Record oil profits

[Trvlr500]

Originally Posted By: grampi
Trvlr500

Saying oil company profits are the same today as they were 5 years ago is ridiculous.


No it isn't. It's the truth. The oil companies make roughly 9% profit on a gallon of gas. They are selling more of it which makes it LOOK like their profits are higher but in reality the 9 or 10 percent is the same as it has been for years.

There is a difference between demand allowing a compoany to sell MORE product at the same profit LEVEL and making more PROFIT per gallon of gas sold.

The profit is the same as it has been for years. If you want to blame someone for the gas prices blame your government. They are the ones at fault just as they are for just about every other problem we have right now.

THEY take the bribes from the lobbyists and THEY pass the legislation. Just another case in point is tobacco. They say there are over 4000 chemicals in tobacco. Another pack of lies.

Nothing goes into anything we consume unless the government knows about it first. Blame the FDA, the Department of Agriculture and the USDA. It's NOT the tobacco companies putting that stuff in there. It's your government allowing it because they are bought and paid for.

I think you've been watching the talking heads on "bubblevision" for too long, Grampi. There are hundreds of other news sources out there that don't have an agenda and they aren't hard to find.

 

[Tornado Red]

Originally Posted By: Jimmy9190
I know there are some legit reasons for gas prices and oil prices to increase. Nothing stays cheap forever but that doesn't mean prices can't remain reasonable. However I think there are too many greedy people and corrupt practices in the oil industry. Why has it skyrocketed like it has and no one does anything about it? The speculation and price manipulation inquiry that was recently announced will not find anything; it will get swept under the rug and ordinary people will never hear anything else about it.


Do you want some "legit" reasons? Or would you rather have remedies? Let me address remedies:

1) Open up drilling everywhere there is oil.
2) When a company buys a lease to drill on federal land or on the continental shelf, then do not put up bureaucratic barriers to keep them from drilling.
3) We need more pipelines to get oil and fuels from where they're produced to where they can be used. The government should encourage the building of these pipelines, not prevent or delay them.

4) All levels of government, from school districts to the federal government, need to get off the addiction to debt. When foreign countries earn dollars, let them spend those dollars on US manufactured goods instead of Treasury debt. Let us stop borrowing trillions from the rest of the world, to prop up this house of cards for just one or two more years.

5) Whether we like it or not, interest rates will go up. Instead of waiting for foreign creditors to force this move, our Federal Reserve should preempt the foreigners. This would strengthen the dollar and discourage the buying of gold, silver, and other commodities.

If the government keeps spending and borrowing, and the Fed keeps printing dollars, then there is no limit to how high oil prices can climb. You are [censored] because of $113 crude oil and $4.00 gasoline -- just imagine $1,000/barrel and $40/gallon gasoline. Or crude at $10 million or $10 billion or $10 quadrillion per barrel, because that kind of hyperinflation has happened before, in Weimar Germany and recently in Zimbabwe.

Just imagine how valuable your 401-K account will be worth, if fuel and everything else rises in price by 10 or 100 or 10 million times.

But bringing down fuel prices requires a different kind of fiscal policy, and a different monetary policy, and a different energy policy. That means electing a different government than the one we have.

 

[Tornado Red]

Originally Posted By: Trvlr500
The oil companies make roughly 9% profit on a gallon of gas. They are selling more of it which makes it LOOK like their profits are higher but in reality the 9 or 10 percent is the same as it has been for years.


When Valero, a refining company, reported its earnings for the 1st quarter the other day, I was surprised that it only earned about 3.4 cents per gallon. I thought 6-8 cents per gallon was more typical.

9% profit, with wholesale fuel prices around $3/gallon, would be 27 cents per gallon. I think 3% is more reasonable for refining companies.

As for companies that produce and sell crude oil, their profits rise and fall with the price of crude. And there are wide differences in the costs of production. So there is no "typical" percentage of profit.

 

[Jimmy9190]

I agree with you 100% TR. I have learned a lot about the oil market from your posts here. I also think there are too many people in each other's pockets in government and in the oil industry and the world environment in general.

I do hope that in time those in charge will fix things and bring the USA back to what it once was. I can't say any more than that because it would be too political.

I just hope and pray things get better for everyone very soon, not just here in the USA but the whole planet.

 

[demarpaint]

Originally Posted By: Tornado Red
Originally Posted By: demarpaint
Like I've said before let the oil futures traders hold the contracts they buy for even a week, to stop the day trading, or pay a penalty for an early sell. Lets see where oil prices head then. Speculators aren't totally to blame for higher oil prices just a part of it. The penalty will tell just how much of a part of the higher prices they are responsible for. The problem is Wall Street won't ever let that happen so we'll never know.


Changing the rules for futures trading in the US would have little or no effect, because day trading would still be possible on exchanges everywhere else in the world.

Or should I say, it would have no positive effect-- destroying the domestic exchanges would be a bad thing.




Fear not, the powers at the top of the food chain won't allow it. It does work well for the mutual funds though, the day traders stay clear.

 

[Tornado Red]

Originally Posted By: demarpaint
It does work well for the mutual funds though, the day traders stay clear.


An exchange is a clearinghouse; it is paid according to the volume of trading. Every trade on a futures exchange involves two transactions -- one purchase and one sale -- and the exchange earns two commissions. Then when the trade is unwound, two more transactions and two more commissions. So exchanges love frequent trading.

A mutual fund is not a clearinghouse. It has to pay a clearinghouse, usually a stock exchange, whenever it buys or sells equities.

 

[demarpaint]

Thanks, I know how it works, and why my idea can never be tested. The last thing these traders want is to see restrictions. I'd be willing to bet if the oil futures traders were required to hold contracts for a minimum required time, they'd look to speculate elsewhere and oil prices would come down. But we'll never know.

 

[Tornado Red]

Originally Posted By: demarpaint
I'd be willing to bet if the oil futures traders were required to hold contracts for a minimum required time, they'd look to speculate elsewhere and oil prices would come down. But we'll never know.


You are partly right -- they would trade elsewhere. But that would not cause oil prices to decline. In fact, if the principle oil trading exchanges are located outside the US, it might accelerate the trend toward pricing oil in some other currency besides dollars. If or when this happens, Americans will have to pay more for oil.

 

[demarpaint]

So all these articles about Speculators having a hand in oil prices rising is totally false? Government looking into it is all a myth because speculators have no hand in oil prices rising, not even a small percentage. It seems there are a lot of people that believe the Speculators are also contributing to these prices. Let me make it clear, they are not 100% to blame, but there are some pretty bright people who feel they are part of the problem. I tend to respectfully disagree with you, in part. As far as them trading elsewhere, those smart minds realize that too, no one said it would be an easy fix, and odds are nothing can or will be done. The stock market, commodities market, banking and real estate markets are all honest and on the up and up? Insider trading, pump and dump, false rumors, and scams, etc., and speculation based on them are non existent in any of the markets I guess.

 

[grampi]

Trvlr500

Oil companies were making 9% profit when gas was $1.99. How can their profit margin possibly be the same now when the price of gas has doubled? You make no sense.

 

[grampi]

Originally Posted By: demarpaint
So all these articles about Speculators having a hand in oil prices rising is totally false?


While many in here claim rising prices are not at all due to speculation and blame it all on the devaluation of the dollar, I'm not in that camp. I think speculation has every bit as much, if not more to do with pricing than does the value of the dollar...I believe if no speculation at all was involved with the pricing of oil, price would go down...

 

[Tornado Red]

Originally Posted By: demarpaint
So all these articles about Speculators having a hand in oil prices rising is totally false? Government looking into it is all a myth because speculators have no hand in oil prices rising, not even a small percentage. It seems there are a lot of people that believe the Speculators are also contributing to these prices.


Oil prices are going up, but so are gold, silver, base metals, grain, oilseeds, sugar, coffee, etc. A great many people around the world -- including rating agencies like Standard & Poors -- have lost confidence in the US government, and by extension they have lost confidence in the US dollar. So they are putting their money into any other asset that they think will not lose value.

It is up to the US government to defend the dollar, but Fed chairman Bernanke's press conference yesterday gave the impression that the Fed will continue its current policies. As for the president's statement that he will ask the Justice Department to investigate allegations of market manipulation... it's good to have watchdogs ensure that market participants are following the rules. But the president seems totally opposed to doing anything that would actually increase energy supplies, that would actually lower energy prices, or that would actually lift global confidence in the fiscal policy of the US government.

So he blames the oil traders. I see that as a sign of desperation.

 

[Tornado Red]

Originally Posted By: grampi
I think speculation has every bit as much, if not more to do with pricing than does the value of the dollar...I believe if no speculation at all was involved with the pricing of oil, price would go down...


Consider the word "anticipation" instead of "speculation".

What do you anticipate will happen in the future?

 

[demarpaint]

I "anticipate" oil prices to go a bit higher and continue to drive everything up along with it, further crippling the economy. The news in the Mid East is still worth a few more $$ on a barrel of oil. Then when oil pulls back high prices will remain, and oil will be blamed.

As far as the President goes, no point in discussing him, the thread will get locked.

 

[Jimmy9190]

I read this today, almost $11 Billion in profits for Exxon in the first quarter of 2011:

http://finance.yahoo.com/news/Exxon-earns-nearly-11B-in-1Q-apf-479576777.html?x=0

In the same article it is reported Shell made a 1Q 2011 profit of $8.78 Billion.

I find it interesting and a little funny that Exxon is already blogging and trying to defend their profits.

 

[Tornado Red]

Originally Posted By: Jimmy9190
I read this today, almost $11 Billion in profits for Exxon in the first quarter of 2011:

http://finance.yahoo.com/news/Exxon-earns-nearly-11B-in-1Q-apf-479576777.html?x=0

I find it interesting and a little funny that Exxon is already blogging and trying to defend their profits.


Highlights from the Exxon-Mobil Q1 results:

Earnings $10.65 billion
Upstream earnings (oil and gas production) $8.675 billion
Downstream earnings (refining, lubricants, etc) $1.062 billion
Chemical earnings $1.516 billion

Clearly the 1st quarter of 2010 was terrible for refining and other downstream operations for Exxon-Mobil (not sure about other refiners). Here's from last year's Q1 report:

Quote:
Downstream earnings were $37 million, down $1,096 million. Lower refining margins drove the majority of the decline, reducing earnings $1.1 billion. Petroleum product sales of 6,144 kbd were 290 kbd lower than last year's first quarter, mainly reflecting lower demand.
The U.S. Downstream recorded a loss of $60 million, down $412 million from the first quarter of 2009. Non-U.S. Downstream earnings of $97 million were $684 million lower.


and from this year:

Quote:
Petroleum product sales of 6,267 kbd were 72 kbd higher than last year's first quarter


Okay, 6267 kbd is not all refined products, but it is mostly refined products. That is 263.2 million gallons per day, or 23.7 billion gallons for the 90 days in the 1st quarter.

So, $1.062 billion in earnings, divided by 23.7 billion gallons, equals... 4.48 cents per gallon.

Again, this is nowhere close to an exact number; it is very rough, but it cannot be wrong by more than a penny a gallon.

To summarize: Exxon-Mobil is a very big company, one of the biggest in the world. It produced about 3% of the total crude oil production in the world, and it refined close to 7% of the world's gasoline and distillate fuels. Its profit margin was approximately 1.6-2.0% from refining.

 

[LTVibe]

Good post TR, but don't expect the mainstream media to ever report the WHOLE story like you do. Their goal is to vilify the oil industry and boost public support for higher taxes on corporate profits.

 

[Tornado Red]

Originally Posted By: Jimmy9190
In the same article it is reported Shell made a 1Q 2011 profit of $8.78 Billion.


I can't tell, from the Royal Dutch Shell quarterly report, what it earned per gallon from refining.

But, Valero is refining and retailing company with no oil production of its own. Last week it reported an operating income of $1.46/barrel from refining -- which, divided by 42 gallons per barrel, equals about 3.48 cents per gallon. So not quite as good as Exxon-Mobil. But then again, XOM operates globally and Valero is strictly domestic.

 

[Tornado Red]

Originally Posted By: LTVibe
Good post TR, but don't expect the mainstream media to ever report the WHOLE story like you do. Their goal is to vilify the oil industry and boost public support for higher taxes on corporate profits.


Taxes in billions of dollars
...........................1Q11........1Q10
Income taxes............$8,004......$5,493
Sales-based taxes.......$7,916......$6,815
All other taxes..........$10,316.....$9,349
Total taxes..............$26,236.....$21,657

Exxon-Mobil apparently pays a lot of taxes already -- over $8 billion in income taxes while the shareholders get to keep less than $11 billion. (The shareholders include us if we have mutual funds or retirement accounts.)

 

[LTVibe]

Fueling Fact

Fable: Oil and gas companies aren't paying their fair share of taxes.

U.S. oil and natural gas companies pay considerably more of their profits in taxes than other industries such as technology and financial services. In fact, the industry pays an effective corporate income tax rate that is 70 percent higher than roughly three in 10 S&P industrial companies.

As for those billion-dollar subsidies oil and gas companies supposedly enjoy, they don't exist. The industry gets tax deductions, as any business does, but they are far less generous than those enjoyed by others in the energy sector. While oil and gas receive slightly more than 1 percent of government energy R&D funding, renewables receive 22 times as much funding.

Fable: Oil and gas industry profits are “excessive.”

Many lawmakers have long pushed to increase taxes on oil and gas companies. After all, these companies are, in Obama's words, “doing just fine.” Why not spread the wealth?

The trouble is, oil and gas companies aren't as flush as lawmakers make it seem. Like other commodity businesses, oil and gas profits are cyclical, making them prone to booms and busts. According to PricewaterhouseCoopers , in all but four years from 1987 through 2006, oil and gas companies actually earned a lower return on their capital investment than other industries.

This is a key measure of comparative economic performance.