Off topic: Record oil company profits and gas prices

Off topic: Record oil company profits and gas prices

Summary: ExxonMobil's third quarter profit surged nearly 75 percent to $9.92 billion, based on skyrocketing oil and natural-gas prices.

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TOPICS: Emerging Tech
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oil.jpgExxonMobil's third quarter profit surged nearly 75 percent to $9.92 billion, based on skyrocketing oil and natural-gas prices. It's the largest quarterly profit in history for a U.S. company. And we thought Google was a hot company. Royal Dutch Shell third quarter profit grew 67 percent to $9.39 billion, riding on skyrocking oil prices. BP profits climbed 34 percent for the same quarter. 

ExxonMobil's Chairman Lee R. Raymond commenting on his company's third quarter results said: "Following the hurricanes, ExxonMobil maximized gasoline production from all of our refineries which were operating in the U.S., and increased imports from overseas affiliates to meet U.S. demand. We acted responsibly in pricing at our company operated service stations, and we also encouraged our independent retailers and distributors to do the same. Third quarter 2005 results were adversely impacted by the hurricanes, with U.S. production volumes down 50 thousand oil-equivalent barrels per day and additional costs of approximately $45 million before tax. Our earnings in the third quarter reflect the impact of the relatively volatile industry environment on commodity prices and industry margins. Reduced volumes and higher costs will also impact the fourth quarter."

The calculus of record oil company profits during a time of natural disaster and lower production is basically a commodity supply and demand story--but you have to feel ripped off by the oil companies.  Raymond's statement that the third quarter "reflects the impact of the relatively volatile industry environment" is one of the understatements of the year. Sam Bodman, U.S. Secretary of Energy, believes that oil companies should boost refining capacity. That should have happened a long time ago...

Topic: Emerging Tech

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14 comments
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  • Outrageous

    Theoretically, oil companies should make the same profit at all times - when oil prices go up, your prices go up at the same time - and the profit stays the same. The only way to INCREASE profits is when the price of oil goes up, you increase your prices MORE - which gains you increased profits. AFAIK this is called "gouging" and is illegal. Whatever happened to the windfall profit tax?
    Roger Ramjet
    • That's assuming...

      ...someone, somewhere, has set the level of profit that the company is allowed. Has such a limit on profits been set? Are old companies not allowed to set their own prices based on demand?

      Carl Rapson
      rapson
      • BTW...

        ...that should be "oil" companies, not "old" companies.

        Carl Rapson
        rapson
      • Just what is

        the fine line between "gouging" and supply and demand pricing? I'm assuming that oil companies are satisfied with their profits (percentage)BEFORE this major spike happened - what made them change their mind?
        Roger Ramjet
        • Ah

          Not that's asking the right question. It would be interesting to hear the responses to that.

          Carl Rapson
          rapson
          • Sheesh

            "Now", not "Not".

            Carl Rapson
            rapson
  • why increase capacity?

    and decrease profits. The oil, electric and gas industries have the supply cut right to demand so they can control prices "without fixing", unfortunately this means in a time of crisis we pay a premium.

    The answer:
    buy oil stock, and when the price goes up and profits increase as a result, you get the money back from the dividend of your stock.

    (yea right)
    pesky_z
  • oil prices

    Could someone please explain to me where my line of logic is wrong as I am probably not as knowledgable as I should be on this matter.
    If prices go up 100% say from 1.50 per gallon to $3.00 per gallon and the company tries to run an 8% profit aren't they jumping from a 12-cent profit to a 24-cent profit therfore doubling the actual money made without doing any more work. If that is not price gouging then what is? I realize that most companies work on a percentage of profits, but come on. I understand that this goes deeper than just the price at the gas station but doesn't the same logic hold through for the entire line of business that is involved in the production of the oil to getting it to the consumer?
    kurt0920
  • oil prices

    Could someone please explain to me where my line of logic is wrong as I am probably not as knowledgable as I should be on this matter.
    If prices go up 100% say from 1.50 per gallon to $3.00 per gallon and the company tries to run an 8% profit aren't they jumping from a 12-cent profit to a 24-cent profit therfore doubling the actual money made without doing any more work. If that is not price gouging then what is? I realize that most companies work on a percentage of profits, but come on. I understand that this goes deeper than just the price at the gas station but doesn't the same logic hold through for the entire line of business that is involved in the production of the oil to getting it to the consumer?
    kurt0920
  • oil prices

    Could someone please explain to me where my line of logic is wrong as I am probably not as knowledgable as I should be on this matter.
    If prices go up 100% say from 1.50 per gallon to $3.00 per gallon and the company tries to run an 8% profit aren't they jumping from a 12-cent profit to a 24-cent profit therfore doubling the actual money made without doing any more work. If that is not price gouging then what is? I realize that most companies work on a percentage of profits, but come on. I understand that this goes deeper than just the price at the gas station but doesn't the same logic hold through for the entire line of business that is involved in the production of the oil to getting it to the consumer?
    kurt0920
    • profits

      Profit margin is not based on "amount of work" or total profit dollars. Gouging would be an inordinately high % return on investment, not overall dollars. Example: Exxon made $9 billion profit. Based on the dollar figure, that seems high and gouging from just the $ perspective. Revenues were $100 billion, profits were <10%. They also reinvested over $4 into R&D bringing less than 6% profit. Also, to my knowledge, this does not include the 50% taxes applies to the oil companies, thus bringing their return on investment to under 3%!!! Would you put your money into a high risk investment earning this margin? Investors have the right to a reasonable rate of return, no matter what the total dollar amount is.
      eaglecycling@...
  • RE: Off topic: Record oil company profits and gas prices

    Exxon imports product from overseas into the U.S. because environmentalists have prevented the construction of new refineries for thirty years. Exxon is building massive refineries and chemical plants in Asia to service Asian demand for refined product. Venezuela targets Exxon specifically in prohibiting exports to Exxon.
    tahur@...
  • U.S. and State taxes

    U.S. and State taxes take the biggest chunk out of your gasoline dollar. In some States, the taxes are a percentage of the sales price.
    tahur@...
  • profit is from overseas also

    Exxon derives a considerable portion of its revenues and profits from overseas operations. Exxon is building refineries and chemical plants in Asia and the Middle East. Venezuela has just refused to sell any of its difficult to refine crude to Exxon. Now Venezuela cannot find any place to buy and refine its crude. Citgo gasoline stations are owned by Venezuela.
    tahur@...