Oil Toil Shmoil

Big news today!  Exxon has Ondansetron hydrochloride reported a Diflucan 50 mg huge profit Buy Brand Torsemide 20 mg Levitra Online numbers for the reporting period.  It is somewhere around 11 billion.  That is a lot of money.  So bring out all of the people who don’t like the big oil companies.  The questions are flying.  “Is this too much?”  Here is another number for you.  That 11 billion is only an 8.47% profit margin.  That is correct.  For every dollar the company brings in 91.53% is spent to bring in the product they sell.  They make a little over 8 cents on every dollar.  Just so you know, 8.47% is on the low side of profit margins made by corporations in the United States or anywhere in the world.

On a side note, I do support finding more efficient alternative fuels and even ways of making oil more efficient.  I just don’t like the way we are going about it.  We don’t need a shove from the government.  When there is a need in the market it will be filled.  I am confident of that.  Government needs to keep their fingers out of economics and let it work.  They tend only to mess it up anyway.  Ethanol is a great example.  Prices of corn are sky high and they are now finding that this alternative fuel is less efficient and more polluting than gas.  But our government got behind it because it was “alternative”.  Sorry, back to the show.

Now 11 billion is a huge sum of money but their revenue of over 138 billion is an astronomical number.  Consider with me where that other 127 billion goes.  It is paid to contracting companies, to employees, to manufactures, and spent all kinds of ways to produce their product.  In other words it goes into the economy.  This is not a bad thing.  Consider also with me why their revenues are so high.  Maybe it is because the produce a product that everyone uses multiple times a day.  From the gas in your car to the plastic bags you use to put your sandwich in and everywhere else in between, we use petroleum products all the time.  Since their product is so widely used it would make sense that they have large numbers to show for it.

People all across the globe use petroleum products so it makes sense that they have large revenue and profit numbers.  What else factors into this?  Sure the high price of oil factors into it but we will get to that in a second.  The business side also plays a large role.  The way they run their business is key.  How efficient a business are they?  Do they make efforts to cut out the fat?  Even with oil prices high if they ran their business inefficiently they could easily lose that 8.47% profit margin.

Now to the high oil prices which there is someone new to blame everyday for.  Is it the oil company’s fault?  Is it the speculators?  Is it the Saudi’s?  The list goes on.  If oil companies are controlling the level of production then it could be their fault.  But who put the restrictions on building new refineries?  Congress.  From the numbers I have seen our domestic refineries are running at capacity.  Who is keeping the oil companies from drilling in places that would produce more supply?  Congress maybe?

Now to the speculators.  Very simply, speculators are like gamblers in a casino with slightly better odds because they have information to base the gambles they make on.  Speculators look at the conditions around them and guess if a commodity will go up or down based on market conditions, supply, demand, laws.  Right now, the congresses general treatment of oil companies has been hostile (one of the reasons we are even discussing this.  Windfall profit tax anyone?)  If the government is being hostile towards any industry I would say that it would be harder to produce this commodity so supply shrinks and prices go up.  Basic economics.  The speculators are not to blame.

Are other countries holding back on us to keep the prices high.  Probably so which points to the fact that we need to be as energy independent as we can be (and not just in petroleum products by the way)  In a free market  prices will fluctuate based on  market conditions.  If the oil companies were controlling the price of oil don’t you think their profit margin would be a little better than 8.47%?  I do.

Next topic: the windfall profits tax that is being discussed.  This is ridiculous, plain and simple.  Have we really swung that far toward socialism that we need to take from one (who earned the profit) and give to another (who did not)?  I hope not.  This scares me a bit.  Why are we not talking like this when it comes to our entertainment industry?  The Dark Knight (one of my favorite movies by the way) has pulled in close to 400 million while it only cost around 180 million to make.  How high a profit margin is that?  What about the millions we pay our professional athletes?  Oh, and another news topic of the day.  Angelina Jolie and Brad Pitt have pictures of their new born to be featured in People magazine, that they sold for 14 million dollars. Why are we not talking about these items as well?  Why do these people make so much money?  Because that is what the market says that they be paid no matter what I think of it (I don’t like it, if you were wondering.  I think good teachers should be paid more.).

If people are willing to pay 14 million for baby pictures that is their business.  All of the profit margins mentioned above are all much higher than 8.47%.  If Exxon cheated to make their meager profit percentage then take it away.  That just means that they are bad cheaters and don’t deserve it anyway.   But at least the oil companies are providing us with a product other than being distracted from real life long enough that we start criticizing blindly those who provide a large part of said life it to us.  And they are making a much lower profit margin than the rest so maybe, just to be fair, we should give them some of The Dark Knights profits. (Please read the sarcasm in that last statement)  I know that energy is a large topic these days and it needs to be talked about, so why can’t we talk about something that will actually make a difference?  Finding new and inventive ways to sink the oil companies will not solve our problem.

In closing, I don’t think the government has a problem with people making money.  I just think government has a problem if they aren’t in some kind of control of that money.  So they do their best to be in control.  Just a thought, and a scary one to boot. (Oh, and I don’t apologize for ranting.  It felt good.)

Brian