Damn that's a lot of profit...
$36.1 Billion in Net Income...
Damn that's a lot of profit...
What do you think the odds are we could legislate the profit levels of oil companies - like insurance companies which can't have a margin higher than a legally set level?
January 30th, 2006 10:43am
That'd be nice if that were to happen, though I don't really expect it to.
I don't know much (read: anything) about the oil industry, but I was under the impression that oil was a commodity. And, isn't the profit margin on commodities usually quite slim? I realize that a there's an unfathomable amount of oil being sold, but that amount of profit still seems kind of high to me.
It's not a commodity - the demand is higher than the supply. ;)
January 30th, 2006 10:54am
Conoco Phillips calls it a commodity...
"As an international commodity, crude oil is bought and sold 24 hours a day, so its price is changing constantly."
Guess what? It wasn't Conoco Phillips that wrote that, it was a marketing intern. ;)
January 30th, 2006 11:01am
That's precisely what Gordon Brown does from time to time, announce a new tax for oil producers.
January 30th, 2006 11:02am
> but that amount of profit still seems kind of high to me.
It's the refined quantity that matters too. Many refineries have been retired explicitly to keep prices high. So when people want to drill for more oil it really doesn't matter. They can just close down more refineries, as they have already done.
Uh, you WANT gas prices to be high. Even higher than they are right now.
Nothing else is going to drive investment and encouragement of alternative energy.
"They can just close down more refineries, as they have already done."
No way! When they do that, you'll see capitalism at work, with lots of Mom & Pop oil refineries popping up to undercut the big guys!
January 30th, 2006 11:08am
I'm not complaining about the price of gas, per se, Philo.
That amount of profit on a commodity is what seems so insane. Plus, I don't really trust the oil companies (who clearly have the resources) to significantly investigate alternative energy sources.
"Nothing else is going to drive investment and encouragement of alternative energy."
And if the price of gas is artificially inflated and we can just go on using dino juice except for all the hype, then why do we need alternative energy? :P
January 30th, 2006 11:44am
Well, if the price of gas is high, and the price of oil not so high, that means profits which go to the oil companies.
And I didn't mean that they'd use the profits to investigate alternative energy - I meant that public opposition to high gas prices would spur the investment.
Actually, instead of capping profits, just tax the fuck out of petroleum refining and distribution. It's a pretty fair thing to tax discriminantly - pollution, hazmat, EPA nightmares - just levy a huge tax on ShellExxonMobilBP
That's the thing:
1) Most (the absolute majority) of the high gas prices in Europe are down to taxation.
2) Because the oil companies care about profits, not margins, it might actually be beneficial for them to have low gas prices. If everyone starts driving SUVs to pick the newspaper off the front lawn, the oil companies will earn more.
January 30th, 2006 12:02pm
So Jacob, what's high?
I heard on the news that Exxon's revenues were $378 billion. That is a world record (beating out Wal-Mart). But $36.1 billon profit is only round 10%.
Granted that's higher than most commodities, but it's nowhere near the non-comodity companies, such as say, Microsoft's 70%+ margins from a few years ago.
Anyway, commodities are short-term cyclical, long-term stable (basically going down). A one year bump is not very meaningful.
That's a good point. I didn't really take the number into perspective. I guess, though, I had the mistaken impression that margins of 1-2% were about average for things considered commodities (I have no idea where I got this impression, maybe the semiconductor industry.)
y the way, What's curious is that Exxon is building up its war chest (even after giving $23 billion in dividends last year), instead of looking to buy more oil companies. I think they know that when investing you're not supposed to buy high.
>> What's curious is that Exxon is building up its war chest (even after giving $23 billion in dividends last year), instead of looking to buy more oil companies.
Who are they supposed to buy? The industry is about as consolidated as you can get right now. There has been a huge amount of buying going on in the last few years.
January 30th, 2006 7:42pm
I recall the period whan a system had matured to the point where no further development was warranted and revenue had peaked being referred to internally as "the Harvest".
As employee of TOT (French supermajor) every 2 years I get 20% discount to purchase share of our comp, not to mention if I perform well I get free stock or stock option. I oppose any regulation that might dampen the ever increasing profits (henceforth share price) of oil comp.
Btw our share kicks XOM, BP, RD, CVX, COP asses. And fyi if you're interested this year we will do stock split.