Big Oil Profits

[renferme]

As a matter of disclosure: I own Exxon stock.
I am a conservative; I believe in capitalism, free enterprise, supply and demand.
I believe in making a buck; believe in less government, low taxes,
BUT,,,
When I hear about big oil making record profits at the expense of the American consumer, I can help but wonder if the moral and ethical thing to do would have been for big oil to lower prices to help the American Consumers during the recent run up of gasoline prices.
Are the big oil companies going to take those huge and some say "ill-gotten" profits and look for more oil and build more refineries? The cynical side of me says "NO" !
Are the big oil companies going to give that money to their executives in the form of higher salaries and bonus's and higher dividends to stockholders ? The cynical side of me says "YES" !
Are we Americans being screwed ?

 

[laurence]

What's the average return for the Oil industry over the last 30 years?

Was anyone calling congressional hearings when oil was $10/barrel and gas was a dollar a gallon? I work in a cube farm, the average vehicle in my parking lot is a Ford F-150.

Every time a member of Congress comes up with a new tax/fee/levy/regulation for the oil industry, big oil decries it in public but smiles in private. Why? Just another barrier to entry for new competition. It's almost as if the govvies are collaborating to ensure an oligopoly.

There are positives, higher oil prices have made things like the Canadian oil sands a profitable place to drill.

What am I saying? Enjoy your profits, rebalance your portfolio, lean days for oil will come again.

 

[maddythebeagle]

whatever....stop eating up the political rhetoric.

 

[renferme]

What's the average return for the Oil industry over the last 30 years?

Was anyone calling congressional hearings when oil was $10/barrel and gas was a dollar a gallon? I work in a cube farm, the average vehicle in my parking lot is a Ford F-150.

Every time a member of Congress comes up with a new tax/fee/levy/regulation for the oil industry, big oil decries it in public but smiles in private. Why? Just another barrier to entry for new competition. It's almost as if the govvies are collaborating to ensure an oligopoly.

There are positives, higher oil prices have made things like the Canadian oil sands a profitable place to drill.

What am I saying? Enjoy your profits, rebalance your portfolio, lean days for oil will come again.

no doubt, the American public guzzles too much gas and could save up to 50% if we switched to small cars, like Europeans drive. And, if demand decreased, prices would drop. So, is it solely up to us to get prices lower ? Or should Big Oil and Big Government help out by searching for more oil and building more refineries ?
Should Big Government mandate more fuel efficient vehicles ?

 

[laurence]

The only thing I want big government to do is close the stupid exemption for "big trucks". I'm sorry, a BMW X5 is not going to be used for farm labor!

As far as refineries, everybody wants more of them, just not in their back yard.

People have been talking save the earth for decades, I have donated more than a few bucks to such causes. But nothing happened until gas prices shot up. Now I have neighbors buying things like a toyota matrix instead of an H2. I say let the prices rise, we are still below the average price in the EU.

I'm open to any suggestions, Maddy.

 

[maddythebeagle]

I'm open to any suggestions, Maddy.

my comment was to the original poster. If you are an exxon shareholder, you probably should know a little more on the issues, than to listen to Barbara Boxer on C-span using the issue as a political tool.

 

[Texas Proud]

Most of the people shouting about the 'high' prices are the ones driving the gas guzzler trucks and SUVs.... I could care less about saving them any money...

The oil industry is making 'record' profits because they have 'record' investments... They are not way out of line with their ROI or ROA... I saw something where Citi has a profit margin of 33%!!! The industry is BIG, REALLY BIG... Sales for Exxon was something like $100 Billion... in 3 months... compare that to the TOTAL GDP of New Zealand for a full year of $92 billion...

Also, they have a tax provision for the quarter of $6 billion... and that is only their income taxs.. not all the others they have to pay.

The free market works great... let it work.

 

[renferme]

I'm driving a 2000 Camry getting about 23 to 24 city and 29 highway.
And it's paid for long ago. .
Not exactly a guzzler.
Won't buy a new car until the Camry dies and then I'll probably get something like
a Corolla.
.
Sure the free market works great, no doubt about it.
I'm talking morals and ethics here, not capitalism.

 

[uncledrz]

I get a little nervous when we start talking about throwing the morality claim against big oil when the business they are in is legal and provides a necessary service and product to the consumer of its product (individual, business or government).
The run up in prices has always given me cause to question whether there is collusion, but each and every investigation has shown that there is not.
So I say get rid of the government policies that induce high fuel consumption (i.e. the immediate write off for vehicles over 6,000lbs) and let the market set the price for fuel. Equilibrium will eventually reached with either increased supply or (heavens no, not in the US!) decreased consumption.
Uncledrz

 

[justin]

I'm driving a 2000 Camry getting about 23 to 24 city and 29 highway.
And it's paid for long ago. .
Not exactly a guzzler.

Not by American standards. But that gas mileage in Europe would probably be on the higher end of gas consumption inefficiency. Of course you'll pay double what you pay here for gas. It's all relative.

 

[TargaDave]

I have no problem with these oil profits or with GM-Ford-etc being on the ropes. As the traditional oil supply eventually starts to taper off giants like XOM will have to adapt. GM-Ford-etc did not adapt as needed and they are loosing.

I also agree with Bogles recent statements about corporate officers often putting self interest ahead of shareholder interest. That's a corporate governance issue not a profit issue.

 

[Dry Socks]

I also agree with Bogles recent statements about corporate officers often putting self interest ahead of shareholder interest. That's a corporate governance issue not a profit issue.

This is interesting...
Self interest (enlightened or otherwise) is the basis of capitalism. I would expect corporate officers to always put self interest first but still follow the law. The system has to be designed to work with self interest at its root.

 

[Nords]

I would expect corporate officers to always put self interest first but still follow the law.

Hah!

Not to people like Mike Milken, Ivan Boesky et cie (which actually included Gary Winnick?!?), Mark Whitacre & the top 20 of ADM, Prudential of the 1980s, Solomon Bros of the '90s, anyone in Enron's top 100, Sunbeam with Chainsaw Al, Tyco with Dennis K., Global Crossing, Wall Street tech analysts... the list goes on & on. And for every documentary book I read I suspect that there are hundreds of unindicted co-conspirators & thousands of other undiscovered felons.

Self-interest to the exclusion of the law? No problem.

 

[Dry Socks]

Hah!

Ok, you're right.
I should have said:

I would expect really really hope corporate officers always put self interest first but still follow the law.

 

[HFWR]

Our CEO made 63x my income last year...

Is he worth it? Apparently the BoDs think so...

 

[renferme]

Ethical behavior and following the law ? Two different things.
A person can be unethical and immoral and still follow the law ?
Is that right? Depends on who you ask.
.
CEO pay ? They're not worth it. The argument that to get high quality executives you have to pay big bucks doesn't hold water, IMHO.
I know lots of high quality people, highly intelligent people, people with smarts and common sense, and excellent business sense, that are ethical and moral and would make terrific executives but will never get the chance.
.
Poor management leads to future poor management because the executives promote people just like themselves. At least that way in my old company and other companies I suspect.
But that's another issue altogether.
.

 

[brewer12345]

Ethical behavior and following the law ?    Two different things.
A person can be unethical and immoral and still follow the law ?
Is that right?   Depends on who you ask.
.
CEO pay ?    They're not worth it.    The argument that to get high quality executives you have to pay big bucks doesn't hold water, IMHO.
I know lots of high quality people, highly intelligent people, people with smarts and common sense, and excellent business sense, that are ethical and moral and would make terrific executives but will never get the chance.
.
Poor management leads to future poor management because the executives promote people just like themselves.    At least that way in my old company and other companies I suspect.
But that's another issue altogether.
.

I've met execs who are clearly worth every penny and those who aren't worth a penny. The real problem is that it is hard for shareholders to tell the difference and next to impossible to remove the lousy ones until the damage has aready been done. This is governance issue, not a moral or legal one.

As for oil profits, C'mon guys, give it a rest. If you make more money than the average investor, should the gummint take the excess away? Will the gummint be there to bail Exxon's shareholders out when they have a bad year? Don't think so.

 

[renferme]

I've met execs who are clearly worth every penny and those who aren't worth a penny. The real problem is that it is hard for shareholders to tell the difference and next to impossible to remove the lousy ones until the damage has aready been done. This is governance issue, not a moral or legal one.

As for oil profits, C'mon guys, give it a rest. If you make more money than the average investor, should the gummint take the excess away? Will the gummint be there to bail Exxon's shareholders out when they have a bad year? Don't think so.

I thought it was a good topic for discussion. If we give it a rest, then should we not give everything else a rest and then no more discussion ?

 

[brewer12345]

I thought it was a good topic for discussion.   If we give it a rest, then should we not give everything else a rest and then no more discussion  ?

Ok, so what is your solution? You want to socialize the industry? Tax away profits? Something else? Hold forth, oracle.

 

[Texas Proud]

Sure the free market works great, no doubt about it.
I'm talking morals and ethics here, not capitalism.

So, say you live in San Francisco and you bought your house many many years ago for $20,000.... Now, it is worth $1,000,000..  is it morally and ethically wrong for you to sell it to someone at $1,000,000? This is 49X your cost.  

The oil companies are selling a commodity that is priced on the open market.  If they own it in the ground they should be able to sell it for the going rate.. if that is a big profit then so be it...  Your complaint is that since they are so BIG they make a lot of money.  But, why do you not complain about Microsoft selling their product at a much HIGHER margin than oil?  

What about drug companies that have one of the highest profit margins around?  

So, I do not have a problem with their high profits even though I do not like the price of gas (or should I say liked as it has come down a LOT).

 

[Lazarus]

Just a small point. There is no such company as Exxon it is ExxonMobil. Stock symbol XOM.

Corporate morality? No such thing. A corp. exists to make money and for no other reason. If you don't like their actions, don't buy the product or their stock. I know it's not possible to do without some products like gas.

How about tobacco companys? Their product is expensive and kills you! People still buy it and the stock.


I own XOM stock but my statements would be the same if I didn't.

 

[MooreBonds]

As another post has said....what about Citigroup and Bank of America? They earn BILLIONS in profits! Where's the 'excessive profits' on them?

And as ConocoPhillips exec pointed out - they earn something like 7% net income on their revenues. 7% Net income off of your revenues sure as hell isn't 'price gouging' to me.

One last question - as will undoubtedly happen, when India and China start to modernize and import massive more quantities of grains and meat/poultry to feed their combined 2 billion people: will we suddenly cut the farm subsidies and exact an "excessive food profits tax" on the farmers when the price of chicken breasts doubles and you pay $3/lb for sugar due to a doubling of the world demand, even though they're making just as much percentage-wise on their sales, due to higher costs for fuel and fertilizer?

 

[eridanus]

The consumer has, in most cases, the ultimate power - Stop Buying. Also, we get the (oil-friendly, chicken-hawk) government we elect.


Full disclosure: I own CVX and PBR (great run!).

 

[Gone4Good]

In a competitive market the surest cure for high prices is . . . high prices.

High prices cause demand destruction - i.e. energy conservation

High prices cause alternatives to become viable - i.e. hybrid cars

High prices cause increased investment in new supply

It is through high prices that the market signals the need for greater investment and encourages conservation of a scarce resource. It is also the mechanism by which scarce resources are rationed.

If the government tampers with the pricing mechanism by mandating lower prices than a number of things happen 1) lower prices discourage new investment which prolongs the resource scarcity 2) artificially low prices encourage over consumption of the scarce resource 3) over consumption and under investment causes rationing through another mechanism - shortages (as in gasoline lines).

Anyway, in a country where people gladly pay $2-$4 for a 16 oz cup of coffee and $1.25 for a 20 oz bottle of water, isn't it a little bit silly to be soooo angry over paying $3 for 128 oz (1 gallon) of gasoline.

 

[renferme]

I think everyone is aware that Exxon is ExxonMobil XOM.
It saves 5 key strokes to just refer to them as Exxon.
.
Solutions: wish I had one; thought that members on this forum could discuss; maybe a few solutions would pop up.
.
Of course, in the macro sense, high prices are or should be best for America.
But in the micro sense, it's hurting me and many others.
.
One of my original questions has not been addressed: What do you think big oil will do with the PROFITS made recently? Anyone in the oil industry out there ?
Does big oil expect big government to build new refineries for them ?