I want someone to explain how you go from a nice 10% profit at $60 a bbl last year to only a 10% profit when oil is over $100 a bbl less than a year later? I KNOW the refining costs didn't go up 70% in less than a year. Someone out there is making a LOT OF MONEY.
BTW, Gulf Coast jet fuel closed at $156.93 today (up over $4 a bbl today). I guess China's needs for jet fuel must be going gangbusters. If this continues at this rate, we'll be out of oil by Christmas, possibly Thanksgiving...................
I would like to know that too. Keep hearing that oil companies only make 10% profit. I guess oil industries assume if they say the samething over and over, it will brainwash all people into believing it.
I would like to know that too. Keep hearing that oil companies only make 10% profit. I guess oil industries assume if they say the samething over and over, it will brainwash all people into believing it.
Its not a guess its a fact. The oil companies spent over 2.2 trillion dollars on taxes between 1977-2003, which did not include royalties and real estate taxes. In fact they were paying about 3 times more in taxes than what they made in profit. Lets all attack them some more and destroy the free market, capitalist country we live in by showing all companies that if they make a profit by god they are going to pay. People wonder why companies bail out and head to places like China to produce their products. Oil is a COMMODITY people, investors and speculators who head pension funds and hedge funds are just as much to blame for high oil prices as anyone. It is a fact that there are many hedge fund managers making millions of dollars a year buying and selling futures and oil contracts, nobody attacking them is there? All we can do is blame big oil because thats what we see on tv from politicians. Sorry but there are so many more factors to this problem than big oil.
ok I dug up this article for you all to read from 2005 that shows profit margins of other industries. As I stated 10% is about what the profit margin is for big oil, but looking at other industries like pharmaceuticals, oil is not as profitable as one may think. Factor in costs of exploration and those profits are needed to keep drilling. In addition, a windfalls tax enacted by Jimmy Carter in 1980 actually decreased oil production. You do the research and make up your own mind. The article is posted below
It is far more fashionable these days to condemn oil industry profits than to consider the possibility that there might be something good about them. This is especially so when, weeks after Hurricane Katrina devastated the Gulf Coast, gasoline prices remain high and approaching cold weather triggers nightmares in the Northeast about budget-busting heating oil bills.
Reports that the profits of the major oil companies surged during the third quarter seemingly added insult to the injuries of drivers still reeling from sticker shock at the pump. Proving once again that politics makes strange bedfellows, Senate Majority Leader Bill Frist, R-Tenn., has joined a growing number of colleagues and commentators from the left and the right in denouncing the oil industry’s supposed price-gouging and profiteering in Katrina’s wake.
Under the pretense of protecting consumers from greedy Big Oil, some of the industry’s congressional critics have raised the possibility of reinstating a tax on “windfall” profits. But the attack dogs might do well to consider the consequences of such a punitive measure. A tax on profits would do more harm than good—a lesson we learned a quarter-century ago.
In 1980, President Carter signed into law the Crude Oil Windfall Profit Tax Act, which established excise taxes as high as 70 percent on the difference between the market-determined price of oil and a (lower) price set by law. The tax was dropped in 1987, but according to the Congressional Research Service, almost $80 billion was drained from the industry’s income statements while it was in effect.
Money that could have been invested in new oil and gas production and to expand refining capacity was instead diverted to Washington. It should come as no surprise that oil production fell. In fact, 1.6 billion fewer barrels of crude oil were produced in the United States from 1980 to 1987 than would have been produced otherwise. American dependence on foreign oil rose apace.
However tempting it may be for populist politicians to meddle in energy markets, almost anything Congress does will only make a bad situation worse. Oil and gas production is a risky business, as Katrina and Rita demonstrated so vividly.
Despite the industry’s above-average risk exposure, Big Oil is not extraordinarily profitable. According to Business Week and Oil Daily, average industry earnings were 7.7 cents per dollar of sales in the second quarter of 2005, also a time of relatively high gas prices. During that same quarter, by comparison, banks earned 19.6 cents; pharmaceuticals 18.6; software and related services 17; semiconductors 14.6; household and personal products 11.3; insurance 10.7; telecommunications 9.6; food, beverage and tobacco 9.4; and real estate 8.9. The corresponding figure for U.S. industry as a whole was 7.9 cents per dollar of sales.
Oil company revenues may be running at record levels, but so is the cost of the industry’s most important input, crude oil, selling on global commodity markets nowadays for about $60 a barrel. Only a few years ago, during Asia’s economic crisis, it was going for $9.40 a barrel.
The good news is that markets are working. They—not the oil companies—determine the prices of crude oil, gasoline and heating oil. When world supplies are stretched tight, as they have been over the past five years, prices predictably rise and become more volatile. Supply disruptions explain why prices rose dramatically after Katrina wreaked havoc on the refineries and oil production facilities in the Gulf.
Because of the recent price spike, gasoline use is down. Consumer interest in hybrid vehicles and alternative fuels is at an all-time high. But even at today’s prices, the production of alternative fuels remains at a significant cost disadvantage relative to fossil fuels. For the foreseeable future, then, America’s energy security will continue to depend on a reliable supply of crude oil and the capacity to refine it.
The National Petroleum Council estimates that, to meet expected demand, producers will have to invest almost $1.2 trillion through 2025 to fund oil and gas exploration and production in North America. Raising capital of that magnitude requires investor confidence in the industry’s long-term fiscal stability. There has to be an incentive for oil and gas development. Profits provide that incentive. Take away industry profits, and drilling will stop.
Congress should consider measures that will increase oil supply, not reduce it. Vast regions of the United States remain off-limits to oil and gas production. Owing to overly restrictive government regulations, the construction of refineries and liquefied natural gas (LNG) terminals has become extremely difficult. The United States has less refining capacity now than in the 1970s. Action is needed in Congress to open up new areas to energy development, both onshore and off, and to provide an environment conducive to expanding refinery capacity and adding more LNG facilities.
The worst thing that could be done is to revive the windfall profits tax from the 1980s. Such an ill-conceived policy would short-circuit the market forces that must operate for the oil industry—and the national economy—to recover from Mother Nature’s wrath.
Its not a guess its a fact. The oil companies spent over 2.2 trillion dollars on taxes between 1977-2003, which did not include royalties and real estate taxes. In fact they were paying about 3 times more in taxes than what they made in profit. Lets all attack them some more and destroy the free market, capitalist country we live in by showing all companies that if they make a profit by god they are going to pay. People wonder why companies bail out and head to places like China to produce their products. Oil is a COMMODITY people, investors and speculators who head pension funds and hedge funds are just as much to blame for high oil prices as anyone. It is a fact that there are many hedge fund managers making millions of dollars a year buying and selling futures and oil contracts, nobody attacking them is there? All we can do is blame big oil because thats what we see on tv from politicians. Sorry but there are so many more factors to this problem than big oil.
You sound like a spokesperson for the OPEC. Fact is if your gross profit goes up by 400%, even if you make 10% profit, your net profit also goes up by the same factor. That's simple math. Name me a commodity that has rising prices like oil. The world has become too dependent on oil and we are being held hostage by this oil addiction. Commodity traders and the weakening dollar has played a role on the skyrocketing oil price but the reality is the oil industry has the oligopoly control over the situation. No one is saying here that the oil companies are the only culprit, but the responsibility falls squarely on their shoulders, along with corrupt politicians.
good point, not a spokesman for OPEC, but I do believe we need to encourage business to thrive. If your company made 336 billion and you kept 10% of that as profit while the rest went to Washington you wouldnt be too happy about it thats all I'm saying. Our industry among others are overtaxed. How much are we going to tax those who make profits until they say no more? Its not right and we all know it. The oil companies are more than paying their fair share. The markets determine a good portion of oil prices not exxon or bp.
I would like to know that too. Keep hearing that oil companies only make 10% profit. I guess oil industries assume if they say the samething over and over, it will brainwash all people into believing it.
Kind of like ABC/CBS/NBC/CNN when they keep saying "record profits" or "windfall profits"...drink up, there's more koolaid where that came from.
Canadian Tar Sands? It won't provide the oil that it is capable of, unless we switch to Alternative Energy. And, if we switch to Alternative Energy, we won't need the Tar Sands.
What am I talking about?
Currently, to change the Tar Sands into oil, we burn natural gas to do it. LOTS of natural gas. In fact, to convert all the Tar Sands to oil, would take ALL the natural gas in North America.
So, we provide a great new source of oil, but the price of natural gas will go through the roof, negating the savings we get from cheaper oil.
So, for the Tar Sands to be used, we need an Alternative Energy source, like wind/solar power to convert the sands.
We need to start an "Apollo" type program, to get Renewable Energy off the ground. Let's stop subsidizing oil, and subsidize Renewable Energy instead. It is clean, and it won't run out.
cliff
YIP
This is correct, thank you atpcliff. It is interesting to note that whenever I see a big oil CEO try to refute peak oil, they always talk about new discoveries, particularly the Tar Sands in Alberta. What they don't mention is the cost that you've mentioned involved in the extraction/production of this type of oil. Uses massive amounts of natural gas and potable water just to produce a very low quality crude.
Remember, each year it is harder and harder for oil companies to find and drill new fields. The "easy oil" is gone, what's left is in smaller fields (less yield) that require far more drilling and infrastructure to yield the same amount that a larger field would have in the past. Offshore drilling is extremely expensive.
What's left is increasing difficult to retrieve, and demand keeps growing. These two basic facts are the primary reasons that the cost of oil can continue to go up while the profit margins at oil companies remain essentially the same.
Not defending big oil . . . they're just doing their business and turning a reasonable profit. It's only going to get worse, and the US is at least a decade behind where they need to be in adjusting to a world where oil is no longer cheap and plentiful.
Remember, each year it is harder and harder for oil companies to find and drill new fields. The "easy oil" is gone, what's left is in smaller fields (less yield) that require far more drilling and infrastructure to yield the same amount that a larger field would have in the past. Offshore drilling is extremely expensive.
What's left is increasing difficult to retrieve, and demand keeps growing. These two basic facts are the primary reasons that the cost of oil can continue to go up while the profit margins at oil companies remain essentially the same.
Not defending big oil . . . they're just doing their business and turning a reasonable profit. It's only going to get worse, and the US is at least a decade behind where they need to be in adjusting to a world where oil is no longer cheap and plentiful.
Good point. Also if you read the article I posted above it talks about the 1.2 Trillion dollars that big oil will need to invest in new exploration. The assets needed to drill for oil are costly much like the airline business. Factor in the billions in taxes they pay and soon it doesnt look so profitable in harder times. These are publicly traded companies who are trying to make money for the shareholders. I would be willing to bet every one of us is a shareholder in some company and we expect our investments to pay. If ABC airline was making billions in profits (not ever likely) you can bet there would be politicians having those stupid hearings on Capitol Hill asking our CEO's why we were making so much money. God forbid if you make a profit in this country.
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