Oil Company Executives Defend Profits

[raVeneyes]

Oh, so it's when RITA hits. I thought you were trying to say that the oil companies just coincidentally HAPPENED to gouge prices at around the same time as the disaster.

It all makes so much sense now.

What?

 

[fossten]

Flap flap flap...

Who Has the Biggest Profits, Big Oil or Big Media?
Posted by Brian Boyd on November 10, 2005 - 11:16.

The media has repeatedly given air time to charges that the oil companies are taking advantage of consumers and earning unfair profits. Throughout the year reporters have alleged "oil companies...are making massive profits," "oil companies have watched their profits soar" and "record profits for the oil producers." But how do these oil profits compare to those of the media companies, themselves?

On November 9th, Congress held hearings and demanded that oil company executives, as ABC’s Jake Tapper said, "explain themselves as to why they’re experiencing record profits." Using Yahoo! Finance, I looked up the profit margin numbers for five of those oil companies and for five of the major media companies.

Looking at both industries, three of the top five companies with the highest profit margins were media companies. Comparing the average profit margin for the top five in each oil and media was complicated by the fact that Viacom, which owns CBS, actually lost money for the period covered by Yahoo’s numbers. The average of the four profitable media companies was a profit margin of 8.83%. Throwing Viacom’s zero into the average pulls it down to 7.06%. While the top five oil companies averaged a profit margin of 8.13%. With an average profit margin of 8.83% maybe ABC, NBC, CNN and Fox could be a little less greedy and reduce the number of commercials they sell.

Media
Walt Disney - 8/78%
General Electric - 11.4%
Viacom - Lost money
Time Warner - 6.22%
News Corp. - 8.92%

Avg w/ Viacom - 7.06%
Avg w/o Viacom - 8.83%

Oil

Exxon Mobil - 10.34%
BP - 6.26%
ConocoPhilips - 8.15%
Shell - 8.21%
Chevron - 7.69%

Average - 8.13%


http://newsbusters.org/node/2761

 

[raVeneyes]

Flap flap flap...

Who Has the Biggest Profits, Big Oil or Big Media?
Posted by Brian Boyd on November 10, 2005 - 11:16.

The media has repeatedly given air time to charges that the oil companies are taking advantage of consumers and earning unfair profits. Throughout the year reporters have alleged "oil companies...are making massive profits," "oil companies have watched their profits soar" and "record profits for the oil producers." But how do these oil profits compare to those of the media companies, themselves?

On November 9th, Congress held hearings and demanded that oil company executives, as ABC’s Jake Tapper said, "explain themselves as to why they’re experiencing record profits." Using Yahoo! Finance, I looked up the profit margin numbers for five of those oil companies and for five of the major media companies.

Looking at both industries, three of the top five companies with the highest profit margins were media companies. Comparing the average profit margin for the top five in each oil and media was complicated by the fact that Viacom, which owns CBS, actually lost money for the period covered by Yahoo’s numbers. The average of the four profitable media companies was a profit margin of 8.83%. Throwing Viacom’s zero into the average pulls it down to 7.06%. While the top five oil companies averaged a profit margin of 8.13%. With an average profit margin of 8.83% maybe ABC, NBC, CNN and Fox could be a little less greedy and reduce the number of commercials they sell.

Media
Walt Disney - 8/78%
General Electric - 11.4%
Viacom - Lost money
Time Warner - 6.22%
News Corp. - 8.92%

Avg w/ Viacom - 7.06%
Avg w/o Viacom - 8.83%

Oil

Exxon Mobil - 10.34%
BP - 6.26%
ConocoPhilips - 8.15%
Shell - 8.21%
Chevron - 7.69%

Average - 8.13%


http://newsbusters.org/node/2761

Umm...what?

To be more clear...what does this have to do with anything? The recent profit that oil companies have been making isn't about profit margin it's about the fact that they are making more profit this year at this point in the year than last year.

In fact they've already made some number of billions of dollars more than they did all of last year.

 

[fossten]

You people JUST DON'T GET IT.

That's right, Democrats...get those big, bad oil companies. Of course, you won't see a dime of the money. It'll get absorbed into the Federal budget and the costs will be passed right back to the consumers like always.

It'll be nothing more than another stealth tax increase for every American who drives a car, just like the futility of raising the minimum wage.

 

[Calabrio]

I wish we could blame just "liberals" and Democrats for failing to understand market forces regarding this argument. Unfortunately, too many knee-jerk Republicans are trying to make political hay exploiting it as well.

What's important to note is that fuel prices are going down.
Supply has increased. (refineries and platforms are back online)
Demand has fallen. (higher prices encouraged more Americans to change driving habits and in some cases, even buy more efficient vehicles.)
Prices are dropping.

Economics isn't nearly as complicated as people want to think. Supply and demand is actually very simple and logical.

 

[fossten]

Economics isn't nearly as complicated as people want to think. Supply and demand is actually very simple and logical.

You'd think, but with these guys, I don't know...

 

[barry2952]

I'm all about profits but this is rediculous. Yes, the oil companies are entitled to a big profit. They take the big risk.

But, just because you can make a bigger profit offers no justification for doing it. I'm in a business that reaches light fixtures that my customers have no equipment or personnel necessary for repairs. I'm just like the oil company. Who are you going to get to do the work but someone in my business.

I have many customers that I've had for 30 years and they no longer get competitive bids. I know this for a fact. Should I charge 50% more than the job is worth, just because I can?

 

[Calabrio]

I'm all about profits but this is rediculous. Yes, the oil companies are entitled to a big profit. They take the big risk.

But, just because you can make a bigger profit offers no justification for doing it. I'm in a business that reaches light fixtures that my customers have no equipment or personnel necessary for repairs. I'm just like the oil company. Who are you going to get to do the work but someone in my business.

If your company had to invest hundreds of billions of dollars inorder to get a 2% return in a good quarter, they'd probably shut the doors.

I have many customers that I've had for 30 years and they no longer get competitive bids. I know this for a fact. Should I charge 50% more than the job is worth, just because I can?

You could try, but you'd quickly find that those customers would start getting quotes again.

You're in a service industry, so it's a little tough to make a perfect analogy.
But let's say that you also install and sell new light fixtures too.

You bought 100 units on Monday for $100 each. You typically mark them up 10%, selling them for $110 each.
On Wednesday, the light fixture manufacturer is hit with a tornado. Suddenly the price of new light fixtures shoots up to $175 each.

So, do you sell the light fixtures for $110 each still, since you bought a few at the earlier price, or do you start selling them for $200 each?

If you sell them for a $110, how will you afford to resupply?
If you charge between $175-200, are you gouging?

 

[barry2952]

That's the major difference. Why should I make an enromous profit on what I have in stock when I can simply raise prices based on a new basis? I will still have a higher profit based on the same profit margin on a higher basis. That's the fair way to make more money.

In speaking to an oil and gas driller last weekend he stated that the oil companies do operate on profit margins. he said that the refiners make 5% and the distribution network makes 8%. Seem low but once I considered how many billions of gallons are sold it made sense why their profits are so big.

 

[Calabrio]

That's the major difference. Why should I make an enromous profit on what I have in stock when I can simply raise prices based on a new basis? I will still have a higher profit based on the same profit margin on a higher basis. That's the fair way to make more money.

Let's move the analogy one step further.

You sell your existing supply of light fixtures at the very fair price of $110. You pass your foresite on to the customer. You exhaust your inventory and do great business, selling all 100 since you have the lowest prices.

Now you buy another 100 units, but now you pay $175 each for them. $17,500 out the door for the order.

A few days later, they restarted production and prices drop. $100 again.

Now how much do you sell the lights for?

 

[barry2952]

I see your point as light fixture prices do not fluctuate wildly like the oil market. But while I see your point I still think it unfair to their consumer base to simply give the industry a bonus because things got tight for a little while.

As your analogy goes, 100 light fixtures would last me for a while and the price may rise and fall by the time I deplete my stock. That is my point.

 

[fossten]

During hurricane Katrina, three Texas and three Louisiana refineries were shut down. That's a total of 6. That dramatically impacted supply, which drove the price of oil up, which in turn drove up the price of gas, since gas was also in short supply. These 'record profits' are only a short-term thing. In fact, the costs to repair and restart the refineries will eat into those profits in the next quarter.

Don't forget that oil is traded mainly in three different ways: Contract arrangements, spot transactions, and futures. During the hurricane, the futures traders were driving the price even higher with their speculation, while the spot traders were paying based on need and supply.

 

[MAllen82]

Your whole statement was excellent.. :Beer

mespock, you DO love me, don't you???

You are a rare person, one who can spot such genius. )D )D )D )D

 

[Calabrio]

I see your point as light fixture prices do not fluctuate wildly like the oil market. But while I see your point I still think it unfair to their consumer base to simply give the industry a bonus because things got tight for a little while.

As your analogy goes, 100 light fixtures would last me for a while and the price may rise and fall by the time I deplete my stock. That is my point.

O.K. let's say you deplete your stock and the prices haven't fallen yet.
Now, you've sold all your inventory and you have to replace them with material that costs twice as much. Are you sure you're going to be able to afford that without experience serious financial challenges.

I doubt it. Most companies can't.

That's the problem. You sell inventory at market price, or replacement price, not what you paid for it. At least if you're dealing with volume, you have to do this.

 

[scott9050]

This was a story from a while back:

(10/10/05 - RALEIGH) - A fuel distributor padlocked the pumps at a Durham gas station and then emptied the store's tanks after the operator refused to increase his prices, Attorney General Roy Cooper charged in a price-fixing lawsuit filed Monday.
"I won't stand for a gas supplier leaning on a local station to hike prices," Cooper said. "Consumers and businesses are already paying more than ever before for gas. They don't need gas prices hiked even more by somebody trying to make a fast buck."

Cooper's suit charges that representatives of Mebane-based McLeod Oil Co. pressured Steven M. Grover, the owner of the A&P Mini Mart in Durham, to immediately raise gas prices Sept. 28 by 40 cents a gallon. The suit claims operators of other stations supplied by McLeod were upset with Grover's low prices.

In an affidavit, Grover said McLeod told him his prices needed to be "in the ballpark" of those charged by other stations. Grover declined and learned later that night that McLeod had padlocked the store's pumps, which McLeod owned.

McLeod representatives returned the following week and asked Grover's wife to "get with the program and raise your prices," according to Grover's affidavit. She also declined, and McLeod emptied all of its gas from the store's tanks, which McLeod also owns.

A woman who answered the phone at McLeod referred questions about the lawsuit to the company's lawyer and spokesman, David Permar. Permar is unavailable for comment until Oct. 17, according to an assistant at his office.

Cooper's office said the company was expected to resume supplying gas to A&P on Monday.

The lawsuit is the first of its kind in North Carolina since Hurricanes Katrina and Rita disrupted oil pumping and distribution from the Gulf of Mexico, helping to push the cost of gasoline above $3 a gallon. In the weeks since, Cooper's office has received hundreds of complaints about gas prices in the state, which on Monday averaged nearly $3.05 for a gallon of regular unleaded gasoline.

The lawsuit filed in Wake Superior Court accuses McLeod, its affiliate Home Oil Inc. and their manager, Wesley C. Mehring, of conspiring to fix prices. Cooper is asking the court to block the companies' illegal practices, to fine each party $5,000 and to force them to relinquish any illegal profits.

 

[MarkOfDeath]

I heard that there was no gas shortage in the 70s, I dont know, but a while back my teacher said that he saw gas trucks at 1 in the mourning filling up the tanks at closed (due to the fact that they were small ma and pa stations and couldnt compete) gas stations because the bigger company had no were to put it. I dont know thats just what he said

 

[pepperman]

I heard that there was no gas shortage in the 70s, I dont know, but a while back my teacher said that he saw gas trucks at 1 in the mourning filling up the tanks at closed (due to the fact that they were small ma and pa stations and couldnt compete) gas stations. I dont know thats just what he said

There was a gas shortage in the 70's, the lines were long and you could only get $5.00 worth of gas at a time. Gas prices were fairly low at that time also, I grew up during the 70's.

 

[MarkOfDeath]

who knows, that was the easiest class, it was Chem Advance placement, I slept in class and got all F because a suck at math, but he passed me because I was a republican and I talked to him about car plus I fixed his truck for him.

 

[pepperman]

who knows, that was the easiest class, it was Chem Advance placement, I slept in class and got all F because a suck at math, but he passed me because I was a republican and I talked to him about car plus I fixed his truck for him.

Thats cool, i hated math class, i barely passed that class!!!