How the hell are oil companies making record profits???!!!!

[LynneSin]

:grr:

http://www.nytimes.com/2005/10/28/business/28oil.html?hp&ex=1130558400&en=2f3797e198ba25c2&ei=5094&partner=homepage


I can appreciate that oil companies aren't non-profit organizations but as I flipped through the channels on TV, I kept getting angrier as I saw news stories about "Record Profits" by the oil industries. How the hell can they be making record profits when we're being forced to pay $3/gallon just to run our cars......



.......Unless the oil companies took advantage of a few hurricanes to help push for this bountiful windfall.

If we had democrats in charge maybe someone would have the balls to investigate why oil companies are raking in a windfall while we Americans suffer at the pump!

[bigbrother05]

1. Price gouging

[madokie]

21. fair and square

[TX-RAT]

26. OK , Who's gouging, and how are they doing it?

[madokie]

33. I think you could look at the compensation to the top tier

in management and see the answer to that.

[TX-RAT]

35. Lots of top executives in lots of company's make big money.

That doesn't answer my question.

[bigbrother05]

37. They are charging more at the pump

than the actual increase of the cost to produce each gallon, therefore with less production, but higher prices = windfall profits= price gouging.

[cantstandbush]

42. Notice how the prices have dropped since the revelations about profits.

This was gouging pure and simple and the Bush administration let it happen.

[clydefrand]

2. Supply is less than the demand is what I heard one person

on the news say today.

[rateyes]

6. They have the capacity to produce more fuel..

they keep "just enough" on hand in order to keep prices up, IMHO. Production rates fell more than 4% during the same time of these windfall profits, while those profits rose somewhere in the neighborhood of 75% over last year. Talk about looters. Talk about "wealth distribution"--reverse Robin Hood--stealing from the poor and giving to the rich.

[bahrbearian]

10. Now Now , that sounds like class warfare...

[rateyes]

24. That's because it is class warfare!

:)

[OneTwentyoNine]

18. Really?!? Then gas stations would be closed all over the US

Honestly,has anyone seen ANY gas stations closed?? If supply is that much less than demand then someone wouldn't be getting any fuel or simple run out. I haven't seen ONE station closed,and that includes when we took a 10 day vacation.

[madokie]

22. and their argument will be that they raise the price to keep demand down

[ComerPerro]

25. But of course, its bullshit

If that were the case, shouldn't THEIR prices be higher as well. As in, the costs to drill and the produce gasoline?

In a case like that, our prices would be high, but since their costs would be high they wouldn't have record profits.

Isn't this the kind of shit that the "Free Market" is supposed to magically eliminate, according to conservatives?

[rateyes]

3. Collusion. nt

[Debbi801]

4. According to the news on the radio this morning...

"Unless the oil companies took advantage of a few hurricanes to help push for this bountiful windfall."

This is exactly what they did.
:mad:

[jarnocan]

5. It is all the same big picture and OUR WCW!!!!

Because they can. We need to act on all this justifiable anger and reality checks.
www.worldcantwait.org Photo/support group on FLICKR http://www.flickr.com/groups/worldcantwait/ also photo chain http://www.photochains.com/view/WorldCantWait I just started these to promote and support these important efforts endorsed by the PDA!

[Sgent]

7. price inelasticity

An increase in price does not lead to a reduction in demand.

Thus a doubling in price leads to maybe a 10% decrease in demand. Therefore the higher the price, the more revenue. Since costs for the oil companies are fixed, it all goes to the bottom line.

The above said, it doesn't mean that there shouldn't be government regulation, but a decrease in natural demand can lead to an increase in profits w/o actual price gouging.

[durablend]

8. Never fear!

Cuz the ABC presswhore sez it's just good ole supply and demand causing these record prices and cuz this is Uhmerikkka we can't have none of that gubermint regulation of oil companies cuz it causes peoples to be thrown out of work and companies to go under while making even more money.

In a nutshell: BEND OVER PAY UP AND SHUT UP!

:sarcasm:

[bahrbearian]

9. $2.08 in Witcita

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x2187852

[Spider Jerusalem]

11. Simple economics.

Worldwide demand for oil has increased by roughly 10% in the past 18-24 months (up to a level of, IIRC, 84M bbl/day, largely driven by expansion in India and China). Supply, however, is flat or slightly declining, due to major producing regions (the North Sea, Cantarell in Mexico, and possibly Saudi Arabia) having passed their production peak. Without excess production capacity, the market is demand-driven. Increased competition for a limited resource leads to higher prices, which are then naturally passed on to consumers. The temporary loss of US onshore refinery and offshore production capacity in the Gulf of Mexico due to storm damage slightly exacerbates the problem.

And even at $3/gallon, Americans STILL pay less for gasoline than anyone else in the industrialised world.

[IChing]

28. Thank you Alan Greenspan for the simple economic lesson

It still doesn't explain why PROFITS being so high,

But explained DEMAND.

[onenote]

34. Think in terms of return on investment

If you have a product that costs $0.90 to make and you sell it for $1.00 you have a profit of $0.10. Now assume that the cost of your product doubles to $1.80. So you raise your price. If you raise it to $1.90, your profit stays at $0.10, but your return on your investment is cut in half. So you raise the price to $2.00, which doubles your profit (i.e., its $0.20 instead of $0.10), but your return on your investment stays the same.

As the price of oil goes up, the oil companies raise their prices to maintain their returns, which means that their profits go up.

Not defending it, just trying to offer an explanation.And I should add that I havent looked to see if the oil companies returns are improving. That could reflect increased sales (since more sales increase return due to some costs being fixed) or it could mean that they are just screwing the hell out of us.

onenote

[RB TexLa]

36. Very true

I get so tired of the people who say the oil companies should give up some of their profits as if they can just lower the price of a commodity traded on an open world wide market. The only way they can lower their profits would be to deliver the product 20% or 25% less efficiently. I don't think anyone wants that.

Also if we needed new refineries as much as some say they would have been built. There are regulatory costs to building anything, an office building, apartments, refineries, you name it. That is a cost of doing business if you are not going to make enough money off of the building to warrant the costs of building it, you don't build it, that rule of business applies the same to refineries.

[IChing]

38. "The only way they can lower their profits would be to deliver '

Yeah right, they delivered it before without receiving the highest profit in the corporate history of the United States.

Lame logic

[RB TexLa]

39. no it's not

they are making the same margins, they are just dealing with larger numbers.

[OneTwentyoNine]

41. Yup,Exxon made TEN BILLION in profit in ONE QUARTER....

The largest amount of fucking money they have EVER made. Supply and demand is merely the spin to keep the billions flowing in.

[shoelace414]

12. they are treating gas like

Enron treated electricity in California in 2001

[tsuki]

13. And don't forget DeLay's Corporate Welfare windfall.

[asjr]

14. They drilled their shafts right into the pockets

of the consumers. They don't have to import oil to get their greedy hands on billions.

[kywildcat]

15. Rice=ExxonMobil

Cheney=Halliburton (services specific to the oil industry)
Bush=Royal house of Saud

Virtually every major player in the cabal comes from oil. There is no incentive from this administration to reign in oil companies. Alas, big oil has yet to receive the full payment due for getting BushCo elected. We've only just begun to pay.

Also, we complain about pump prices now. Just wait. When every product on the shelf....cleaning chemicals, soap, toys, food jumps in price. Plastics are oil based. Chemicals are petro based.

This is going to get ugly quick.

[global1]

16. Because We Have An Oil Administration In The White House....

and now we have the likes of Frist and Hastert sitting there innocently wondering why? Come on folks. George W Bush wasn't born yesterday.

[truthisfreedom]

17. it's called profit-taking, people. face it. it's all about capitalism.

gouging, on the other hand, is totally illegal. in every state of the union.

so shut them all down!

[TX-RAT]

27. so shut them all down!

Not a problem, just show us who's gouging, how there gouging,and where.

[muriel_volestrangler]

19. Because America hasn't invaded enough countries

to force them to produce more. How else would you expect the USA to be able to control the world price of oil, if not by force? If your concern is whether Americans suffer at the pump, you are presumably wanting to have command of the world oil market, despite the USA producing only about 10% of the world's oil.

Or, if your concern is the size of profits of American oil companies, you could ask them to stop producing oil in other countries. Presumably they would sell their operations abroad to other companies, who would then make the profits. I can't see that this would make gas any cheaper.

[BiggJawn]

20. How? Uh, fill up your car recently, Lynne?

Look for the full page ads today from the fat bastards as they explain that tearing our life savings away from us and putting it in their Channel Island banks is GOOD for Murka....

[all.of.me]

23. i know. doesn't that make you sick?!?!?

i was REALLY pissed when i read of exxon/mobil's record profits, while i struggle to get by with gas prices the way they are.

does no one see this?! is there no one that can help us while this blatant shit goes on? isn't it illegal? it just makes no sense to me that someone is making tons of money off us who live on the edge. (i have all the answers to those questions, they just don't fit into my reality.)

[liberalconscious]

29. sucks to be an SUV

On the plus side all the people who bought hummers are toatallly getting screwed at the pumps.

[TX-RAT]

30. If they can afford it , how are they screwed?

[PA Democrat]

31. They also severely underfund their employees' pension fund

NEW YORK - Altria Group is on fire. The company responsible for Marlboro cigarettes and Oscar Meyer wieners has returned 37% to shareholders over the past year.

But if investors bothered to read the company's financial statements, they might be less sanguine: Altria (nyse: MO - news - people ) is $2 billion in the hole on its pension obligations--quadruple the deficit from three years ago.

And it's not the only one. The S&P 500 rose over 10% last year, and there were boasts aplenty of fat payments to retiree funds. But out of 365 index members with defined benefit plans, 311 left the plans underfunded at year's end, writes Jack T. Ciesielski in the latest issue of his Analyst's Accounting Observer. His study of 10K footnotes shows that even the 20 biggest contributors to underfunded plans last year face a daunting task: They will need another seven years at current contribution levels to climb out of the red.

Some of the biggest underfunded companies: Exxon Mobil (nyse: XOM - news - people ), which is $12 billion in arrears and 24 years away from payback; General Motors (nyse: GM - news - people ), which is $8 billion in the hole; and IBM (nyse: IBM - news - people ), which is facing $7 billion in underfunded pensions. The latter two giants need another eight and four years, respectively, to meet their obligations, which themselves are moving, and ballooning, targets.

http://www.forbes.com/personalfinance/2005/07/07/pensions-ibm-hp-cz_bc_0707pensions.html

[MadHound]

32. Price gouging, creating articifially tight markets.

First off, there is open price gouging going on. The gas that you bought today was actually bought and paid for at prices from a month ago. Yet time and again we see that the day after the price goes up on a barrel of oil, the price on a gallon of gas also rises. Thus they are making even greater profit off of cheaper oil.

Secondly, oil companies are creating artificially tight markets. They are shipping oil, gas, natural gas, propane and heating oil overseas. Thus they make money from the petroleum products that they export, and create a tight market here in order to justify their higher prices.

Thus the record profits.

However they may be creating their own demise in the long run. People simply can't afford such high energy bills anymore, so they are cutting back and conserving in any way they can. Many people that I know(myself included) are looking to kick their own personal oil addiction by using wood stoves, installing solar panels and wind turbines, and through the use of biodiesel. If this continues to catch on across the country, this will spell the downfall of big oil. But it might take awhile to do so, and sadly in the meantime, those least able to afford it, the poor and those on fixed incomes, will have some very rough times ahead.

[Ilsa]

40. Bigger spread in the markups?

Banks always made more money, initially anyway, when interest rates were higher because the spread between prime and cost of funds was bigger whereas administrative costs were fixed. Banks paid for that eventually though as fewer customers could afford the higher rates and they were bankrupted by them. The same will happen to oil companies eventually, I think, if they don't look for alternative sources as people switch out of fossil fuels.