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- jsd8cc, on 10/12/2007, -7/+17Can anyone can explain to me the following:
Oil demand in America: +0.06% from 2005
Exxon's profits: +36% from 2005
R&D, drilling costs, margins...it's all B.S. Let's face it, without oil this country would grind to a halt, and we're in the middle of a war. Now Big Oil comes along and makes the largest profit of any company in the history of the country. It's a national security issue and we're being gouged. FDR would have had thrown these profiteers in jail. - benhocking, on 10/12/2007, -6/+15Can you tell us what we SHOULD do to hurt ExxonMobil? I'm not anti-capitalist, but I am pro-science, and this BS that ExxonMobil has been pushing about global warming not being anthropogenic (google exxonsecrets) or being good for you has made me livid. As far as I know, no other gas company has participated in this sham. So, whenever people complain about Big Oil's campaign of disinformation, they should really be focusing on ExxonMobil.
- hackwrench, on 10/12/2007, -3/+12Wrong. Oil prices are supposed to rise in relationship to their relative value to other goods.
- TekkaManBladeX, on 10/12/2007, -3/+12I use to think that the oil companies were just bastards. To some degree, they are but then I re-evaluated my position. The oil companies are doing more good than most people realize. WIth ever increasing demand, there's just no slowing it down except to increase prices. What would happen if prices were lower? People wouldn't give availability a second thought. We've become so use to the abundance that there is no push for improvement. Fuel efficiencies? What a joke. Why can't we do better? No demand. 10-20 mpg is just fine for people because gas was plentiful and cheap. Alternative fuels? Yea right...why bother. Only recently has the push for better effeciencies and alternatives have been notable. The increase in prices have tried to keep demand in control but let's face it, we're addicted to the black stuff and we'll pay whatever we have to. The average American would rather give up their first amendment rights than give up their SUV. As an economist said in a piece with John Stossel, these companies are saints. Just give it some thought and you'll realize that they're actually the good guys...well...as good as they can be.
- Egoist, on 10/12/2007, -4/+12The price of oil isn't set by big oil execs sitting in a boardroom cackling manically and they're most certainly not "profiteering". It's a commodity and the price is determined on the futures market, where people just like you and me purchase contracts with the price based on any number of things from supply and demand to temperature to political instability in the oil producing regions. They make a 36% increase in profit because the price of oil on the market increased by that much and the reason it increased that much is because of factors (more or less) out of their control.
The oil market is so huge and diversified that not even a giant like Exxon-Mobil can sway the market one way or the other. If you want to blame someone, look at yourself and anyone you see who uses something derived from crude oil (gas, plastics, bicycles, pogo sticks). As long as demand continues to increase and supply doesn't catch up, prices will remain high. That's how our market works and that's what causes crude price fluctuations. The price of gas is a whole other story. - TraderMatt, on 10/12/2007, -6/+13And just to add... Exxon's profit margin's are markedly low compared with other large US corporations. Last year's 36b in profits came on 9.7% margin. So they made 9.7 cents per dollar of revenue. In other words, there is very little "markup" (to use a retail term) on their product. In comparison, Microsoft's margin was 30.8 cents per $1. Google 23.8.
* I don't expect JSD to understand these advanced finance concepts like "profit" v. "revenue".
Like Office Space...a lot of fractions of a penny add up.. - KyleRayner, on 10/12/2007, -3/+10Ah, the original. Ill also cross-post my comment in hopes of further discussion:
Isnt oil traded on a futures market? Meaning that the traders bet on the risk, or chance that the price may increase in the near future? Seems to me like a chance of sudden rise in price is built into every purchased barrel of oil. So, the price of oil goes up when things Might happen. However, when something Does happen, like Hurricane Katrina for example, the price goes up further? I dont get it.
When something does happen, the price should stay the same, until its time to purchase oil extracted and refined After the bad event happened. BUT, when things go sour, you see the prices rise at the petrol pump immediately. Even though that oil was previously purchased at a lower price, and purchased with a future of risk in mind.
I call bollocks. What prevents Exxon, or any other company, from hiring insiders to inflate the prices of oil within the futures market? - Epimetheus, on 10/12/2007, -1/+7Retail prices = $3.23.
Distribution Costs, Marketing Costs and Profits =$0.15
Crude Oil Cost = $1.64
Refinery Cost and Profits = $0.82
State Underground Storage Tank Fee = $0.01
State and Local Sales Tax = $0.24
State Excise Tax = $0.18
Federal Excise Tax = $0.18
Exxon Mobil's gross margin is 9.8 cents of profit for every dollar of revenue. They maintain a consistent % margin, which is paltry compared to the banking and drug industries. If there were some vast big oil conspiracy as some propose, you would see this margin largely increased. However in reality it has dropped since '05 and increased by .3 since '04.
"This stupid amount of profit, made whilst America's poor get poorer and poor"
Ah yes, the poor, who are so much worse off now than they were 50 years ago.
"The rest goes to the fatcat in charge, for stupid stuff "
Stuff like being one of the very few people qualified to do the job. You know, silly little things like that.
"The ruling classs has only one interest and that is to make profit."
Or it could be they value dedication, hard work, and education and as a result are successful.
I absolutely love how you refer to them as "the ruling class" while blatantly ignoring the that you are being charged twice as much by your own government for no other reason than the fact that they squandered all the other money you gave them. Who really acts more like a ruler? If you don't like "fatcats", don't buy their stuff. I promise they won't come after you. Try telling the IRS that you are giving yourself a tax-break based on the idea that the government shouldn't be able to tax a tax. See what happens. Whine all you like about people who have more than you. You are nothing more than a practitioner of the politics of greed who tries (and fails) to paint those who have less as, by definition, oppressed. - mighty_mouth, on 10/12/2007, -0/+6"when things go sour, you see the prices rise at the petrol pump immediately"
You are right. But it is no conspiracy. Here's how it works:
1) The guy that owns the local BP gas station is selling his gas at, say, $2.75/gallon
2) Suddenly Major Crisis X occures in the Middle East
3) Speculators in the futures market see a chance to make money and purchase more oil, resulting in increased oil prices
4) The gas station man realizes that next week he is going to have to pay more money to have his tanks refilled
5) He raises prices NOW in order to pay for next weeks refilling
It also works in reverse. When prices on the futures market go down, you usually see prices at the pump drop immediately.
If you doubt any of this, feel free to go talk to the guys that are running the gas stations in your area. They can further explain how the gas market works. - mighty_mouth, on 10/12/2007, -0/+6Is oil 36% more valuable this year that last year? Considering that fact of the current war in the Middle East, I must say that yes, it probably is.
Did Exxon's profits come from the increased oil prices? I'm not sure.
Maybe one of us should go read their 2Q report? - mighty_mouth, on 10/12/2007, -1/+6*whispers* its the invisible hand at work!
Note: you aren't allowed to digg me down unless you have actually read _The Wealth of Nations_ yourself. - ExCornelius, on 10/12/2007, -0/+4"Nevermind the fact that while you waste your time defending them, they are trampling on you in their quest for more profit. "
Businesses don't trample their customers. In order to get a profit they have to trade you something you're willing to buy. Until the day Exxon can come to my house and say "buy this gas, or else", only the government can trample on me for profit. - Egoist, on 10/12/2007, -2/+6@b0wl0fud0n: As long as there are emotional traders, the price is going to be the same. Breaking up Exxon into 10,000 companies isn't going to drastically increase the supply. Right now, it's in Exxon's best interest to put every gallon it can get its hands on onto the market with the prices as they are. The reason oil prices are so high at the moment has less to do with supply than instability in the middle east.
- benhocking, on 10/12/2007, -2/+6(a) How long ago were you in college? (Since the scales have definitely tipped in the last decade or so.)
(b) Are you sure you understood him? There's a professor (in climatology, I believe) here at UVA that some people claim doesn't believe in global warming, when what the professor is really saying is that technology will cure the problem (i.e., he acknowledges the potential for a problem) by itself. - jlaw84, on 10/12/2007, -1/+5I don't know why you are getting dugg down. You are 100% right.
- Egoist, on 10/12/2007, -9/+13You're getting a little defensive from the get-go, but I do admit that 90% of the people who come in here crying about how evil and greedy Exxon is has no idea of how their business or markets work. The other 10% are simply anti-capitalists where any form of profit in any business is considered evil.
- benhocking, on 10/12/2007, -4/+7@b0wl0fud0n: Actually, I'm more interested in hurting ExxonMobil because of their attack on science. I don't care that much about gas prices. (I buy about 2-3 gallons of gas a week for my wife and I combined.)
- jsd8cc, on 10/12/2007, -4/+7@Egoist
I asked for an explanation, and so far I haven't heard one. If all you can do is deride, then so be it.
It still doesn't explain how despite demand being the same, profits are at record levels. It's not rocket economics. - b0wl0fud0n, on 10/12/2007, -5/+8@ benhocking
What we should do is to break up the oil companies. One of the biggest reasons why oil prices are continuing to rise is because the larger oil companies have all bought out the smaller oil companies; thus there is no real market competition. There are A LOT of oil reserves which are untapped merely because there is no incentive to drill for more oil. By breaking up the oil companies, it'll put pressure on each company to drill and thus lowers the costs of oil as supply increases. - loganrapp, on 10/12/2007, -1/+4The oil industry is the only one in the world that will have higher profits in times of crisis in the regions of where their commodity is most densely located.
The IRA starts taking up arms again, you won't see potato exports suddenly shoot up in value.
Not saying they're saints, but, well, if you don't take the opportunity to make billions of dollars in revenue, and other competitors do, you think you're going to have a job very long? Highly doubt it.
In this most recent crisis in the Middle East, notice also that the commodities market has managed to not freak out about oil. Despite the fact that prices have gone up, I'm only paying .02 more a gallon than I was prior to the bombing runs. I'm not entirely certain what that means in the grand scheme, or if my prices are totally not indicative of the country (or globe) at large, but it seems to me that cooler heads at the trader level may very well be a large part of what we need to keep prices lower, in an industry where economists have stated that a vast majority of the price is made based on fear, and not on supply/demand. - wvdavis, on 10/12/2007, -0/+3@ mr ASSMAN - "I ***** hate how we are doing nothing about this."
Me too, believe me I have written my fair share of letter to Congress. Anyway someone explained it to me this way.... Let's say the oil companies are make 8% profit and our fine government is taxing it at 16% plus the state tax (what ever that is). What incentive does the Government have to put the thumbscrews to the oil companies? None really.
So in the words of Martin Riggs (Mel Gibson) in Lethal Weapon... "Basically we're just f'd" - ExCornelius, on 10/12/2007, -0/+336% increase of a profit margin of less than 10% (ie, around 3%), not a 36% increase in price.
- Bioshocker, on 10/12/2007, -0/+3The price on the trading markets is set by the neuroses of the traders dealing in them. If the US wasn't fighting two wars, if Venezuela hadn't elected a left-wing president, if Israel and its neighbours could get along, the traders wouldn't be so worried about supply being disrupted, so the price would come down.
If you want to blame someone for the prices, don't blame the companies. Blame the governments whose foreign policies created the current mess. - sp3tt, on 10/12/2007, -1/+4@mighty_mouth. I've read Human Action, am I allowed to digg you up?
- wvdavis, on 10/12/2007, -2/+5Bottom line is this... @ 10 Billion dollars profit a quarter we could be paying less at the pumps and they could still be making a profit. I'm not saying not to earn a profit, but this is greed.
XX-Off Exxon!!! You and the rest of the oil conglomerates SUCK!!! - benhocking, on 10/12/2007, -0/+2"Do you have any idea how much money oil companies spend on alternative energy research (i.e. fuel cells)?"
@TraderMatt: If we were talking about any oil company besides ExxonMobil, you'd have a point:
http://www.usatoday.com/money/industries/energy/2005-10-27-oil-invest-usat_x.htm - foamweapons, on 10/12/2007, -0/+2"Traders are worried about supply being disrupted"
Actually, the only reason supply shortages exist are because the 6 oil companies have cut down production. No new oil refineries have been built in the US since 1976. Did you know US oil stockpiles are hovering at 8-year highs? But there's not enough oil we can use because oil companies refuse to refine it.
"A congressional investigation uncovered internal memos written by the major oil companies operating in the U.S. discussing their successful strategies to maximize profits by forcing independent refineries out of business, resulting in tighter refinery capacity. From 1995-2002, 97% of the more than 920,000 barrels of oil per day of capacity that have been shut down were owned and operated by smaller, independent refiners. Were this capacity to be in operation today, refiners could use it to better meet today's reformulated gasoline blend needs. Profit margins for oil refiners have been at record highs. In 1999, for every gallon of gasoline refined from crude oil, U.S. oil refiners made a profit of 22.8 cents. By 2004, the profits jumped 80% to 40.8 cents per gallon of gasoline refined. Between 2001 and mid-2005, the combined profits for the biggest five refiners was $228 billion." - Public Citizen http://69.63.136.213/cmep/energy_enviro_nuclear/electricity/Oil_and_Gas/articles.cfm?ID=11829
Energy trading markets may set oil prices, but they are just a smoke-screen to hide the real bottleneck of increasing supply to lower prices... limited refining capacity.
If you want a comprehensive report on how the oil industry has cut back supply by closing down oil refineries you can read a report by Oregon Senator Wyden:
http://wyden.senate.gov/leg_issues/reports/wyden_oil_report.pdf - AFCdtLoeb, on 10/12/2007, -0/+2The oil companies have the most to lose from ultra high prices. Same with OPEC. Think about it. When oil hit sixty bucks a barrel, we mostly complained, but our habits remained identical. When gas hit three dollars a gallon, I kicked the pump, but then burned rubber away from the station just like I did when it was at two fifty. However, when gas hits six, seven, eight dollars a gallon or more, I can promise you all those alternatives will start to look REAL nice. I promise you, when gas climbs to Europe levels, expect me to start trying to run my Focus on vegetable oil. When oil is seventy five dollars a barrel, the world has its attention focused on whether America Has Talent, but when its a hundred and fifty plus, I promise that every backyard chemist and tinkerer will be trying to figure out an alternative.
- benhocking, on 10/12/2007, -1/+3@mighty_mouth: Is this close enough:
http://dir.salon.com/story/comics/boll/2002/01/24/boll/index.html - benhocking, on 10/12/2007, -0/+2When's the last time they lost money?
- inactive, on 10/12/2007, -0/+2National gross profit margins for refiners have hovered around $21 a barrel this week, compared with about $12 a barrel a year ago, according to information compiled by Bryant Gimlin, an analyst with Fort Lupton- based Gray Oil Co.
Gross refining margins - calculated by subtracting refiners' crude-oil purchase price from their wholesale gasoline selling price - hit a record high of $31.71 a barrel on Sept. 1 shortly after Hurricane Katrina, which knocked out refineries and pipelines.
The profit margins, which aren't publicly reported by the companies, represent the amount of money refiners make from selling gasoline and other products, minus their costs for crude oil.
http://www.denverpost.com/business/ci_4105814 - ExCornelius, on 10/12/2007, -0/+2"No new oil refineries have been built in the US since 1976. "
Yup. You can thank the government for the myriad fees and regulations that makes opening a new one so unprofitable. Same goes for why we have a handful of ***** 70s style nuclear reactors instead of a plethora of safe pebble-bed reactors. - Bioshocker, on 10/12/2007, -0/+2*Someone*'s making a lot of money out of the current global instability ...
If I was an evil Bond villain, I would be CEO of an oil company and I would fund global terrorist groups to help keep prices high. Damn what an awesome plot, I'm off to sell it to MGM now. - Sukino, on 10/12/2007, -1/+3You know what's ridiculous?
"Oil and gas companies do benefit from a lower corporate income tax, and they'll reap billions in tax breaks."
(http://www.grist.org/advice/ask/2005/08/03/umbra-oil/)
This money should be used for alternative energy sources. - mighty_mouth, on 10/12/2007, -2/+4Profit margins on gas are pretty low. In-store items are really where gas stations make their real money.
Can this explain a 36% increase? I don't know. Maybe. Maybe not.
Perhaps people, not wanting spend more gas traveling to other stores, have purchased more items in the gas station's store. - bsolah, on 10/12/2007, -1/+2The idea that the Middle East has something to do with it, is a farce. America (and Australia where I live) are not reliant on Middle East oil. The US government has been working so a long time to remove they reliance on Middle East oil. That is why bombing the ***** out of Iraq, Lebanon et al is so good to Bush & Co. But they rise the prices just the same, and make a nice profit out of it, whilst the economies of Europe and China feel the heat from the price rise.
- bsolah, on 10/12/2007, -0/+1Call me part of the 10% of anti-capitalists that think businesses and corporate fatcats are 'evil.'
This stupid amount of profit, made whilst America's poor get poorer and poor, shows the priorities of the system. The ruling classs has only one interest and that is to make profit. Whilst the workers, the ones who actually drill the oil, refine it etc, get a measly portion. The rest goes to the fatcat in charge, for stupid stuff like 'taking the risk for outlaying the capital' that he made from exploiting other workers in the same process. - foamweapons, on 10/12/2007, -1/+2Exxon/Mobil is price gouging. Last year as a share of capital investment, Exxon Mobil made a 46% rate of return on it's US oil operations, a 59% profit margin on it's US oil refining, totalling $36 billion. They love reporting this information to their investors, but their PR department tells a completely different story. The information you see saying they have 9% profit margins are *****, and are from their PR department. Face the facts, a barrel of oil costs $20 to make, they turn around and sell it for $70 because that's the price set on commodity exchanges.
It's a myth that Saudis or OPEC sets oil prices. The prices are set on energy trading markets. Back in 2000, Enron lobbied hard for the "Commodities Futures Modernization Act." Look it up. It deregulated the energy trading exhanges, meaning over half of the trades are unregulated. When the oil companies are the main ones throwing money around on these exchanges, it's easy for them to hike up the price.
People are going to call me anti-capitalist for pointing out these facts, but I call it anti-monopolitic thinking. Oil is a limited natural resource. Just like we limited profits in the early 1900s for the utility companies, government needs to stop the oil monopolies from overcharging consumers. I like the idea of a windfall profits tax:
http://www.citizen.org/cmep/energy_enviro_nuclear/electricity/Oil_and_Gas/articles.cfm?ID=14648 - Bioshocker, on 10/12/2007, -0/+1"The idea that the Middle East has something to do with it, is a farce. America (and Australia where I live) are not reliant on Middle East oil."
Go look up some basic economics. The price is set by supply and demand, and by speculation on that supply and demand. Anything that threatens the supply - e.g. a war where you are trying to extract or transport the oil - will affect the price. The current war(s) is absolutely affecting the price of oil.
The US government isn't working to remove the reliance on Middle East oil. It's working to ensure that it has control over Middle East oil. It's working to make sure anti-American presidents can't say "no oil for America", which would affect supply and send prices skyrocketing. - szelij, on 10/12/2007, -2/+3When you see such profits you know someone is getting squeezed somewhere. The high price of oil nowadays is mainly from competition with China and concerns about long-term supply.
What you can do is to build more refineries...
Other than that, buy more shares. Now if you'll excuse me i need to get ready to buy new computers with this good news. - youareretarded, on 10/12/2007, -0/+1Quote: "Retail prices = $3.23.
Distribution Costs, Marketing Costs and Profits =$0.15
Crude Oil Cost = $1.64
Refinery Cost and Profits = $0.82
State Underground Storage Tank Fee = $0.01
State and Local Sales Tax = $0.24
State Excise Tax = $0.18
Federal Excise Tax = $0.18
Exxon Mobil's gross margin is 9.8 cents of profit for every dollar of revenue. They maintain a consistent % margin, which is paltry compared to the banking and drug industries."
The difference being that people don't have to rely on drug companies and banks to earn a living. I don't use any drugs (not even aspirin) and if I had to I could make due without using a bank. - hbomb, on 10/12/2007, -0/+1No one seems to complain when oil companies lose money.
Don't like them, don't drive, or buy a scooter. - ExCornelius, on 10/12/2007, -0/+1"When the price of crude oil goes up, it means their raw material becomes more expensive "
You've got it backwards. Final goods prices are not determined by cost plus profit. Prices of inputs are based on the value of the end product, the thing people actually want to buy. As the market price for an end-good (e.g., gasoline) goes up, the input goods become more valuable. - VSAMCluster, on 10/12/2007, -1/+2"It also works in reverse. When prices on the futures market go down, you usually see prices at the pump drop immediately. "
That's crap. At least in the US, there's no rhyme or reason to the decreases, rare as they might be. I've been following oil prices for the past few years since there's no public transportation out where I'm at and even when oil prices drop, I see the gas stations bumping their prices up.
Pretty much, until you can find an alternative to oil, you're screwed. - eMuleDude, on 10/12/2007, -0/+1Exxon Mobil Corp. is now worth $403.25 billion.
http://finance.yahoo.com/q?s=XOM - geronimo, on 10/12/2007, -0/+1"You can thank the government for the myriad fees and regulations that makes opening a new one so unprofitable. "
Yes, and who was behind those? Oil companies for one. Oil companies love environmental regulations when it comes to refineries. They join hands with the Sierra club to make sure refineries cannot be built, securing their profit margins. - labmouse42, on 10/12/2007, -1/+2@benhocking
The best thing you can do is to help to come up with an alternative fuel source.
When Exxon comes and offers to buy it from you for more money than you could count, say no.
You will need to apporach a company like Honda and get them to make it.
I suggest Honda as the CEO of Honda was laughed out of the office by the big American Manifactures in the 70s when he proposed a small economical car for the masses.
Sell the car, see huge profits! - mferreri, on 10/12/2007, -0/+0ECONOMICS 101 for jsd8cc:
"Oil demand in America: +0.06% from 2005
Exxon's profits: +36% from 2005"
Exxon's PROFIT MARGIN: 9.8%
(Translation on Profit Margin: So for every dollar earned, they get to keep 9.8 cents.) Obviously Exxon's costs of goods sold INCREASED to record levels. And in your terms: Costs of goods sold = "R&D, drilling costs, margins...it's all B.S. " Exxon is spending huge amounts of money to make their 9.8% so all you Exxon haters can embellish in that at least. This concept shouldn't be so enlightening to everyone. Go read something productive.
- TraderMatt, on 10/12/2007, -0/+0Do you have any idea how much money oil companies spend on alternative energy research (i.e. fuel cells)? A ***** load. Now you can certainly deduce that this is in an effort to make money once those resources reach the mainstream, but nonetheless they aren't just sitting back and waiting for their companies become irrelevant.
I would also like to take a survey to see how much exxon derision comes from the anger over gas prices, which as I explained in the top post, has jack ***** to do with their profits. Even the effing psychos at Greenpeace (Exxpose Exxon) admit that protests over gas prices are completely symbolic (from article by in Elizabeth Souder in 7/28 Dallas Morning News). So if you are generally pissed over the idea of capitalism or you have a problem with profiting off of the extraction and refinement of crude oil I guess you have a basis. Otherwise you are misguided. - EdwardPrise, on 10/12/2007, -0/+0@ExCornelius
I see your point about final cost and value.
The thing I'm getting at is how could these companies benefit from the situation, unless they are the ones manipulating the prices. The refineries are the middle man between the consumers and the oil producing countries. -
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