Now I’m no big fan of capitalism and Big Business, but I don’t see any justification whatsoever for trying to extort more money from the oil companies because they’re making a profit.
I’m right there with ya. Unless there is some evidence of efforts to artificially limit supply. And I have not seen anything like that yet.
I think the problem is that oil companies, riding shotgun on OPEC’s heels and making a ton of money, have continued to demand subsidies for exploration, tax breaks, etc., despite making the most money by any company in any quarter in history, while American consumers and to some extent, the rest of American business, suffers.
I don’t think that the big US oil companies are doing anything unethical in terms of their markets, if for no other reason that they don’t control OPEC. Just don’t plead poverty and try to use the government to rig the free market if you’re raking in money hand over fist.
Capitalism and fair competition is great for everybody else if you can game the system in your favor. That’s the problem I think.
Their net profit for one company that was considered so excessive was about 10 percent of gross sales. I’m not sure I consider that excessive. I looked up that company and their net profit as a percentage of gross sales last year was about 5%, the year before about 4.5%, and the year before that, a loss of 0.5%. On average, that’s less than 5% for the four years.
Some years are good, some average, and some not so good–kind of like any other business. Except farming (or the airlines) maybe.
Did you hear the one about the farmer that won $5 million in the lottery? They asked him what he was going to do with it, and he said he figured he’d just keep farming till it was gone.
Let’s play a guessing game.
Of the following, which company is the one gouging us the most and what company is it?
**Profitability ** Profit Margin (ttm): 18.65% Operating Margin (ttm): 26.82%
**Profitability ** Profit Margin (ttm): 31.90% Operating Margin (ttm): 42.19%
**Profitability ** Profit Margin (ttm): 10.59% Operating Margin (ttm): 16.10%
**Profitability ** Profit Margin (ttm): 6.99% Operating Margin (ttm): 11.28%
What company or industry isn’t going to the gov’t and trying to get free money? If you can get something for free why not? I’d save the derision here for those in Congress too pathetic enough to stand up and say there is no reason to fund the oil companies.
“Profitability Profit Margin (ttm): 31.90% Operating Margin (ttm): 42.19%”
Hey! How did you get Tom D’s accounting books?
~Matt
It’s very easy to demonize those that “Appear” to be doing well while someone else suffers…Tabacco companies, DOW, Alcohol etc etc have all suffered similar fates.
When you here numbers like 15 gagillion dollars in profit people go “Holy crap they’re making a killing”, doesn’t matter if that 15 Gagillion is only a 5 or 10% profit margin.
Oh and lets never forget that the general consesus is that anyone in business is making a killing, not paying taxes and “Writing off” EVERYTHING they buy. So even if the oil compaines are reporting they are only making a 10% profit “WE” all know they are lying now don’t we…
~Matt
The major issue is not the price of a barrel of oil. It is the capacity to refine the oil into gas. The US has not build a new refinery for over 20 years. The oil companies have not been able to justify the cost of building additional refineries due to the environmental restrictions placed upon refinery construction. Not saying the restrictions are a bad thing, but simply put the restrictions cause the expense of construction to be so high that it isn’t feasable to build.
People are upsed about the ARNW drilling. There are large deposits of oil off the coast of California, Gulf, and Eastern seaboard. It is not financially feasable for these companies to tap into these resources. So we are limited with refining capacity, not oil reserves.
I share an office with a former Shell logistics person that is knowledgable about the oil industry and this information is from him.
Just my 2 cents from what I have learned. It is a pretty interesting dynamic.
I saw Lee Raymond on Charlie Rose before the Congressional grilling. He said that one of the things people misunderstand about the lack of new oil refineries is how much effort/expense/etc they go through to make existing refineries more efficient, which represents, basically, a better way of increasing refinery capacity.
You’re right vitus. The statement about not building a new refinery, while true, is a bit misleading. Many of the existing refineries have been upgraded and expanded and now produce significantly more than they used to.
We still need more refining capacity though. And it is not just the environmental regs, it is the NIMBY’s. Who wants a refinery in their backyard? Certainly not me. Refineries are one of the reasons Houston fights for the worst air in the country despite geography that allows for pollutant dispersal (compared to the basin in LA).
A while back Congress was looking at easing environmental restrictions if the refineries were placed in poor neighborhoods. It was touted as a “jobs” creation.
Yes…most refineries run at 100% capacity or close to it. This is because it is more efficient to do so. When looked at from the outside, it appears to indicate that there is a lack of capacity. While we haven’t added any refineries of late, most have been incrementally expanded to keep pace wth the increasing demand. However, some percentage of our gasoline comes from foregin refineries.
If we lacked the capacity to refine oil into gasoline, it would seem that we would suffer from a gasoline supply shortage, manifesting itself as gas lines and stations running out of fuel. This does not appear to be the case.
I am going to hazard a guess that the second item on your list is Microsoft.
These numbers are not relevant, however. The important numbers are return on investment. I haven’t seen those for the oil companies over, say, the last 10 years, but I suspect they are not great.
Exon’s profit was $10 billion in the last quarter. It’s the highest earned by any company in history. A new record!
Wouldn’t it be nice if these oil companies started to divert some of their immense cash flow toward alternative energy sources and began to build business interests in this area. Viable mass alternative energy replacement for fossil fuel would be so beneficial on so many; … no, practically all levels.
But that was on over $100B in gross sales–therefore, ~ 10% profit margin.
Do you consider 10% excessive??
10% is marginal, I would expect more to be honest from a business.
I did learn 1 other tibit that I wasn’t aware of regarding oil movement. The large super tankers have to offload their crude to smaller ships in order for them to get to the refineries due to the lack of deep water ports in the US. So the big ship brings it in from the middle east and has to transfer to smaller ships before it even hits the US refineries.
Interesting I thought.
The reason there is not a shortage of gas is economics . The demand stays in check with refining capacity.
I would say it depends on the way you look at it.
Let’s say a hotdog vendor makes 100% nett profit in a week which was $300. In contrast a restaraunt makes 30% nett profit in that same week after covering all costs and that came to $30,000. Who would be better off? The hotdog vendor or the restaraunt owner? Who would be living the high life?
Just a thought don’t take it to heart. I’m more interested in the issue as to when and if the oil companies will start diversifying away from fossil fuel.
**Profitability ** Profit Margin (ttm): 10.34% Operating Margin (ttm): 17.16% Management Effectiveness Return on Assets (ttm): 17.68% Return on Equity (ttm): 33.28% Income Statement Revenue (ttm): 327.44B Revenue Per Share (ttm): 51.718 Qtrly Revenue Growth (yoy): 31.90% Gross Profit (ttm): 134.49B EBITDA (ttm): 66.38B Net Income Avl to Common (ttm): 33.84B Diluted EPS (ttm): 5.30 Qtrly Earnings Growth (yoy): 74.60%http://finance.yahoo.com/q/ks?s=XOM
I believe most people are really trying to reference the Quarterly Revenue Growth. The profit margin isn’t ridiculous. Though, in no way is it in their best interests to have eye popping numbers in that area, nice smooth growth is where good accountants will get you.
That’s not a valid comparison. How much capital has the hot dog vendor put at risk vs. the restaraunt owner? Answer–a lot less. Who is living the high life? Don’t know–high income does not necessarily equate to wealth.
As for when oil companies will start diversifying away from fossil fuel, the answer is–When they can make a better profit doing that than they can by refining and selling fossil fuel products. They are in business to make money for their investors.
And, in related energy news, “House leaders late Wednesday abandoned an attempt to push through a hotly contested plan to open an Alaskan wildlife refuge to oil drilling, fearing it would jeopardize approval of a sweeping budget bill Thursday.”
“The actions were a stunning setback for those who have tried for years to open a coastal strip of the Arctic National Wildlife Refuge, or ANWR, to oil development, and a victory for environmentalists, who have lobbied hard against the drilling provisions. President Bush has made drilling in the Alaska refuge his top energy priorities.”
Safe for the time being?
Where are the forests? I dont see any wilderness there.