Who Profits Most From Gas Prices?

[smokey51 14]

OK, so Exxon Mobile earned $36 billion in profits last year. But who profited even more? According to the Tax Foundation the biggest price gouging profiteer was the US government to the tune of $54 billion in oil and gas taxes.

Since 1977, the US and state governments have collected more than $1.34 billion in gas tax revenues in inflation adjusted dollars. That is more than twice the domestic profits of all the US oil companies combined.

What gamble did the govt's take to earn their "profit". The sad part is, Exxon Mobile could lose $36 billion (their profits are cyclical) but the govt's would get their profits just the same. The only way govt's lose is if we start using less oil. Of course then, they would just raise taxes to make up for the loss.

Happy "Tax Freedom Day", April 26,2006.:)

Smokey

[Mountain View 14]

I would be interested to know what government provided services people would be willing to give up to lower thier taxes. Try to be specific. How would it directly affect you? My guess is folks want taxes lowered, as long as any resultant reduction in services doesn't directly affect them. It's a given that government is inefficient so saying, "ring out the waste" doesn't really answer the question.

[dk34 14]

The profit margin on oil to the oil companies is actually very, very low. They just amke their money in volume. As a country, we have done NOTHING to reduced demand over the last 30 years.

[Ron Musgraves 240]

OK, so Exxon Mobile earned $36 billion in profits last year

I believe that was just last 1/4

[Jeff 232]

I believe that was just last 1/4

I think your right that figure seems low since they are giving the CEO $400,000,000 retirement Hell they show maybe lower profit %'s ( not this past year)but that doesnt account for the crazy salaries & retirement packages they give the top execs. They have higher profits if they took back the 4 mill

Just my $.00002

[smokey51 14]

The $36 billion profit figure is correct for 2005 and revenue grew to $371 billion for a gross profit of 9.7%(low compared to many other companies).

The federal gas tax is 18.4 cents per gallon, and the average state and local tax is 28.5 cents per gallon!

Of more interest, in the past 25 years, oil companies directly paid or remitted $2.2 trillion in taxes, after adjusting for inflation, to federal and state governments including excise taxes, royalty fees, and federal and state corporate income taxes. That equates to more than three times what they earned in proits for the same period (Department of Economic Analysis and the Department of Energy.

And Jeff, I am not 100% sure, but I believe the $400 million is spread out over many years.

Smokey

[PLD 14]

I think your right that figure seems low since they are giving the CEO $400,000,000 retirement Hell they show maybe lower profit %'s ( not this past year)but that doesnt account for the crazy salaries & retirement packages they give the top execs. They have higher profits if they took back the 4 mill

Just my $.00002

Just a few points that have been overlooked.

First, that payout was an obligation made in his employment contract 13 years ago. Taking it back is NOT an option unless they want to be sued for breach of contract (and risk paying even more). The retirement package was based on performance, and he performed well enough under the terms to earn 356 mil.

Second, that 350 million is paid out over 12 years IIRC. That's 29.5mil or about 60% of his last years salary. For the rank and file employee who has a pension plan (rare nowadays), 50% of their last years salary is not unheard of.

Third, Exxons net profit for 2005 (yes, the whole year) was 36.13 billion. If Lee Raymond disavows his entire retirement it would affect profits by a miniscule 0.082%.

Fourth, in 2005 Exxon sold an estimated 1.58 billion gallons of gas. Assuming exxon sold only gasoline and made no money from other petro products, rebating Raymonds entire retirement to the consumer would 1.9c/gallon. At present levels of $3.00/gallon, that works out to 0.63%

Fifth, under Lee Raymonds leadership shareholders have experienced a 274 BILLION dollar increase in the value of their stock over the past 10 years. His retirement package amounts to just 0.13% of that amount. Even so, that 274 billion growth has benefitted sharholders in Vanguard, Fidelity, Spartan, Washington Mutual. These funds are part of employee 401k packages nationwide, teachers retirement funds, insurance porfolios, etc. Bottom line, Lee Raymond's leadership has enabled MANY people to retire, or proceed toward retirement, etc with greater success.

Sixth, at todays prices ($3/gal) Exxon made 20.7c/gallon. Government made 45c/gallon (on average, NY = 65c). At 2004 prices, exxon made 0.13c/gal while government made about 40c/gallon. If prices fall dramatically in 2006, and exxon loses money, the govt will STILL get it's huge cut. That said, WHO is doing the gouging ?

Finally, study their CASH FLOW statements for a long period of time. Exxon deals in a highly volitile commodity product. If the price falls next qtr and they are still using this qtrs inventory they LOSE money. In fact during a steady decline, they lose money repeatedly until prices again begin to rise. During this period they must live off the outrageous 8% profits they made during good times. And yes, gas prices do fall and they fall dramatically. Look at the gas price chart I posted in a seperate thread and pay special attention to the years Reagan and Clinton were in office. No cash reserves during a downturn like those = bankruptcy.

[PLD 14]

I would be interested to know what government provided services people would be willing to give up to lower thier taxes. Try to be specific. How would it directly affect you? My guess is folks want taxes lowered, as long as any resultant reduction in services doesn't directly affect them. It's a given that government is inefficient so saying, "ring out the waste" doesn't really answer the question.

All except army, police, fire, & judicial. Keep no service that does not exist to ensure my right to life, liberty, an property.

[VanDiesel99 14]

Professor, why did you choose powerwashing? You seem like you would have been a helluva lawyer.

[Jeff 232]

Just a few points that have been overlooked.

First, that payout was an obligation made in his employment contract 13 years ago. Taking it back is NOT an option unless they want to be sued for breach of contract (and risk paying even more). The retirement package was based on performance, and he performed well enough under the terms to earn 356 mil.

Second, that 350 million is paid out over 12 years IIRC. That's 29.5mil or about 60% of his last years salary. For the rank and file employee who has a pension plan (rare nowadays), 50% of their last years salary is not unheard of.

Third, Exxons net profit for 2005 (yes, the whole year) was 36.13 billion. If Lee Raymond disavows his entire retirement it would affect profits by a miniscule 0.082%.

Fourth, in 2005 Exxon sold an estimated 1.58 billion gallons of gas. Assuming exxon sold only gasoline and made no money from other petro products, rebating Raymonds entire retirement to the consumer would 1.9c/gallon. At present levels of $3.00/gallon, that works out to 0.63%

Fifth, under Lee Raymonds leadership shareholders have experienced a 274 BILLION dollar increase in the value of their stock over the past 10 years. His retirement package amounts to just 0.13% of that amount. Even so, that 274 billion growth has benefitted sharholders in Vanguard, Fidelity, Spartan, Washington Mutual. These funds are part of employee 401k packages nationwide, teachers retirement funds, insurance porfolios, etc. Bottom line, Lee Raymond's leadership has enabled MANY people to retire, or proceed toward retirement, etc with greater success.

Sixth, at todays prices ($3/gal) Exxon made 20.7c/gallon. Government made 45c/gallon (on average, NY = 65c). At 2004 prices, exxon made 0.13c/gal while government made about 40c/gallon. If prices fall dramatically in 2006, and exxon loses money, the govt will STILL get it's huge cut. That said, WHO is doing the gouging ?

Finally, study their CASH FLOW statements for a long period of time. Exxon deals in a highly volitile commodity product. If the price falls next qtr and they are still using this qtrs inventory they LOSE money. In fact during a steady decline, they lose money repeatedly until prices again begin to rise. During this period they must live off the outrageous 8% profits they made during good times. And yes, gas prices do fall and they fall dramatically. Look at the gas price chart I posted in a seperate thread and pay special attention to the years Reagan and Clinton were in office. No cash reserves during a downturn like those = bankruptcy.

OK thanks for explaining that, I was wrong again. Those poor oil execs

NOT!!! OIL COMPANIES S--K and 400 mill is still crazy and I dont feel for oil companies one bit and as for taxes we have to pave the roads for the cars to drive on so those cars can get the gas that make them oil execs rich.

I actually dont hate oil companies I just dont like them right now

Phil do you really study their CASH FLOW statements and all this other stuff?. Just a thought why dont you get your nose out of all those books and go wash something dude. If I had all your brains I'd be the PW King by now. Hell I wish I had 1/2 your brains my desk & office paperwork wouldnt be such a disaster and I'd have more time to hustle work and get rich like all those big corps.

Are we going to have fun on this topic!!!!

Sorry, I was wrong about their profits for the year, I just heard the #'s you all mentioned on that darn Fox news

[smokey51 14]

Yes, and the oil companys have to make all that money so they can reinvest in finding oil (well, where the liberals will let them drill) invest in more equipment, do research including alternative energy sources, pay all them stockholders, etc, etc., etc.

I think our biggest problem is we don't realize just how much it takes to bring us gas to the pump, and quite frankly I have a hard time digesting just how much all that money really is. I work better when it's percentages where the numbers stay in the 2-3 digit range!

By the way Jeff, would you be satisfied making 10% profit each year? I don't think so or you would not be out there busting you butt everyday.

Have a great day

Smokey

[Jeff 232]

Yes,

By the way Jeff, would you be satisfied making 10% profit each year? I don't think so or you would not be out there busting you butt everyday.

Sure if it was on billions a year and then I get a 400 million retirement. 10% sounds good

Smokey dont take me to seriously. I just like to blab about this stuff, because truly no matter what goes on (except something tragic) I just keep rolling on

Hell I just wasted a bunch of gas the other week, I was getting new tires so I went out and smoke the heck out of my old ones, had fun hadnt done that in a long time. I just want to keep the execs in the money LOL

[CCPC 26]

Oil companies don't bother me much, I'm working on an engine for my PW and for my truck that runs on poop. Can't wait!!

[PLD 14]

Professor Doolittle, why did you choose powerwashing? You seem like you would have been a helluva lawyer.

Moderator!!! Van is saying very nasty things about me! ;)

My 2nd love is computer engineering, my first is my family. When one (work) did not accomodate the other any longer, it had to go. Since I had build my home and lifestyle around a rather substantial income, I needed something that I could develop quickly. Other requirements were: No travel, flexible hours (for kids activities), and close to home. PW fit all of that.

As for law, it does interest me a great deal. I love a good debate, and will even take sides that I do not agree with for the sake of exploring the issue. But I'm not sure if it's somthing that I could do every day for 10 years, or would simply tire of it in a year. Hence, I have not been able to convince myself that going back to law school would be a wise investment of my time or money.

[PLD 14]

Phil do you really study their CASH FLOW statements and all this other stuff?. Just a thought why dont you get your nose out of all those books and go wash something dude. If I had all your brains I'd be the PW King by now. Hell I wish I had 1/2 your brains my desk & office paperwork wouldnt be such a disaster and I'd have more time to hustle work and get rich like all those big corps.

Just their 10-Q's. You didn't think I made those stats up, did you?

As for washing things, "we" have been busy all day. Right now, I'm exploiting some poor laborer who's out washing houses while I eat lunch and talk on TGS. And since it's three pm, my work calendar says that we are currently exploiting a senior citizen for the outrageous sum of $125/hr. #2 of the day, IIRC.

P.S. My desk is also a disaster...

[PressurePros 248]

6.5% margin isn't going to set the world on fire but when you are talking about billions of dollars in gross sales, it's rather healthy. My family's retail beer distributor works on about ten percent net margin and it's a healthy per annum dollar.

Restrictions won't work. Tax decreases aren't going to happen. Everyone isn't going to trash their Hummers and SUV's and enviromental restrictions aren't going to less in the long run. It's really left to the individual. I do check tire pressure more often, accelerate more smoothly and maintain 65 mph or under. I'm a horsepower freak so the idea of a hybrid car I'd have to push up a steep hill is not yet in the cards but I am trying to come around.

What I don't understand is when a barrel of crude goes up $.95 pump prices rise by $.15/gallon. Based on margin and yielding 20 gallons of refined gas from a barrell it should be about a nickel. I guess panic is a valid economic variable to supply and demand.

[Mountain View 14]

Interesting interview with Petroleum Industry Spokesman on CNN internet site. Something for everyone in this story. Search for "Big oil defends gas prices".

[smokey51 14]

Ken, you talk about your family's beer distributor works on 10% margin, you have to realize the amount of people that effects, the amount they put back in the business, who gets paid what, etc. Admitted, billions sounds like a lot, especially to this feeble mind, but just think what they reinvest, all the thousands and thousands of stock holders they must pay, the risk they have taken, etc. If you compare the two equally, then I think you can have some kind of respect for the oil industry.

I keep hearing people talk about a "windfall" profits tax on big oil but that would never work. What would their incentive be to make a profit. I bet we would be in gas lines then for sure. And as long as they are at it, why not have a "windfall" tax for Microsoft, Dell, and GE, all who had better profit margins than the oil companies.

Its just business!

Smokey

[PLD 14]

I'm a horsepower freak so the idea of a hybrid car I'd have to push up a steep hill is not yet in the cards

Have you seen the new Lexus hybrid? Very slick car. Apparently, hybrids can be designed for fuel economy or performance. Lexus designed for performance, and apparently was quite sucesssful at it. Anyway, many Lexus owners who bought the new "hybrid" for fuel economy were quite unhappy (did they not READ the brochure/mpg label before spending 40k?). Now for the good part; Apparently, in a hybrid the difference between performance and economy is all in the computer. So, in response to angry customers Lexus offered a free retrofit. The result? The Lexus hybrids (incl retrofits) now have a button to select performance or economy.

"268-hp [15:1 weight to HP ratio] Total Output - The RX 400h possesses exceptional power—not just for a hybrid vehicle, but for an SUV as well. That’s because the RX 400h is powered by both the V6 engine and electric-drive motor(s). As a result, the AWD enjoys a robust acceleration from 0 to 60 in 7.3 [1][2] seconds, outperforming many of its V8-equipped competitors. " - Lexus

[Mountain View 14]

tessssssssst

[Mountain View 14]

Think gas prices are too high? Gas prices aren't too high it's the very fact that our currency is nothing but debased paper backed by hot air, backed by bonds foreigners own. Want me to make a better point. In 1960 we had silver certificates backed and redeemable by 1oz of silver per dollar. In 1960 one dollar backed by silver purchased you 4 gallons of gas. Gas was selling at .25cents a gallon. Ok....fast forward to 2006. How much gas will $1.00 buy you? About 1/3 of a gallon. Well, well, well.........if we still had sound currency backed by silver, guess how many gallons of gas you could buy????? 1oz of silver is trading around $12.50 right now and it's price has parallelled the price of gas over time. Do you research. Guess how many gallons of gas that 1oz of silver would buy you right now???? 4 gallons of gas which is the same as it was in 1960. We've been hoodwinked by the federal reserve. I encourage you to go to www.realityzone.com and purchase the book "Beast from Jekyll Island" by Griffin to find out the truth. It will make you sick to your stomach, because you will never ever find the truth anymore in the mainstream press. I challenge you to do your homework. Also, keep voting for the Republicans or Democrats...and you will never get real change in this country because they are bought and paid for by the same powers to be behind the scenes.

[Mountain View 14]

Um, who's writing under my name and avatar????

[PressurePros 248]

Ken, you talk about your family's beer distributor works on 10% margin, you have to realize the amount of people that effects, the amount they put back in the business, who gets paid what, etc. Admitted, billions sounds like a lot, especially to this feeble mind, but just think what they reinvest, all the thousands and thousands of stock holders they must pay, the risk they have taken, etc. If you compare the two equally, then I think you can have some kind of respect for the oil industry.

I keep hearing people talk about a "windfall" profits tax on big oil but that would never work. What would their incentive be to make a profit. I bet we would be in gas lines then for sure. And as long as they are at it, why not have a "windfall" tax for Microsoft, Dell, and GE, all who had better profit margins than the oil companies.

Its just business!

Smokey

I would imagine R&D is factored in before net margin but I could be wrong. I understand they need to have dollars to continuosly develop effeciency and refinement strategy.

I do understand business (Bachelor of Science degree in economics from U of Penn) My point was not really to denegrate the profit structure of petroleum processing companies but to comment upon how net margin is usually lower than 15% in any business that operates with bricks and mortar and uses a volume trade business model.

There was a windfall tax during the 70's. It targeted oil companies as a amtter of fact. I believe most of it was phased out during the Reagan years (go figure) You are right, it is not effective.

If anyone should be targeted for any type of gov't control (which I disgaree with altogether) it is Pharmaceutical companies. They also have tons of R&D and operate under the benign guise of saving lives. They along with banks are flat out whores, imo.

[Mountain View 14]

From the Associated Press

"Congressional anxiety in this election year only grew this week as major oil companies began announcing huge first-quarter profits. Exxon Mobil Corp. on Thursday said it made more than $8 billion during the January-March period, the fifth largest quarterly profit for any public company ever."

Entire article http://news.yahoo.com/s/ap/20060428/ap_on_go_co/congress_oil

Another good one http://www.npr.org/templates/story/story.php?storyId=5365439

[Mike Williamson 198]

Right now, I'm exploiting some poor laborer who's out washing houses while I eat lunch and talk on TGS. And since it's three pm, my work calendar says that we are currently exploiting a senior citizen for the outrageous sum of $125/hr. #2 of the day, IIRC.

God aren't employees great??!!

[Mike Williamson 198]

Interesting interview with Petroleum Industry Spokesman on CNN internet site. Something for everyone in this story. Search for "Big oil defends gas prices".

http://money.cnn.com/2006/04/26/news/economy/oil_profits/index.htm

NEW YORK (CNNMoney.com) - Big Oil defended its record profits Wednesday, saying they weren't that out of line with other industries, and that recent consolidation in the sector was essential for the U.S. to remain competitive in the global oil business.

"Seven of the 10 largest oil companies in the world are owned by foreign governments," said Red Caveney, president of the American Petroleum Institute, according to a statement from a press conference. "Earnings and reinvestment numbers may seem big to you, but in an industry that must make multi-billion dollar investment decisions annually to remain competitive, they absolutely are necessary."

The statement was a clear bid to head off antitrust concerns voiced recently by several members of Congress. There is currently a bill moving through the Senate that would limit future oil company mergers, and some Senators have publicly called for the break-up of some companies.

Caveney also said oil prices have risen in line with other commodities. He responded to calls for the oil industry to invest more in production and renewable energy efforts by saying the oil industry had invested $100 billion in "emerging energy technologies" over the last five years, while all other industries and the federal government combined have invested just $35 billion.

Caveney said the real cause of high energy prices, and what policy makers should focus on, were barriers to more oil exploration in the U.S., too little focus on conservation, as well as rising geopolitical tension and rising worldwide demand.

"Over the past several decades, our nation has chosen a menu of public policy decisions that has resulted in decreased domestic energy production and done little to promote energy conservation and efficiency," he said. "If we all do not understand the factors that determine energy prices, we are never going to get the policy right."

The oil industry has come under fire recently as its profits, following the price of crude, have soared.

Exxon Mobil, the country's largest oil firm, reported annual earnings last year of $36.1 billion, or $1,146 a second, a record for any U.S. corporation.

Exxon is due to report its first quarter earnings Thursday. Oil prices have risen 6 percent since the company last reported Jan. 30.

In addition to talk of breaking up the oil companies, some lawmakers have called for a "windfall profits" tax and for the United States to sue OPEC for price collusion.

But many observers say these calls will do little to bring down the price of oil and gas, which is driven mostly by rising demand that is not being matched by an increase in supply and speculative buying by investment funds.