I know I'm getting old when I remember gas at and under $1.00 a gallon, and I know I don't like seeing costs jump as the gas price has, but it really grinds me when I then read that the oil companies are raking in record profits seemingly quarter after quarter.
Exxon Mobil is the world's largest oil company. Its first quarter 2007 profits were up 10% at $9.28 billion - a first quarter record (read the article here).
In a different article (read it here), it is noted that Exxon Mobil posted the largest profits of any US company last year, breaking the profit record it set in 2005. The profit was $39.5 BILLION. Regardless of the cost of R & D, that is a hefty profit.
According the article:
On the refining and marketing side of the business — known as the downstream — Exxon Mobil's earnings rose to $1.9 billion from $1.3 billion to start 2006, lifted by improved refining and marketing margins and more efficient refining operations.While I appreciate a company looking to maximize its profits by reducing waste and improving efficiency, you do have to wonder at what point price gouging comes into play.
A company's refining margin is the difference between what it costs to refine crude oil and what the company makes selling refined products, such as gasoline and jet fuel.
If Pfizer posted the most profits of any company in the US I'd imagine there would be a cry that they are capitalizing on individual's illness and many would demand government intervention. Yet outside of our major cities we are nearly wholly reliant upon our automobile. It provides us with access to our employment, goods, medical care, schools, etc.
I don't have an answer for this one, but it does seem that something needs to be done. Not only will we pay for this at the pump, but we'll pay for it with every good we buy, through our school taxes (increased cost to transport), and in our borough taxes (fire calls, ambulance, and police).
16 comments:
We were warned in the 1970's about the future of energy in this country and we have done nothing while the rest of the world, China and India, have become huge consumers of oil.
As to the profits, lets keep in mind that here in PA we pay a 21 cent gas tax and an 18 cent federal gas tax. Last year Exxon/Mobile paid 100 billion dollars in taxes to the federal government. This figure does not include the taxes paid by Exxon's workers, administrators, shop owners and their employees. Meanwhile we continue to not drill, not put up refineries, drink bottled water in plastic bottles made from petroleum. The leftist media and their cronies in Congress are smearing Bush with this issue while as late as the recent Kerry campaign they wanted to raised the federal gas tax by 50 cents. I could go on and on about this matter but I suggest we look to the real culprits here, government and kook environmentalists.
Gas was under a dollar just prior to 9/11. I remember it being $0.85 at the Sheetz in State College around 1999-ish. So it wasn't that long ago...under a Democrat.
Last week, I was on Staten Island (New York) and had to gas up before heading back home to Nazareth. I don't know what I was thinking, but I let the attendant do it for me - for the low price of $3.57 per gallon!!!! New Jersey still has the best gas prices.
Crude oil costs about $68 per barrell right now. A barrell contains 42 gallons, which works out to about $1.62 per gallon that the oil companies pay for crude.
So, with gas at $3 per gallon, first, let's subtract out the $1.62 the company pays for the base product, leaving us at $1.38.
The total tax (state and federal) we in PA pay amounts to about $.60 a gallon (I believe the article I saw put it at around .63, but rounded down just in case), that now leaves us with $.78.
Now, you have to factor in the cost to ship the oil into refineries and gas out, the cost to actually refine it (run equipment, pay employees, etc), and of course, the very small margin that goes to the shop owner that sells it to you.
I think you will see the $.78 quickly eroded down to only a few cents per gallon that the oil companies make.
Where the profits come in are the volumes of gas being sold. As our population has increased, so has our demand for gasoline, fuel oil, motor oil, etc.
So, in reality, the group that gets the biggest chunk of the $3 per gallon is not the oil companies, but our state and federal government.
With the new anti-gouging legislation being passed at the national level, maybe we as citizens should ask for it to be enforced against government agencies as well as oil companies.
The $68 per barrel is the price crude oil is traded on either New York Mercantile Exchange or the International Petroleum Exchange. Remember that US oil companies buy oil from the Middle East at rates discounted below the exchange price. In return, they sell the oil which they prospect and drill for in the continental US, Alaska, Gulf of Mexico, Bering Sea, etc. to other countries at rates much, much higher than they pay from the Middle East.
If you think that the oil companies are only making a few cents a gallon, then I have a bridge to sell you...
Anon 1:26PM
You might want to google Exxon/Mobile and go to their web page. It has a pretty good outline as to what is and what is going to be. There is also an excellent comparison chart to other industires.
Exxon notes that last year they made approximately 10 cents a gallon. Their profits are large because they are selling a product globally. We not only stop them from drilling, we impose standards for refineries where they pay the fine rather then fixing or repairing them much less building a new one. They also point out that they are involved in new forms of energy which makes sense since they are already an energy company. Petroleum companies are not good investments when compared with other places to put your money. Check with your broker or with outfits like Morning Star and that has been the case for many years.
Chris, you've missed my point...they may make only $0.10/gallon on oil purchased from the Middle East but they are making a great deal more on their global sales outside the US. The higher the exchange rate for crude oil, the more the US oil companies can charge on the global market.
BTW, only an oil company apologist would cite Exxon's homepage in a discussion over the price of gas. Isn't this the same Exxon that told the American people the WMDs were in Iraq...oh, sorry, I had Exxon confused with somebody else not related to the oil industry. :(
Anon 4 PM
I quite frankly don't care if the oil companies make more on sales outside the US. Just like any company, they are in business to make a profit. And, just like a lot of other US companies, they make a lot of that profit offshore.
We should probably be thankful for that otherwise we would be paying 4 to 5 dollars a gallon at this point.
If you are going to jump on the oil companies this way, maybe you should open your eyes and see who else is gouging your pocket. Oil companies are the current target because the media and presidential candidates tells you they are a target.
I put out some basic facts at 9:46 AM with real numbers. You are only giving us the party line. You want me to agree with you, start using facts and not emotion.
You want to affect gas prices, drive less, car pool, ride your bike, walk. Do whatever is necessary to lower demand. Or complain to state and federal legislators to stop using gas as their endless pocket book to pay for their pet projects.
You did not provide any basic facts but merely a mathematical problem solved with one great mythical variable...oil companies do not pay $1.62 per gallon. BTW, according to Webster, a fact is "a piece of information presented as having objective reality". The "real numbers" you provided a highly subjective.
There are a multitude of potential arguments on this one, but at the end of the day, as I noted in the original post, the gas price went up to 3.07 before Memorial Day from 2.99 in one location and guess what?
Today it was back to 2.99 when I drove past the Hess and Sheetz stations on Schoenersville Road on the way into the office.
What happened that resulted in the price hike? A holiday known for travel. Who gains? Not the US government, they would have brought in the same amount of tax no matter what the price. The stations squeezed out an extra .10 per gallon for four days when people were expected to travel more than normal.
It's all a scam! They always raise the price of gas this time of year - - - just when everyone's getting ready to travel. Watch it drop mid-September.
We're all at the mercy of these morons in Congress, etc. They're all puppets and it's all a scam. No one's out for the better of our country and citizens - they're all in it for the $$$$.
Anon 7:26
Yes, they are facts. The price per barrell is what it is, you can't make that one up. I did some additional research on the DOE (that is Department of Energy, not making it up) site, and amazingly, the world wide markets, including the Middle East, are in the mid $60's per barrell.
Maybe I should make up some conspiracy theory that you seem to subscribe to that all is a scam.
Maybe you should study supply side economics in that if there is a high demand and short supply, the price will go up. Maybe if we drilled for oil in our own country prices would drop.
But, I think they should keep going up. Clearly, they are not high enough because there has been little done to conserve.
Take a look at the parent pickup lines at all our schools. Hello people, we have buses that are paid for through our tax dollars. yet, I see way too many cars parked, idling no less, burning gas for no reason. I have seen people drive to their mail boxes, drive their garbage to the end of the driveway, and my favorite on the news a few weeks ago: an overweight woman being interviewed, complaining about gas prices as she sat idling in the drive through line waiting for her Big Mac.
So to all of you, you are the reason gas prices are so high, and at the same time, you are adding a lot of extra carbon dioxide into atmosphere contributing to global warming.
Sorry, Al Gore would be upset with you.
Somewhere you can't get it through your head that the major US oil companies do not pay the exchange rate for oil because they produce much of it themselves. Do you think a farmer who produces corn drives down to Giant when his family wants corn for dinner. How about the apple orchard owner, they surely don't go to the store and pay full price for an apple they they can pick from their property for free.
I'll say this one more time, the price of crude oil per barrel is the exchange price, not the price it costs the major US oil companies per gallon. If Exxon owns the oil rights of a crude oil deposit in Texas, they are not paying $68/barrel for their own oil. When Exxon buys oil from the middle east, they are also not paying the exchange rate. You seem to forget that much of the technology and equipment ion the middle east is supplied by major US oil companies. Although they may not own the mineral rights in the middle east, they surely use their equipment and technology in exchange for a reduced price per barrel.
Anon 8:31
Again, where are your facts and data points? It is easy to make an accusation without facts.
I suggest you do a little research and factor in a little common sense.
The DOE website will give you more than enough data.
Does this oil magically spring from the ground and into the refineries at no cost? Apply a little logic and realize that even though they own the rights to that oil, there is still quite a large cost associated with drilling it, pumping it and moving it to the refineries. Not to mention you have to pay all the people involved along the way, taxes, permits, etc.
If you have other data that shows that the oil companies can get the oil into their refineries at a very low cost, then I would be happy to listen to your argument and maybe it will get "through my head". Or maybe, you can disconnect yourself from the emotion and politics, look at the real data, and draw the conclusion that the oil companies are making less of a profit than our state and federal governments are on a gallon of gas.
Sorry, I don't listen to the media or political sound bites to tell me what is right and wrong. I look at numbers, pure and simple. And, until you can offer some that support your stand, I'm not buying it.
To begin, a wee little reminder to attack the argument, not the individual.
I'm not going to go hog wild digging into numbers and statistics, but it is true that the largest profiting company in the US is Exxon/Mobil.
Regardless of how much tax is paid, Exxon/Mobil remains the most profitable company in the US.
It is also true that we are paying the highest gas prices we've ever paid in the US and I'd guestimate (though haven't done the math to prove) the rate of increase over recent years is greater than those preceding them and the increases are out-pacing inflation.
At the end of the day this could very well be one of those instances where the obvious answer (rising gas prices = greater corporate profits) is wrong.
I think everyone can respect a desire for companies to be profitable, but jumping the price of a gallon of gas .10 on the eve of a travel holiday then dropping it back down once the holiday is over is (pick your word) greedy, profiteering, gouging.
If these companies were struggling you could understand them having to raise prices, but the fluctuations appear to be made to maximize what is already the country's most profitable company/industry.
The government's threatened to take over healthcare, I'd hate to see them try the same with fuel/energy, because I'm quite certain they won't do as well as private enterprise. At the same time, as prices continue to go up people are going to get more upset and politicians are going to get involved. Let's hope the companies self regulate this behavior before the government does it for them.
Ross,
Agree and have been attacking the topic with data. Today, we are going after the oil companies, tomorrow, who knows, phone, cable, etc. Companies whose bottom line is to improve their bottom line. Did we scream at the orange producers when those prices jumped over the winter due to frost/ice damage? After all, they wanted to make a profit as well. Maybe they should have taken less.
Yes, oil company revenue and profits are way up. At the same time, has anyone in the media talked about the increased demand for petroleum products? Logic dictates that with the increase in population, the number of vehicles owned by the average family, and the exodus to more suburban locations, that demand would go up, as would profits as they are selling more fuel. Add to that the shear number of hours spent driving during a given week, I would venture to guess that we consume gas at a faster rate than our parents did.
Numbers don't lie, but emotions do.
As for the Hess station, my guess is you are talking about the one right off 22 on Shoenersville Rd. I went past a couple of the other stations a little further up the road over the weekend, and their prices were basically what they have been. My guess is that Hess may have jacked up the price for the weekend because it is easy off/on from the highway. Not uncommon throughout the country from what I have seen on my travels.
Having traveled all over Europe and Asia, we still pay less than those regions, but they also drive less or use very economical vehicles.
We live in a market economy. WE the consumers control the market price. Find ways to lower demand and price will soon follow.
If you want the government to start controlling industries and prices (and this applies to healthcare as well), we will soon find ourselves no better than some of the banana republics that have everything controlled by the state.
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