Heaven knows that we at LST rip on the Chronicle now and then, but we also like to point out when they get something right, and this is one of those times.
In a business piece about oil company profits, our beloved hometown rag provided a pretty good balance:
Exxon Mobil Corp. alone rang up a $9.9 billion profit. Whether Exxon and its competitors will be able to persuade the public their earnings aren’t really so huge remains to be seen.
"You make nearly $10 billion in a quarter, and you’re making more than number of Fortune 500 companies put together," noted Ed Rothschild, a longtime energy industry critic in Washington.
The story then turns to Exxon Mobil’s point:
For their part, the oil companies have been trying to make the case their earnings aren’t out of line.Exxon Mobil has taken out ads in major daily newspapers comparing oil and gas company earnings with other sectors. An ad headline "Oil and Apples," features a chart that shows pharmaceutical companies, banks, software firms and tobacco giants all earning more pennies on the dollar than energy companies.
The ad shows energy companies earning 7.7 cents per dollar of revenue, and Exxon Mobil 8.6 cents, versus 7.9 cents for U.S. industry overall. With "a true ‘apples to apples’ evaluation — you see that oil earnings are not out of step with other major industries," the ad reads.
How about that?
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34 Responses to “Chron reports on oil profit debate”Search
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Big Oil is a bunch of liars. Isnt it funny how when people start to get mad and look into alternative fuels and high milage cars the price of gas mysteriously comes back down.Yeh, down to $2.frickin 40 a gallon. Today Rush, God love him was on the side of BO. Saying ketchup is more per gallon than gas. Yeh, but I dont need 50 gallons of ketchup this week to get to work! Hmm.
Whatever happened to that engine that ran on water? Guess that inventor had an unexpected vacation to Siberia.
“pharmaceutical companies, banks, software firms and tobacco giants”. How does their cents per dollar of revenue compare with other markets that are not favored with high returns to dollar invested? Give me a break! What was the cents per dollar of revenue for the previous quarters? I don’t recall any oil imbargos, or any other market event to drive oil prices up. The prices were already way too high long before the hurricanes offered an excuse.
Let me preface by saying that I don’t work for an oil company or own any stock in them. BUT, I am getting a bit tired of the villification of BIG, BAD, EVIL BIG Business. Companies are what drives the economy, stupid. They are not in business to LOSE money, but to make as much of it as possible. Do you all want to live in a Socialist or Communist country where everyone is equally poor and equally miserable, except perhaps the fat and corrupt politicians?
leave it to gregg to go off w/out showing all the facts again. i sometimes think he’s a plant by LST staff just to get the conservatives going.
anyways, i also listened to rush; and gregg didnt tell you that rush also said that oil’s average profit per gallon was 10 cents while the average taxes per gallon are 45 cents. so, who’s making the money ?
and i happen to have read that gas stations typically are making 1 cent per gallon, they make thier money on items bought in their stores typically.
here’s the article rush cited that makes an attempt to explain the gas prices. my take is they go up in anticipation of high replacement costs for fuel they hold(i.e hurricanes) and go down once those are either incurred or are not incurred.
http://www.townhall.com/opinion/column/alanreynolds/2005/11/03/174128.html
mizsak, there’s a big difference between making a healthy profit and rape. Oil companies, drug companies, etc. - they are making sick profits at the expense of hard-working Americans.
Also, as per Matt’s postings, no personal attacks.
skicougar,
The gas station owners are the ones making the least amount of money. Sure the tax is high, but what about all the tax breaks these companies get? And would you rather have a state income tax?
If Exxon reported 9 billion in profits, you can be assured it was much higher. Imagine if they had reported double-digit billions for their profit. They couldn’t. They’re all living the high life, and we’re paying thru the nose (and every other hole in our bodies).
mizsak,
I am in business and a profit is why I work. But these large corps like BIG OIL and WAl-MART make billions in profit and then turn the screws to us periodically to get even more. Why does BIG OIL have to advertise on TV?
Wal-Mart comes into town selling $1 underware and puts the small business man under. The majority of jobs at Wal-Mart dont pay enough to rent a cheap trailer and make a payment on a 75 dodge. But the carrot is the chance to become management and get stock. Hear the Wal Mart ads on radio lately?
Point is these companies should do the right thing without the gov mandating them.
“If Exxon reported 9 billion in profits, you can be assured it was much higher.”
What makes you think that, Headshaker? Why would a company possibly tell its shareholders that it’s doing WORSE than it really is? You can’t claim “so they can dodge taxes” because GAAP books and tax books are two completely different animals.
Golly no one complains when Time Warner turns a large profit, no one complained when Dell turned a huge profit last quarter, no one complained when Microsoft turned a large profit two quarters ago.
So the oil companies turn a profit. So what? Has any one that complains ever taken the time to see how much in taxes they pay, what it costs to operate, how much it costs to find, recover and transport the oil, how much their their overhead is in payroll, insurance electricity etc. How about equipment costs? How bout all them years that “Big oil” didn’t turn any profits? Let us not forget that “Big Oil” is publically traded so their investors will reap returns from those profits.
ok headshaker,
next time you sell your house, try and buy something similar for what you paid for it originally; oh, and i’d like at least 1/2 of any profit you make over 10% of what you paid originally. if you get 1 1/2 what you paid for it and dont give some of those profits to the unfortunate. well, thats just evil.
Matt, Matt, Matt, you’re starting to sound like Owen now. Don’t take this personally because it’s not, but you will be introduced into the real world at some point. It comes with age and experience.
skicougar, when you can come up with an apples for apples comparison, let’s talk.
# 9 skuawkbox,
My point exactly. My prior “stupid” comment was not aimed at anyone in general except those out there who grabs every chance they get to become “victims.” Who out there is complaining that Google’s stock is approaching $400.00?
These “HUGE” profits are a mere drop in the bucket if you look at the bigger picture. Redistribution of wealth does not accomplish much of anything. You should check out the following article which was on CNN/Money website today: money.cnn.com/2005/11/01/pf/expert/ask_expert/index.htm.
My point is that we live in a free society and we are free to work as hard as we can to improve and better ourselves, but there are countries out there where, had we been born there, we would not even have that opprtunity. Who cares if some company makes a lot of profit? What happened to the “everything is possible” mentality of our forefathers?
Howdee mizsak #12
I did not take your statement as stupid. You made a good point that this is the land of liberty and anyone one including “Big Oil” should be allowed to do the best they can.
I hate the high prices as much as the next guy, however being a business owner myself I realize what it takes to make those “OBSCENE PROFITS”. I also am very much aware of market forces. Here we are four years after 911 and I am finally getting back to where I was pre Sept 11.
What is a huge profit? Where is the cut-off from huge to big? How long do you have to operate at a negative to make up for a huge profit? Who gets the money if we tax excess profits? What makes anyone think the price of gasoline will go down? Does anyone remember the 70’s and Jimmy Carter’s windfall profits tax? Who said stupid is as stupid does? Cheap fuel is a thing of the past and there is nothing you or the Government can do about it.
You dont need to buy a Dell computer or cable TV. There is competition. Same with everything else except oil.You can do without both.You want to get to work? Unless you want to depend on Metro you need gas. You cant make your own.
Until there is real competition in what will power a vehicle dont talk to me about BIG OIL making a fair profit.
It’s all part of the business cycle. Big oil is currently running roughshod over the American consumer. This is due to our lack of efforts at conservation, renewable and alternative energy sources, the distaste most non-urban Americans feel towards mass transit, and our love of big autos with extremely poor gas mileage. The rise of fuel costs will eventually lead to a focus on improved gas mileage, a re-examining of mass transit, and a general reduction in fuel usage because people’s behavior (buying patterns) will change based on individual budgets. This decrease in demand will lead to lower prices.
However, all this could change if the government steps in and starts treating oil/gas similar to the way we treat electricity, water, and other basic necessities. That is, by regulating them and setting price controls. This is a distant possibility at the moment, but you’re starting to see even Republicans say things to this effect. That is definitely a new development.
If it happened, one of two results:
1) That gasoline prices will rise anyway when the government realizes too late that it costs a lot of money to produce gasoline. We then have another industry that was doing just fine as-is in the private sector, but got gobbled up by the feds in a misguided attempt to pacify disgruntled voters.
-OR-
2) That gasoline prices will either stay the same or drop lower due to government subsidies to accomplish that goal. We then have added another expenditure to our federal budget that is already bloated.
I’d rather pay four dollars a gallon right now than see either one of those scenarios play out.
We really don’t have it so bad. Here are some prices per gallon from around the globe:
UK TEESIDE $5.64
HONG KONG HONG KONG $5.62
UK MILFORD HAVEN $5.56
UK READING $5.56
UK NORWICH $5.54
GERMANY FRANKFURT $5.29
DENMARK COPENHAGEN $5.08
NORWAY STAVANGER $5.07
NORWAY OSLO $4.93
ITALY ROME $4.86
TURKEY ISTANBUL $4.85
PORTUGAL LISBON $4.80
KOREA SEOUL $4.71
SWITZERLAND GENEVA $4.56
KOREA KOJE/OKPO $4.53
AUSTRIA VIENNA $4.50
CROATIA ZAGREB $4.32
JAPAN TOKYO $3.84
AUSTRALIA SYDNEY $2.63
Of course there are some places with lower gas prices than us:
LAOS VIENTIANE $1.66
THAILAND BANGKOK $1.60
CHINA TIANJIN $1.54
CHINA SHANGHAI $1.48
RUSSIA MOSCOW $1.45
KAZAKHSTAN ALMATY $1.36
KAZAKHSTAN ATYRAU $1.35
TAJIKISTAN DUSHANBE $1.32
AZERBAIJAN BAKU $1.15
VENEZUELA CARACAS $0.14
Care to live in any of those countries? Venezuela by the way has a government that subsidizes their gasoline. I could introduce you to a Venezuelan (living here in Houston) who could easily convince you that you don’t really want to live in Venezuela. Consider fully before you complain folks.
BTW, I really didn’t intend to go on at length like this. My real intention was to praise the Chronicle for giving a balanced view for a change.
MM,
in all those countries that have high prices they drive small efficient vehicles and there is alternative transportation like bike,bus,trolley,rik shaw and other mass transit.
We need 300+ horsepower road sensing cars and big 8000 lb trucks with 26 in rims and pipes.
I for one do not want to see the feds getting involved in the supply of gasoline. What, in God’s name, have they done well, ever? BIG OIL is already a very heavily regulated industry. It’s a miracle if you ask me that they even turned a profit.
18)”We need 300+ horsepower road sensing cars and big 8000 lb trucks with 26 in rims and pipes”.
It’s called the “tiny tee-tee” syndrome. I think there is a direct correlation between the size of one’s “privates” and the size of their vehicle. Makes me wonder about all the Hummer drivers. The bigger the car, the greater the “insecurity”-so to speak.
Willie
Awww c’mon man do you expect 6 foot 3 and overweight me to drive cross country in a Civic. I drive a big pickup truck and used to drive 18 wheelers (I think I remember you and me talking bout that), when the auto makers create a mid sized car that I am comfortable in for 700 miles (yes I travel that much at a time regularly) I’ll buy it. Till then 17 - 21 mpg will be my plight.
Ya’ll can drive them tinkertoy cars if you wish but I CHOOSE not too. Driving them things in Houston traffic is like attempting suicide everyday. No thanks.
Oh yeah the Houston reference is because I used to drive a Chevy S-10 in Houston and I was very insecure.
I don’t know much about the second author, but Ivanovich is usually pretty good on oilpatch matters.
I don’t work for Exxon used to work for Amoco Prod and I am currently in the Middle East.
Exxon’s sales are mostly LNG to Asian Markets - most of that profit is LNG Sales from Qatar, Saudi Arabia and the UAE. Exxon has made a significant profit on US fuel sales - but remember the BILLIONS of Dollars in TAXES and FEES that its employees, its stock holders PAY - every year - Exxon supports America 100%
Also - walking is good for you - try some
If you don’t like the price of gas - well……..
Remember the Windfall Profits Tax that Ted Kennedy Passed over Fords and even Carters Veto(Supreme Court overrulled it then the Democrats Passed it again)
This tax caused the following cities (Midland, Oklahoma City, Odessa, Tulsa, Denver, Humble, Witchita, El Dorado) to become irrelevant to the oil and gas industry as the wells were capped (that is destroyed) because this tax took 90% of the profit away from strong independent oil firms like Skelly, Sunoco, DX, Shamrock, Sinclair, even ended Gulf Oil. this stupid bill - caused the destruction of 2.75 to 3.5% of the entire World Wide oil reserves according to Oklahoma University’s famous paper. (University of Oklahoma Business School Website) Only Murphy Oil Survived as they had to sell ODECO to get operating cash and is partly owned by the Walton Family.
No one sent money to Exxon when oil was 17 dollaras a barrel or even 7 or when gas was only a dollar a gallon or less.
Eric,
I do not believe all of your facts are correct with regards to the demise of Gulf Oil (or Sinclair for that matter).
I was a Gulf Oil E&P employee in the 70’s and 80’s and the demise of Gulf Oil was directly related to having Oilmen and Engineers running the company. Their failure to recognize the ins and outs of Wall Street placed the company in a vulnerable position. What did they do?
Our President at the time, Jimmy Lee, was an engineer and an Oilman’s Oilman, but he took the company’s profits and paid the stockholders good dividends and plowed the rest back into the company.
Gulf would still be around if it had carried a lot of debt or sat on the profits, instead we had to sell off assets to fight a takeover by Boone Pickens. In the end it became a choice between Boone Pickens or Chevron.
I do not like the taxes on oil myself, but not for the same reason. Oil Companies (or any company for that matter) do not pay taxes. Consumers pay taxes in the prices charged at the “pump” or till.
Windfall Profit Taxes takes money from the consumers and puts into the pockets of politicians and the government, who waste the money.
Don’t get me wrong. I have worked in the energy biz for many years and seen a mountain of waste inside the majors, but they could take lessons from the folks who brought us the Post Office, DOE, FEMA, and the Department of Homeland Security. This is a choice of lesser evils.
Senators Schummer and Kennedy want the money for their pet social projects, but it takes a majority in the House of Representatives to decide tax and spending issues. The same majority who delivered up that piece of roast pork otherwise known as the Highway Bill. Oink Oink
Simple
Does anyone think if BIG OIL could drill more here and in Alaska the price would come down? Fat chance. Why would they spend all that money only to lower the price and profit. Plus I would bet money that most of the oil that is pumped in the US would go to the highest bidder. China.
What needs to happen is another way to propel a vehicle that is clean and renewable. Whoever thought at this point in time we would still be using black goo pulled out of the ground. I bet our masters on the mother ship monitoring us have to be disapointed in our progress.
Gregg,
If China bought every bit of that ANWAR oil, then wouldn’t that reduce the demand on OPEC from China, thereby having the tendency to reduce price from OPEC? I’m not an economic whiz-kid or anything, but supply and demand is a pretty simple concept.
BTW, yes I do agree we need an alternative to gasoline and diesel fuel, but it ain’t gonna happen overnight. In the meantime we need to make the most of petroleum. That’s our reality.
Oh, and don’t go letting Master Zlfeweeref know you are giving away his identity, unless you want a serious “probing” after we all get sucked back up to the mother ship.
Live long and prosper Gregg.
#19 mizsak
Who is regulating the oil industry these days? Oilmen in political power. And you wonder how they even make a profit? Unreal.
You wonder why I shake my head.
#28 and if you think the fact that oilmen in political power has even 10% to do with our current high gasoline prices, then I am going to have to shake my head vigorously. Do you actually think they have control over the entire world oil market (including OPEC) and can set oil prices at will?
Remember, it’s a worldwide free market, not a local public utility…
ANWAR drilling will be nothing more than the last fix for a desperate junkie. We need to move beyond oil with the same ingenuity that led us to put aside the horse and buggy. Until then all we are doing in supporting the very people that want to kill us.
What kind of sense does that make? Junkies never see beyond the next fix. It’s time for us to wake up and recognize the future. America is capable of once again leading the way in finding an alternative to oil if we will only exhibit the will to do so.
In my simplistic mind, “profit” is defined as income minus expenses. I applaud BIG OIL for managing their money that well to generate profits big enough to upset even the self-styled conservatives. Where’s the equivalent outrage when government at all levels can’t generate a surplus so that they can (1) pay off some debt, or (2) reduce our taxes and/or send us a refund(and how likely is that)??
Simple
Please argue with facts - all oil companies are run my Engineers and Oilmen. I also noticed that you cited no facts other than a I WAS there so were all Gas Station Attendants and bookkeepers.
I actually worked for the last chairmen of Gulf Oil J L Jackson, was next to Gulf Oil and was on the committee from Amoco concerning a merger with Gulf Oil and you are completely and totally wrong. Read the university of Oklahoma’s paper, jimmy Carter even writes about this in his memoirs - I’m sure as a LINE employee you heard alot of grumblings - T. Boone had an easy task buying what was left of Gulf Oil. Also, you made my case when you spoke of the debt burden - debt rises in oil companies due to a lack of PROFITS
Simple
Please argue with facts - all oil companies are run my Engineers and Oilmen. I also noticed that you cited no facts other than a I WAS there so were all Gas Station Attendants and bookkeepers.
I actually worked for the last chairmen of Gulf Oil J L Jackson, was next to Gulf Oil and was on the committee from Amoco concerning a merger with Gulf Oil and you are completely and totally wrong. Read the university of Oklahoma’s paper, jimmy Carter even writes about this in his memoirs - I’m sure as a LINE employee you heard alot of grumblings - T. Boone had an easy task buying what was left of Gulf Oil. Also, you made my case when you spoke of the debt burden - debt rises in oil companies due to a lack of PROFITS
Eric,
If you remember, Boone Pickens did not get to buy Gulf Oil. He did get to buy enough shares of the company so he would be able to put a couple of his own hand-picked cronies on the board.
The share prices ran up to over a $110 dollars per share in a bidding war, which was eventually converted to shares of Chevron stock, when they successfully became our “White Knight” and rescued us from the clutches of Boone Pickens.
I was a lowly engineer at the time working in the International E&P division of Gulf Oil. Yes, I did not grace the confines of the mahogany corridors in Houston, Pittsburg, or Harmorville, but I did remember reading our company financial statements. (They came with stock ownership) I do not rememeber a single year that we were in the red.
There were pullbacks and slumps, such as the one in the early eighties and the late nineties, but this is the nature of a cyclical business.
I concede that I have not read the University of Oklahoma paper; I’ll try to get around to it someday. Jimmy Carter was a decent person and probably the worst President of the 20th century (strong tie with Wilson and Harding) and the last person I would go to as a reference on the oil industry.
I did not remember the last CEO of Gulf Oil after Jimmy Lee took his golden parachute. I was around for the sell off of Gulf assets for Chevron and it is not a pleasent memory, but this is the nature of the business today. We have gone from the “Seven Sisters” to the Three Old Crones.
I will still stand by my statement. Taxes on oil companies are about as worrisome as a cloudy day, since they are passed directly or indirectly to the consumer. I am still opposed to them, but not because of some unfairness to the oil companies, but rather because of punitive nature of such taxes on the pocketbooks of everyday people.
Simple