Oil price mocks fuel realities

[biblemanryan]

The following is an analysis of a blogger, on the oil company "windfall profits".

"First of all, I think the “massive Big Oil profits” are overblown. Those businesses are enormous. The investment from individual shareholders in all of the organization, equipment, and effort that it takes to get oil out of the ground, processed into petroleum and other goods, and transported to your local gas station is huge. If you look at the revenue of those large oil companies and then subtract out the unimaginably enormous costs, and then look at their profit as a percentage of the unimaginably huge revenue, oil companies don’t earn that much money. Businesses like McDonalds are far more profitable than Exxon and the like. The profit is huge, but the company is the size of Exxon is unbelievably enormous.

Let’s even compare Exxon and McDonalds. In the first quarter, Exxon brought in $116.854 billion in income, while McDonalds brought in $5.615 billion in income. That means, in terms of raw income, Exxon is the size of 20.81 McDonalds - so it would be reasonable to think that it should earn the profit of 20.81 McDonalds. Exxon reported a profit of $10.89 billion in the first quarter, while McDonalds brought in a profit of $946 million. Exxon only earned the profit of 11.51 Mcdonalds. Per dollar of revenue, McDonalds is almost doubly as profitable as Exxon - for every dollar in income, McDonalds profits 16.8 cents, while Exxon only profits 9.3 cents. Does that mean we should break up McDonalds?

Let’s say that we then put a windfall tax on Exxon and siphon away some of that profit, driving their profit down into the 4 cent range. Investors will look at Exxon and see something that they should pull their money out of. Very quickly, Exxon stops having the money necessary to get fuel to you at all. The infrastructure breaks down, no one has the capacity to pull off that large conversion of oil in the ground to gas at the pump, and gas goes ballistic in price. Since there’s no real alternative available, the United States would be hammered.

A windfall tax on the oil companies is basically foolishness. It’s not even a political question - it’s a dollars and cents question. I wouldn’t put my cash in a business that was only profiting four cents for every dollar of revenue - I’d take my cash to another business, as would most investors. If we did this, the oil companies would go away very quickly - and we don’t have the infrastructure in place to handle such a rapid shift. Imagine America if a year from now there was no gas to be had anywhere."

http://www.thesimpledollar.com


I also had come across the following post concerning the supply and demand issues.
Supply and Demand

According to the US. DOE
World Wide Crude Oil Production (U.S. DOE):
1973 – 55.68 million barrels / day
2006 – 73.45 million barrels / day
This reflects a crude oil production increase of 31.9%

World Wide Crude Oil Consumption (U.S. DOE):
1973 – 57.24 million barrels / day
2006 – 85.01 million barrels / day
This reflects a crude oil consumption increase of 48.5%

You may note that according to U.S. DOE figures worldwide crude oil consumption exceeded supply in 2006 by an average of 11.56 million barrels per day. I triple checked the figures on that, because it seems patently impossible that world wide consumption could outstrip supply by such a large margin.

That would mean that in 2006 the world used 4.2 billion more barrels of crude oil than it produced. Is there a giant tank of crude oil somewhere that I’m unaware of, or are these figures calculated using different methods. If those figures for supply and consumption are indeed true, that’s the reason for gas prices to be so high and be prepared for them to rise even further.

[Full Quiver]

hogwash!!!

profit is AFTER all expenses, costs, and overhead. if profits are huge or WINDFALL, then costs were obviously MUCH LESS! Sorry bro.

[oletimer]

biblemanryan posted:

I wouldn’t put my cash in a business that was only profiting four cents for every dollar of revenue

Four cents on a dollor is what a lot busnesses ends up with in the way of profit. Years a go my boss at a fruniture store told me he only got paid 2
% off what they made, but then said that 2% of % $1 million wasn't bad is it?

Many of the local gas stations owner only make from 2-5 cents on a gallon. If they don't sell enough cokes and cigarettes and cakes, you get point, they have to go out of business and do. While the up oil exc. makes boneuses of millions per person.

If I where to believe all that the post had to say , then I might qualify to be a congressman in Washington D.C. now.