Oil company profits

I am extremely disturbed by the obscene profits the oil companies are reaping. With the economy so heavily based on energy, there should be more outrage at the gouging being practiced.

Since it seems that higher cost is the only factor that will encourage conservation, I would much rather pay a gasoline tax that would be earmarked for repairs and rebuilding of our ailing highway and bridge system. This would result in reduced costs to motorists through fewer accidents, insurance and automobile maintenance costs and provide much-needed jobs for our labor force.

We need to be more concerned about our legacy for future generations. We’ll leave them nothing if we consume oil as though there is no tomorrow.

Brian Steele
Olathe

There is much criticism of the oil companies for the price of gasoline and the large profits they are reporting.

No one seems to realize that oil companies have tens of billions of dollars invested in dry well exploration and in capital costs when oil is discovered and additional refining capacity has to be built.

I would guess oil companies’ income-to-capital investment is pretty much in line with other manufacturers.

Edward H. Barnes
Prairie Village

While we were concentrating on preventing terrorism coming out of the Middle East, up popped terrorism right here at home.

The oil companies are ruining our economy, and we can’t do anything about it.

Roberta Newth
Leawood

Comments

[devin]

Wow, Jack, I can't remember the last time I really considered one of your comments off-base. Really, I don't understand what's so obscene about oil companies making a profit of about 10% on their business. Now, there are several things I find fault with in the way oil companies do business, but I don't see their profit margins as one of them. If 10% profit margins are outrageous, then nearly every successful business ever is guilty of this egregious sin. It's awfully hard to maintain a successful business in the long-term if profit margins never exceed 10%. BTW, if you compare the profit margins of the major oil companies to the operating margins of some of the top solar companies (which is easy to do at any of the numerous online finance sites), you will find the most successful solar companies have far higher profit margins than the major oil companies. In addition to the social implications and long-term outlooks, this is yet another reason I invest in renewable energy companies and not oil companies.

Sorry, folks, but if you don't like gas prices (or for that matter, the consequences of sending so much money to hostile governments), it's time to stop pointing fingers at the big bad oil companies and take a look in the mirror.

[stillwaters]

Engineer: "Total taxes per gallon still exceed the Oil Companies' profits per gallon."

Total taxes remain the same (~40 cents) no matter the price of crude. At $3.60 a gallon, that's a little over 11%. Most of the price of a gallon of gas is from the price of crude. With the price well over $100/bbl, this represents well over $2.50 per gallon.

Taxes is hardly the problem with our current sky-rocketing energy prices. It comes down to the price of crude.

I was having trouble finding how much the oil companies were actually making per gallon of gas. Most of you like claiming about 0.08 cents per gallon. Maybe the retail store is making that, probably not even that much. But the oil companies that are producing the oil, refining the oil, and distributing the oil are making a hell of a lot more than that. If you have a good source showing the actual numbers, I'd like to see it. I found one article that showed that Exxon made profits of about 29% of a gallon of gas. That's well over what the state and federal governments are making in taxes.

Anyway, from what I can see, the problem right now is the price of crude. Who's responsible for this? I don't think it's the oil companies, and I know it isn't the government. I'm sure it's a complex global and economic situation, with supply and demand interactions throughout the world.

But to say that the government is taxing too much and the oil companies are just fine with their record billion dollar profits while the middle class is struggling daily is beyond reproach.

[Engineer]

Stillwaters
The profit is still a reasonable 10 or so percent. Total taxes per gallon still exceed the Oil Companies' profits per gallon. Just how much per gallon would the “subsidies" amount to on the total sold? And if the subsidies encourage domestic production thereby keeping the amount paid for that oil in our economy, aren't they a good thing?

[stillwaters]

If the oil companies are only making 8 cents per gallon, then why are they posting record profits that correspond quite well with record prices for crude?

The oil profits are directly related to the price of crude. The higher the price of crude oil, the more money the oil companies make.

"On May 1, Exxon Mobil announced first-quarter 2008 earnings of $10.9 billion—a figure that marks the second-largest U.S. quarterly profit ever"

And our government is still subsidizing them. Ridiculous!

[jack]

Ed is the bright one here? Boy are we in trouble. Apparently, no one has explained to Ed that profit is what is left over after all costs.

[Engineer]

To me the worrisome thing about the rwo letters other than Ed's is that they, like a number of other letters on other threads, indicate that our educational system is not teaching anything about economics in general or about capitalism in particular. Basically pricing in our economy is based on supply and demand. If you don't like the price take action to reduce your demand as devin did. The Oil Companies are making a profit of around 10%, quite in line with the average of US companies. The real gougers in the US economy are the credit card companies (banks) with their 20%+ interest rates.

[devin]

I pretty much agree that Ed has the only letter of the three that shows any intelligence, the other two seem completely ignorant. That said, NMMNG, where are you getting your information?? The FEDERAL gas tax rate is 18 cents/gallon. Look it up. The state rates vary, but very few states wind up with a total tax of 59 cents/gallon or more...our stoner friend in California pays the most taxes on gas at about 63 cents/gallon. Google "state gas tax list" and the second link has a current map of what every state pays. In Missouri and Kansas, the total taxes we pay on a gallon of gas are 36 c/g and 43.4 c/g, respectively.

You might say that's still too high, but look at what you're getting for your money. In Missouri, the ~$500 million collected from fuel taxes is turned into about $4 Billion in state road and highway construction. That's an 800% return on investment for motorists!! Try getting those kinds of dividends from your oil company stock :-) At the federal level, your gas tax comes a lot closer to paying for the cost of roads and bridges, but you're still getting a return on investment that's probably better than an oil company stock. So really, NMMNG, what on earth are you complaining about?? You're getting an 800% return on your money when you pay the state fuel tax. Where can you get a better ROI than that?

Of course, that 800% isn't truly from investing per se, it actually represents a subsidy that everybody pays from income and sales taxes to motorists. So when motorists yell at me on my bike to get off the road (or lay on there horn for a full 30 seconds instead of simply passing like some guy did last night while I just laughed), I can say that in all honesty, I pay for the roads nearly as much as you do. And my method of transportation doesn't tear them up nearly as bad or require nearly as much new construction. If you want cyclists off the road, then start advocating an 800% fuel tax increase so I'm not paying for the roads, too. I have a feeling that with the resulting $5-6/gallon gas, you might see alot more people on the bus and bikes :-)

[NoMoreMrNiceGuy]

I am extremely disturbed by ignorant Americans that somehow think the President sets gas prices. I do not understand why some of these same morons are not outraged by the price of video games which are raking in double digit profits and double digit increases in sales (I thought everyone was sooooooo broke)?

Who is getting rich at the gas pumps?

For starters, many average Americans who hold stock in the oil companies, either directly or indirectly through their 410k or mutual fund. But the fact is, the gross profit margin for a gallon of gas in America today, is what it has always been, on average, .08 cents per gallon, (2.5% at $3.00 per gallon). Though retail gas prices fluctuate with crude prices and supply vs. demand, the gross profit margin per gallon remains roughly the same at all times. (No evidence of price gouging here.)

However the federal government profits approximately .59 cents per gallon through gasoline taxes, 7 ½ times or 750% that of the oil producers themselves and 20% of the price at the pumps. Pay attention here, Washington liberals are attacking oil companies for their 2.5% gross profit margin, while Washington is profiting 20% per gallon. Democrats answer? Tax some more?

If oil companies cut their profit margins by 50%, it would drop the price of a gallon of gas by only .04 cents per gallon. If Washington law makers cut their take by 50%, gasoline would cost .30 cents per gallon less. If the federal government didn’t tax gasoline at all, the price per gallon at the pumps would be $2.40 per gallon instead of $3.00 per gallon and the oil companies would still be at a respectable 2.5% gross profit margin. Who is gouging whom?

Have oil companies sought to inflate gas prices for profit?

If they did, they would have to do it by increasing their per gallon profit margin. Holding their gross margin at 2.5% (.08 cents per gallon) will result in higher overall profits as consumption rises, and both consumption and prices rise during travel seasons. But it does not demonstrate any effort to “gouge” consumers at the pumps.

On the other hand, .59 cents per gallon or 20% of retail gasoline prices is certainly a demonstration of an effort to gouge consumers, but by way of taxation from the federal government. The consumer is in fact being gouged at the pumps and they have been for some years now, by our federal and state governments. Who is gouging whom?

Why have gas prices gone up so much?

They haven’t. Over the last 20 years, gasoline per gallon has increased roughly 60%, which equals an annual average increase of only 3%, which is less than the average rate of inflation.

During the same 20 year period however, the salary of every member of Congress has increased 250% or 12.5% per year. More than four times the average rate of inflation. Who is gouging whom? Who looks greedy now?

Are Americans specifically being gouged by OPEC?

Quite the opposite. The most expensive places in the world to buy gas are The Netherlands, Norway, Italy, Denmark and Belgium, all of which are now above $7.00 per gallon at the pumps. Of course, all of which are socialist governments with even heavier taxes per gallon than America.

The least expensive places in the world are Venezuela, Nigeria, Egypt, Kuwait and Saudi Arabia, ranging between .15 cents and .95 cents per gallon at their pumps. That’s because these are the largest oil saturated countries in the world.

America is the single largest consumer of oil products, yet our retail prices are very average in the world market, despite excessive federal taxation. Who is gouging whom?

Where does all the money go?

Based upon a $3.00 gallon of gasoline, the average break-down is as follows.

Gasoline Retailer $.01 cents per gallon
Oil Company $.08 cents per gallon
Refining $.29 cents per gallon
Marketing/Distribution $.32 cents per gallon
Taxes $.59 cents per gallon
Cost of crude $1.71 per gallon (delivered)

[Rogue]

The oil companies "make" about 7.5 cents per gallon. Seems like a reasonable compensation to me for discovery, development, refinning, and delivery to the pump.

You want prices to drop Brain and Roberta, might I suggest an increased supply just might do that?

[stone]

all three letter writers fail to grasp how much money each entity is making on gas, and what the real factors behind the gas price increases are.

[JUNGLEJACK]

"I am extremely disturbed by the obscene profits the oil companies are reaping."

... I am extremely disturbed by citizens of a FREE country who believe they have the right to decide how much return others can see on their investments.

"The oil companies are ruining our economy, and we can’t do anything about it."

... it's YOUR life, the big, bad oil companies can only ruin your life if you let them.