I'm going to start a four part blogging subject concerning oil companies and all that this entails. Part I will consist of prices and profits; Part II will consist of a growing issue concerning the oil refineries; Part III will consist of the oil "cartel"; and Part IV will consist of supply and demand implications.
At the close of yesterday's market oil stood at $125.80 a barrel; up $1.57 on the day. Many attribute this to speculative buyers, the weakening greenback against other currencies, demand vs. supply, overseas issues concerning the producers and the list continues to grow every day. To think that just ten years ago 1998' we paid just under $1.00 for a gallon of gas baffles me! As of May 4th, 2008 the average price across the United States for a gallon of gas at our pumps was $3.62, an all-time high! This has hit so close to home that I actually bought a more efficient means of transportation (Hyundai Sonata) and laid my truck to rest (F250 Crew Cab Diesel). Even now it still costs over $60.00 to fill the Sonata at today's prices and to think that just ten years ago it would have cost under $18.00 is ridiculous! In fact oil has doubled in just one year and has been six fold since 2002!
I did quite a bit of research yesterday on this subject and found that in 2007 oil companies made over $1,300 a SECOND! Can you imagine pocketing that kind of money in today's economic environment? In fact in 2007 Exxon Mobile Corporation (the largest oil producer) reported a profit of over $39.5 BILLION; that's right folks a BILLION in one year; a United States record! And to carry over this fact they (Exxon) also reported a 1st quarter 2008 profit of $10.89 billion. It's counterpart BP (the 2nd largest oil producer) reported a 2007 profit of a modest (sarcastically stated) $31.3B. Through the first 3 months of 2008 they made $7.6B in profit. To cap things off Shell made $27.6B in 2007 and also reported a profit of $7.8B the first quarter 2008.
I'll leave these statistics to you to form your own opinion. However, do you think that these facts are related? Oil companies (Exxon, BP, Shell, Chevron and others) are making billions of dollars and all the while gas is skyrocketing across the world. Now there are numerous factors that are far more important in dictating issues concerning profit and I know there are much smarter people than me that can perhaps attribute this to "other" items. However, I personally believe these are intertwined and directly related and until someone convinces me otherwise (very hard to do) I will continue to believe this.
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Wednesday, May 14, 2008
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I would like to understand your qualifications on this subject. It seems to me someone in the mortgage industry is not exactly qualified to comment on the oil industry.
If we look at this in terms of profit margins, you will see that the oil industry average is 7.6% in 2007. The profit margin for pfizer in the pharmaceutical industry was over 17% in 2007. Feel free to check other companies in other industries - not many are as alow as 7.6%.
You comment on ExxonMobil's profits being high. They should be. they are the 2nd largest company in the US... Fortune 2. But, as large as they are, do you think they set the prices of gas?
ExxonMobil is the largest US oil and gas company, but they only hold .62% of the world's reserves, and contribute 3.15% of the worlds production.
Compare that with the two largest which happen to be the national oil companies of Saudi Arabia and Iran. Together they control 30% of the world's reserves and contrinute 17.62% of production.
take a look at this report. It will give you some good information for your remaining segments in this interesting topic.
Be sure to read the part about investment of those profits over the years.
http://www.energytomorrow.org/energy_issues/truth_about_oil_gasoline_primer.pdf
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