhone applications worked as long as have WiFi is available. Cell phone service is intermittent in the Eastern Montana area, since we are located near the Badlands, and even the local cell service providers are having problems staying connected.

Lo and behold I received a text message and email from A T & T/Cingular on July 1, 2009 that I was in violation of my contract by being outside of their direct service area. I called the phone number listed in the messages the next morning and was advised that I had 30 days to decide to cancel my contract, without penalty, and find another service provider. Apparently the contract reads that if I use my cell phone for data and phone use over 40% in areas not directly served by A T & T/Cingular my contract could be voided.

I was surprised but told the person that I understood that they had rules and I had agreed to them. Although I don't remember reading any of the gobble de coop stuff they made me sign when I proudly picked up my iPhone birthday present last September at one of their direct sales stores in Issaquah, Washington.

Here comes the real kicker, the customer service person offered to call Verizon Wireless to change over and set up my account with them. Her name is Toryann Adams and she told me that she would call me back in 20 minutes to confirm it with me.

I told Ms. Adams to be sure that I could keep my iPhone with the new carrier as I am now practically married to it. I bathe, eat, drive and sleep with it. In fact my wife is thinking of becoming one of my applications so I will give her as much attention.

Ms. Adams suggested that I get another phone perhaps a Blackberry since they have similar applications and Verizon is one of their carriers. I declined her offer and am still waiting for a call back from her. Time is ticking and I have only 17 days left before I am cut off.

In case one of the A T & T/Cingular executives happens to read the above article and my personal lament to it, please call me at [phone], I need help.

Crude Oil: A Bridge to Our Renewable Energy Future

In addressing the various issues in the comments so far, we should keep in mind that we will have to develop our domestic crude oil reserves while in the mean time using imported crude oil to supply our needs. For the record Canada currently supplies approximately 60% of the crude oil being imported into the US. We should consider them our friends and develop relationships in energy supplies that will be mutually beneficial to both countries. The switch to alternative energy is going to be slow and expensive. The transition from carbon based energy to clean energy will take at least ten years before some of them are going to be economically feasible.

Priming the Pump for $20/Gal. Gas: Interview with Chris Steiner

We could be paying $20 per gallon for gasoline by 2050 but we are also going to pay about that amount for a gallon of milk. There was an index tying the price of a Big Mac to a gallon of gas. How many Big Macs does it take to buy one gallon of regular gasolline in 2050? It would be interesting to wake up in the year 2050, like they do in the movie "Back to the Future", and find out how this all played out. I will not be around since I would be 108 by then.

But if you want one example of a country frozen in time, just look at Cuba today. Fifty years after their revolution installed a Communist dictatorship, they have not been able to sustain their economy under the repressive leadership of Fidel Castro. Their transportation is still being done the old fashioned way with horse and wagon hauling goods in from the fields.

Gasoline prices in Havana are about the same as they are in Miami, Florida. I lived in Florida from 1956 throught 1959 and remember paying 20 cents per gallon for gasoline at the Sinclair station in North Miami.

Prices can only be compared to other non-durable goods to obtain a relative value.

Is a Case of Quant Trading Sabotage About to Destroy Goldman Sachs?

Sergey Aleynikov could be a cyber-terrorist and therefore Janet Napolitano as the Director of Homeland Security will have to investigate this case as well. It will be interesting to watch wether that means that the evidence discovered will be classified. On the other hand if Sergey is tried and found guilty of terrorism where is he going be shipped after Guantanamo is closed? The possibilities on where this story will end up are endless but is more interesting to me than watching those Michael Jackson stories and video reruns being broadcasted on every cable news channel. Keep it coming Tyler.

Crude Prices Up, But Gas Prices Are Down

Gasoline prices at the pump have dropped almost insignificantly when compared to the spot market in the last two weeks. Pump prices did drop a nickel a gallon last week but the spot market dropped 20 cents per gallon at the same time. It is known in our business as the "Shoot up like a rocket, drift down like a feather" effect. Right now the the unbranded independent station owners, who can buy open rack gasoline, have margins of over 30 cents per gallon. Meanwhile the branded major oil company stations are netting about 10 cents per gallon. The inverse was true in the up market but these higher margins for the independent unbranded stations keeps the branded major oil company stations competitive. Otherwise we could be right at $4 per gallon right now.

Various newspapers are reporting that demand for the July 4th weekend is expected to be down and gas prices will therefore continue to go down as well. I am still holding to my prediction that the peak in gas prices will be reached by sometime in the middle of August at around $3.25 per gallon (give or take a dime) then start easing down again after Labor Day and by Thanksgiving we will see the $2 per gallon price on the pumps again.

How I Hedged My Gas Prices

Please check the results of Southwest Airlines results on hedging the price they pay for jet fuel against crude oil before investing into the ETF UGA hedge. SWA's bet was a disaster for them in the last year. My theory is that crude oil prices are being driven by fuel prices specifically gasolin and 2009 has become a "normal" year for the petroleum industry. We will see gasoline prices increase some more during the summer. They will then start declining by the end of October and hit bottom with the Last In First Out ad-valorem inventory tax hitting the petroleum industry at the end of the year. Gasoline prices will be back down under $2 per gallon and crude oil somewhere around the $40 a barrel mark.

Are Gasoline Prices Really Declining?

Jimbo and JeffDB thanks for your kind comments. Jeff - I will follow up on your suggestion and start posting all of my articles on the gasbuddy.com web site. Jimbo - I have already been invited to speak to the Energy Club at the University of Alberta via Skype. I will entertain any other speaking engagement from similar organizations using this method.

It's amazing that between Twitter, Facebook and LinkedIn I have been able to stay in touch from almost anywhere with what is happening in the world including the remote areas here in Montana. It's too bad that my iPhone cannot access G3 when I travel into the Badlands of Montana or North Dakota. It seems like we are still in the Pony Express days in this area when it comes to pulling my email or use Twitter while riding around in the back country.

Are Gasoline Prices Really Declining?

JeffDB - As a matter of fact I do have a gasbuddy.com account but have not had to use it since moving to Terry in Eastern Montana. We only have the Four Corners gas station here in town so there are no other choices for buying gas other than driving to either Glendive or Miles City. Both of those towns are about 45 minutes drive and it would take about 4 gallons in my car to save a couple of pennies.

How Gasoline Is Priced: An Insider's Secret

The refining and marketing of gasoline is controlled by an oligopoly. According to Wikipedia -An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Because there are few participants in this type of market, each oligopolist is aware of the actions of the others. The decisions of one firm influence, and are influenced by, the decisions of other firms. Strategic planning by oligopolists always involves taking into account the likely responses of the other market participants. This causes oligopolistic markets and industries to be at the highest risk for collusion.

The last part about "collusion" happening in my industry is not true. They do not have to collude on setting prices as they have third parties feeding them the information needed to make their pricing decisions. For instance the Department of Energy - Energy Information Administration (DOE/EIA) statistics includes what would be considered propietary in any other industry and it is freely distributed to us every Wednesday morning. Then we also obtain at some cost our competitor's rack price information from Oil Price Information Service (OPIS) and Platt's, Dealer Tank Wagon prices are supplied by the Lundberg Survey (that's Trilby Lundberg) and let's not leave he West Texas Intermediate Crude Oil (WTI) posting by the NYMEX out of it as a guide for the future.

You can see that thee intelligence on our competitors is plentiful and relatively easy to acquire in view of the potential profits that can be made when we put all that information into the retail price decision making grinder. Gasoline is king to the major oil companies, who produce almost 85% of the gasoline refined in the U.S

How Gasoline Is Priced: An Insider's Secret

Jason - The investment community came up with a solution for all that ails our system in pricing gasoline by advising anyone tired of fuel price fluctuations to hedge their purchases by buying future crude oil contracts. Anyone not far up enough on the feeding line should stay away from investing their money that way.