Record profits for gas companys

http://quotes.ino.com/chart/?s=NYMEX_HUX5&v=d6&w=1&t=l&a=50

http://quotes.ino.com/chart/?s=NYMEX_CLZ5&v=d12

By looking at the charts it is very clear why oil companies are doing well right now.

As someone who has worked for an oil company for almost 27.5 years, I have witnessed the oil price crash twice. And the odds are it will again in the years to come.

I am not going to be ashamed of my company actually enjoying good profits at the moment in what is a very cyclical business. I didn't see any consumers feeling bad for us in the mid-1980s when the price of oil dropped down to $10/bbl. and then again just a few years ago when the price of oil dropped down to $10/bbl. again, and we were losing money hand over fist and we were in fear of losing our jobs.

Personally, I would love to see the price of oil drop back down to $35/bbl. and see gasoline back at $1.65/gal.

But it would be the height of corporate irresponsiblity to be selling gasoline at that price today. We basically have a capitalist economy, not a socialist or communist economy.

I don't know about other oil companies but my company is plowing our profits back into exploring for more oil and natural gas and expanding the capacity of one of our refineries. We also sell our gasoline for as low as we can as we since we go for high volume at a low margin.

As soon as I see people complaining with the same vehemence about the prices doctors and hospitals charge for office visits and necessary operations and procedures, then I will take criticism of oil companies seriously. Until then I will consider such criticism to be nothing more than scapegoating by the American people who, through their elected representatives, have placed gigantic amounts of oil and natural gas off limits for drilling in the United States and who have allowed the environmentalists to hamstring building new refineries.

 

The fault for those prices is with the insurance companies. Ever figured out how much the poor physicians and hospitals are required to write off? Apples and oranges.

 

To be more precise, the profits for Mobile Exxon was 9.9 Billion, for Chevron was over 3 Billion. Heard that today on the radio.

Joseph Botwinick

 

I totally disagree, LE. The doctors and hospitals are the ones charging the high prices.

If people aren't going to cut oil companies any slack, then they shouldn't be hypocritical and cut the doctors and hospitals any slack.

Eenergy prices are actually set by the market place. Anyone that doesn't like that should look to the old Soviet Union and see how the government controlling prices worked out. Or look to the Nixon administration and see how wage and price controls worked out in the 1970s.

 

I don't think the government should control the prices. I do think we should be refusing to pay it. Buy less gas, shop around and buy the cheapest gas you can find, and don't travel more than you have to. Send a message to the immoral, greedy oil companies who are still gouging us and profiting on the suffering of others.

 

From July 2000 - July 2005, the health industry's earnings were 35.1% higher than they were for oil and gas companies. Pharmaceutical companies' earnings were 284.2% higher.

 

There is no gouging or profiteering going on as an industry. Frankly, anyone who think they are doesn't know what he/she is talking about; he/she is either talking out of ignorance or is promoting a political agenda.

 

I disagree, LE but for a different reason. The greed of man has increased to the point that he will sue at the drop of a hat, or more precisely, the slightest misdiagnosis of a doctor. The doctor's insurance company requires more premiums to cover his lawsuits and the hospital's too are hit hard. We end up paying through higher ins. premiums or reduced coverage.

 

Here is some info on how oil and gas company profits stack up with other industries:

http://api-ec.api.org/filelibrary/Earnings_10-28-05R.pdf

The problem is that people who are not trained in economics, or who are promoting a political agenda, tend to concentrate on the absolute numbers instead of looking at the return on investment or the return on sales or the return on capitalization. If a company has a huge asset base in absolute dollars, like the big oil and gas companies, then it had best have a huge absolute dollar profit on those assets. But when looked at as a percentage it is a quite reasonable profit margin and less than what lots of other industries earn, including health care companies and pharmaceuticals.

 

I don't begrudge the oil companies profits. It is what they are in business for. What I don't like is the continuing merges these giant oil co. are going through. Competition is what keeps prices in the proper range and the fewer number of players, the less opportunity for competition to regulate the prices properly.

 

I share your concern about mergers. And as you know, this concern is not confined to only oil and gas companies.

Since the oil company I work for is one of the smaller ones I am concerned about it being gobbled up by a bigger company. But it is still has basically a family run business type feel to it so I feel rather confident that the management is not looking for the company to be gobbled up. Fortunately, management didn't take a turn for the worse after its founder died like Wal-Mart did.

 

Timtoolman: // ... is it just me that thinks they
are just after more money.

Duh! Ever heard of Capitalism?

Do a study. Compare the return on investment.
Compare Exxon, SBc (Southwestern Bell Corp.),
CBS (Columbia Broadcasting System). The big bucks
follow the big investiment (Exxon). But you will
probably find small companies (relative) like
CBS will have the largest return on investment.

 

Look at page 4 (you need to have a
Adobe reader 7.0) and you can see something
close to return on investment.

The percentages of oil company is NOT
as large as other type industries; the
absolute volume of dollars is greater,
we use lots of crude oil.

 

In our free market system, scarcity paired with high demand is handled by a rise in price. Then demand will come down and/or supply will increase.

The alternative is government administered rationing when there are supply disruptions as happened during the recent hurricanes. And I really don't think we should go there.

 

Ken,

You still haven't really explained why my area seems to turn your supply and demand theory on its head from the other thread. Wal-Mart is still the cheapest by at least a dime a gallon, yet they have the highest demand right now. Are the other companies still selling the "expensive" gas? Or, are they just greedy and trying to catch up to the 9.9 Billion profits of Exxon Mobile?

Joseph Botwinick

 

JoeBot---son!!! This is gonna look good on my next stock dividend next quarter!!!! Mercy--I had no idea it was at 9.9 billion!! Thanks for the info!!

 

It seems to me ...

Market economics are extremely complex. Supply and demand is the general principle, but is only oen principle.

So Walmart might have the greatest demand, but why? Because they have the lowest price. In a competetive market place, Walmart says "demand is great, let's raise the price." Consumer says, "Let's go across the street."

As for oil company profits, if you don't like the price, then don't buy. Nothing will bring prices down faster than having no cars at the pumps. A day or two or no business and gas prices will fall. That is the demand issue. When a day or two of no sales happens, supply increases. Again, that will bring teh price down. Now, no one is willing to take that hit.

For my end, I wish they weren't making huge profits, but like Ken says, this is cyclical and there is R&D and capital improvements that must go on that is hidden cost. The downtimes have to be covered by the up times.

 

http://www.foxnews.com/story/0,2933,173683,00.html

The rest of the story:

"Exxon's capital expenditures jumped to $4.41 billion
from $3.63 billion a year earlier." So the new
investment is rather hefty also.

//Nonetheless, the result topped the $9 billion net profit reported on Thursday by Royal Dutch Shell Plc (search), though it was smaller than some out-sized profits posted in past years by companies with one-time items, like MediaOne's $26.62 billion profit in the second quarter of 1998 or Ford Motor Co.'s (F) $17.6 billion profit in the first quarter of that year.//

Even the giant oil companies are bested by "MediaOne's" onetime
There is money in communications

You want a bellweather event: consider that SBC
(southwestern bell corporation) is acquiring AT&T.
The new REBUILT BELL will probably use the AT&T name.
I'm mad at SBC, 40 years of loyalty was NOTHING.
I called them to see if they could compete with Cox
Cable for delivery of high speed connection. They
couldn't compete. Within a week SBC called me
and matched Cox Cable's offer. Both SBC and Cox Cable
seem to get more out of NEW SUBSCRIBERS than retaining
old ones. Sorry, i don't follow companies with
NO CORPORATE MEMORY

Meanwhile, what is this dising of Exxon and other big
petrochemical companies. Isn't that something the
terrorists want but can't do

 

The thing is that the profits when looked at as a return on the money that has been plowed into exploration, production, refining, and marketing are not huge at all but much less than what some other industries earn over the same time period.

The issue is not $9.9 billion in net profit but a $9.9 billion on how much capital that has been employed over the years.

Also, Exxon paid $6.1 billion in income taxes in the third quarter, or 38.2% of its pre-tax income. I imagine the U.S. Treasury enjoyed seeing that money.