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Oil Company Profits and High Gas Prices
Old 04-16-2006, 07:53 PM   #1
 
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Oil Company Profits and High Gas Prices

Record high oil company profits and high gas prices. Is that actually more reasonable than it seems?

If the profits are so high why doesn't the free market system bring prices down?

And what's the story with the 400 million dollar retirement package for the Exxon head?
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Re: Oil Company Profits and High Gas Prices
Old 04-16-2006, 10:04 PM   #2
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Re: Oil Company Profits and High Gas Prices

Quote:
Originally Posted by TromboneAl

If the profits are so high why doesn't the free market system bring prices down?*
Because of barriers to entry for competition.* However, eventually the profits will be so high, that the expense of overcoming the barriers will be overcome.* Alternative energy sources will come into play.
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Re: Oil Company Profits and High Gas Prices
Old 04-16-2006, 10:21 PM   #3
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Re: Oil Company Profits and High Gas Prices

Exxon seems like the anti-Enron with any stockholder or employee who is a shareholder profiting from the fortunes of the current economic events. As for the retirement plan of the head of Exxon, well...even though the guy is a 43 year employee of the company and all of this good fortune happened under his watch, there is no way that he should be given such a sweet retirement deal.

Of course if I had such a deal, it would be quite proper.
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Re: Oil Company Profits and High Gas Prices
Old 04-17-2006, 07:40 AM   #4
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Re: Oil Company Profits and High Gas Prices

Given that oil cos, refiners, etc. all suffered through the long, dark night of persistently low commodity prices without getting any sympathy, I don't put too much stock in all the current belly-aching.
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Re: Oil Company Profits and High Gas Prices
Old 04-17-2006, 10:31 PM   #5
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Re: Oil Company Profits and High Gas Prices

Quote:
Given that oil cos, refiners, etc. all suffered through the long, dark night of persistently low commodity prices without getting any sympathy, I don't put too much stock in all the current belly-aching.
I agree, if instead these companies were about to go bankrupt the gov't wouldn't be running to save them. So why all the hardache when profits are at record highs? I don't like paying $3/ gal either but until there's a cheaper replacement I'll have to suck it up like everyone else.
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Re: Oil Company Profits and High Gas Prices
Old 04-17-2006, 10:46 PM   #6
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Re: Oil Company Profits and High Gas Prices

Some reasons for high oil.
*10% increase due to nutjob in Iran
*7% for wacko in Venezula
*8% For a pack of thugs in Nigeria
*6% Premium for having a free market system which enables traders to affect the price both up and down without any true regard to supply/demand.
and on and on.
Take out the first three as issues and oil could fall 25% in a week, but don't hold your breath.* These guys may be wackos, but they know how to game the system to their benefit at your expense*
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Re: Oil Company Profits and High Gas Prices
Old 04-18-2006, 01:29 AM   #7
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Re: Oil Company Profits and High Gas Prices

Try the Don Lancaster method:, Closing the Circle:

Buy enough oil stocks so that the dividends pay for your fuel costs.

(Oil broke $70 today. Hallelujah!)
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Re: Oil Company Profits and High Gas Prices
Old 04-18-2006, 06:39 AM   #8
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Re: Oil Company Profits and High Gas Prices

ED_The_Gypsy,

I agree , my 10% of portfolio allocated to energy has generated substantial returns since early 2004.


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Re: Oil Company Profits and High Gas Prices
Old 04-18-2006, 06:53 AM   #9
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Re: Oil Company Profits and High Gas Prices

Great point Ed. I thought that was the point of this website....become the owner rather than the slave....
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Re: Oil Company Profits and High Gas Prices
Old 04-18-2006, 09:52 AM   #10
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Re: Oil Company Profits and High Gas Prices

Curious, what is the weighted % of the S&P 500 that consists of oil stocks? I mean, I think Exxon/Mobile and it's sisters are half the top ten...so probably most/all on this board are benefitting from the rise in oil.

The other day both DW and I had to stop at the gas station (we were picking up her car from work since she couldn't drive home Friday ). Pulled in next to each other and filled up. Dropped a C-note between us, in 2 minutes! Worse than Vegas! But we aren't going hungry because of it.
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Re: Oil Company Profits and High Gas Prices
Old 04-18-2006, 10:19 AM   #11
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Re: Oil Company Profits and High Gas Prices

Here's the allocation for some Vanguard index funds. SP500 and Total market index are shown, among others.

http://tinyurl.com/h4vrj (scroll to the bottom of the page)


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Re: Oil Company Profits and High Gas Prices
Old 04-18-2006, 11:21 AM   #12
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Re: Oil Company Profits and High Gas Prices

Quote:
Originally Posted by Laurence
Curious, what is the weighted % of the S&P 500 that consists of oil stocks?* I mean, I think Exxon/Mobile and it's sisters are half the top ten...so probably most/all on this board are benefitting from the rise in oil.*
That question appears to be a lot easier to answer for individual funds than for the index.

I see that Exxon-Mobil is 3.6% and the largest holding of the S&P500 ETF SPY, which would make this one stock over a third of the S&P500's energy sector.
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