ExxonMobil Quarterly Earnings...Again

[OldGreyEagle]

Ok, I know I did this once before, but sometimes I dont know when to quit. ExxonMobil released earnings in excess of 10 billion dollars for the last quarter of 2005. So, despite Katrina, despite the devastation of the Gulf Coast refinery infrastructure ExxonMobil still reports record earnings. How? How can this be? I thought we were paying higher prices at the pumps because it was costing more to get the gas to us. How is this not price gouging?

 

Last time we talked about this, I remember a comment that actually the oil compnaies dont determine oil prices as its set by OPEC, ok, but then how do they run away with record profits at a time when gas prices crippple some families? Where is the outrage on this? Democrats want to send a message to the public about Alito being unfit for America, why cant they lead a charge to figure out why oil campanies can make record profits in a time of "crisis. If they are for the little people, lets see some action from them

 

The repulicans say they are for traditional family values and really arent the friend of big business, yet I dont see outrage from their sector. WHy is this behavior accepted?

 

[SR540Beaver]

OGE,

 

My brother has worked in the petroleum industry for 25 years or more. There is a real catch-22 here. New refineries are not being built for a variety of reasons. One is that the government regulations and standards are so tough it drives the price of building a new refinery thru the roof. Next is that no one wants it in their backyard. Third, after spending hundreds of millions of dollars to build a new refinery and increasing production and storage capacity, the price of gas would be driven down and the oil company's investment would end up cutting their profit. It just doesn't make good business sense for them to do it. Why sell gas for $1.50 when you can sell it for $2.50?

 

Don't get me wrong, I'm not defending the oil companies......I'm just delivering the bad news. The truth is that refining and storage capacity are not under that much stress. It just makes a good story for pushing the price up and making higher profits. You are right, people should be outraged. The oil giants have our congressmen in their pockets and they won't do anything to put those expensive dinners, trips and gifts at risk.

[OldGreyEagle]

Ok, I understand that, but then why doesnt competition drive the cost down? Food stores work with a razor thin profit margin, around where I live "club" memberships get you a discount, triple coupon days are held, calls to compare prices are made in the adds with 150% back if you can find an item cheaper

 

I always place my age as being a youth in scouting after Gilwell island but before the demise of the red berets. I rememer gasoline wars, the lowest I ever paid for gas was 18.9 cents a gallon. Do they have gas wars now? I mean other than to see who can raise the price the fastest & highest?

 

 

[SemperParatus]

If they gave out jelly glasses again, would that appease us?

 

OGE, you are absolutely correct...the profits being made by the producers and refiners is unconscienable. Competition is nonexistent in the industry because of the incredibly high price of entry and investment. Our politicos are AWOL on the issue because the Republicans are staunch capitalists and the Democrats need the profits of gas companies to do the only thing they know how to do...bash Bush. In our lifetime, things will not improve. We can revel in the fact that there is a time coming when technology will render Exxon et al about as relevant as a hoop skirt manufacturer. In the meantime, ride a bike in protest and improve your health.

[OldGreyEagle]

Semper, I agree with you, I would ride a motorcycle but too many years of working 2-3rd shift in Emergency Rooms took that itch away a long long long time ago. The bike is the way to go as long as the soccer mom in the Escalade or Excursion gives me 18 inches (provided she can see me)

 

Of course the greatest irony will be when Exxon goes the way of the dinosaurs

[Lisabob]

OGE, whoever posted (previously) that OPEC sets prices was misinformed. What OPEC does is set a price goal that they'd *like* to see their oil selling for on the world market. They then establish a quota for how much oil each OPEC member should be producing, in order to meet that price goal. However, they do not have any direct control over world prices. Non-Opec members (Russia, NIgeria, others) may decide to produce more oil and thus increase global supply, driving down price. Hurricanes may hit off shore rigs, thus (apparently) driving up price. Not to mention that OPEC members regularly cheat and over-produce. So while OPEC may have a strong indirect effect on prices (by setting quotas - supply and demand) they do not directly control the price of a gallon of gas.

 

At the moment, one major factor causing (yet another) spike in gas prices is that there has been an increase in the frequency and severity of sabotage on oil pipelines in Nigeria, which produces roughly 20% of the oil that the United States consumes. Not only is this decreasing supply (and thus increasing prices) but the quality of Nigerian oil is also higher, requiring less refining than say, Saudi oil.

 

About 6 years ago when I was commuting 150 miles each way to work a few times a week, I was darned lucky. For a little while gas dipped below .50/gallon where I was living at the time (Southern Indiana - a state with very low gas taxes too). Yup, I guess these were the gas wars of my time.

 

Personally I have no trouble believing that the major gas/oil companies are blood sucking parasites who will engage in price gauging at every opportunity. Still, it seems that people often want to blame foreign countries (like OPEC members) directly for our energy woes and that's not entirely correct.

 

Lisa'bob

[scoutingagain]

One thing I've always wondered about is,

 

Why is it considered price gouging(subject to state and local penalties) when a local retailer jacks up the price of gasoline beyond the increase in his/her costs to achieve higher profits but it's considered basic economics, supply & demand, free enterprise, yada yada yada, when the big oil companies do it?

 

Although it does come down to basic economics. As pointed out, oil companies can invest in new refining capacity, and extract oil from less profitable reserves, only to drive the price down of gas down and make the same amount or less money. Would you work 60 hours a week for the same salary you could earn at 40 hours a week?

 

At some point the price of gas will make it worth the risk for an oil or chemical company to build additional refineries. But that won't be until there is a reasonable expectation that prices will stay at historical highs for a long time. The time frame to permit, design, build and bring online a new refinery, is on the order of 5-7 years at a cost of bilions of dollars. No one will build an additional refinery until they are relatively confident prices of gasoline will be high enough to justify the investment 7 years down the road.

 

 

Or the price of gasoline will be high enough where folks will be willing to invest in hydrogen cars, or other technology. At $3-$4 a gallon there are other energy alternatives that become economically viable. The problem is, gas needs to stay at those levels, or when the price comes down, everyone will go back to driving gasoline powered vehicles and the new technologies will economically whither.

 

One example, I read recently that for smaller farms, it is becomming economically competitive to use horses again. The cost to feed and house them is becomming competitive with fueling and maintaining a large tractor, and they can reproduce their own replacements.

 

Personally I'd rather have the government not fight unnecessary wars than try and fix a problem the free enterprise system will eventually correct. That's assuming it really is a free enterprise issue. There's a big difference between taking advantage of a market vrs manipulating a market, as hopefully Mr.'s Lay and Skilling find out this week.

 

 

 

SA

[OldGreyEagle]

Ok SA, I can see where you are comming from. Oil Companies can charge what they charge because the consumer pays for it. As a capitalist I guess I have to accept that. But what fries my hams is when Katrina hits, gas prices go up because pumps are out of order, or because supply pipes are non-functional or soemthing liek that. And people pay it because they think its costing money to supply the gas and voila, record products! Isnt this bait and switch? We have to charge more because of Katrina, oops I guess we didnt?

[evmori]

We are being gouged by big oil. No doubt. The individual stations aren't making that much although they are starting to cash in more these days.

 

Here's a link if you want to find gas prices in your area

 

http://www.gasbuddy.com/

 

And here is a link to track wholesale gas prices.

 

http://www2.barchart.com/dfutpage.asp?sym=hu

 

Now to figure out what price you should pay you will need to know what your respective state taxes on gas are and add that to the wholesale price in the chart. For PA, the retail price should at a zero margin should be $2.14/gallon. The average price in PA now is about $2.40 so the stations are making roughly .24/gallon. That might not seem like much but before the prices started to rise, they were making about .12/gallon.

 

This in no way explains why prices are so high, but it does give us a consumers a way to pay the cheapest price we can.

 

Ed Mori

Troop 1

1 Peter 4:10

[Trevorum]

I'm vastly ignorant in economics, so I haven't a clue here. However, I dont believe that Exxon will ever "go extinct". If they are half as clever as I give them credit for, they will anticipate a changing, oil-less, world and will adapt accordingly. Look at Phillip Morris: they make and sell Raisin Bran now in addition to the tobacco products which are ever- shrinking from our world

[OldGreyEagle]

Perhaps Trev, but the opportunity to say that Exxon, or any oil company for that matter would go the way of the dinosaurs was too delicious to pass up

[SR540Beaver]

FYI, the oil giants buy up the patents and new technologies that could replace petroleum so they can continue their monpoly. nothing is changing in the near future.

[scoutingagain]

OGE,

 

There is no question in my mind the oil companies are being opportunistic and taking advantage of a current tight market and high demand for refined petroleum products. The question is, in a free economic society, what do you want the government to do about it?

 

Personally I am more concerned about our continuing and growing dependance on foreign energy sources, particularly from regimes that are less than friendly to us. Iran, Venezuala, and I wouldn't be supprised that once we effectively leave Iraq, the Iraqi's will not be the good buddies that the current administration believed would welcome us with open arms. I think it was McCain that said something like, "Until we(the US) begins to do something to move us towards energy independence, we will continue to be held economically hostage by these nuts." or something to that effect. That means getting our head out of the sand(literally and figuratively) and doing more than looking for more oil in the US. It means encouraging conservation, and energy alternatives other than oil. That is something the government could begin doing. We can only guess what Dick Cheney,(formely CEO of an oil & gas services firm and gov't contractor) discussed with the oil company execs invited to his energy summit several years ago. Whatever it was, I assume we(as in our duly elected government) is currently working that plan. We live with the results.

 

 

SA

[OldGreyEagle]

Interesting thought, what do I want the government to do about it. Its really a philosophical nightmare I really dont want the goverment to "socialize" the oil industry. I would never want that, as I have seen what they did with the railroads and Amtrack and with healthcare. Anyone figure out that Medicare drug program yet? AS far as socialied medicine goes, we have a slice of it already, its called the VA and I havent always been impressed by its machinations.

 

So, if I am not for goverment control, I have to be for the capitalistic approach, whatever the market will bear. But what if the market will bear $10 a gallon for gas? What if it means we drive to and from work, but no where else. We stop and get what food and necessities we need on the way home from work. Restaurants close, Movie theatres close, tourist trade dwindles Oil Compnaies keep making money. What is the answer, I dont know, I wish I did. I do know it insults our intelligience to say that Katrina caused the prices to go up and that our oil producing and delivery infrasctructure has been severely damaged and then record profits are attained?

 

I am not for controls, but I dont want to be trampled either or am I just dreaming?

[GernBlansten]

What can be done? Well, oil and gas is far too important of a commodity to allow greedy robber barons to manipulate the supply and price. It regulates our economy, it underminds our national security and foreign policy, it is a key unavoidable expense to every single American. The solution, nationalize the industry. Yup, we are talking real socialism here but that is the cost of our dependence on the black stuff. Take out the profit incentive, remove the greed and price manipulation. I for one would shed no tears for the stock holders and executives of Exxon et al. Even at our government's worst inefficiency, I doubt they would surpass the greed of this industry. OK, flame on conservatives. Tell us how free markets have helped you put a tiger in your tank.