April 2, 200818 yr Think before you type. Where did I even insinuate that I "hate" oil companies? That the best you can do? Just admit you were wrong.
April 2, 200818 yr Exxon better pump a few billion into the McCain fund... if a dem gets in office they are going to attack big oil with a punch to the face. Very interesting campaign, gas prices is about 40% of most peoples concerns. I wanna see what happens between 2009-2012, if they don't get the gas down I wouldn't get comfy. If that happens, then you will think that $4.00 a gallon is cheap.
April 2, 200818 yr If that happens, then you will think that $4.00 a gallon is cheap. Interesting...why?
April 2, 200818 yr Think before you type. Where did I even insinuate that I "hate" oil companies? That the best you can do? Just admit you were wrong. Comments like these just evade the issue.....it does not matter who is wrong and who is right. It matters what policies are effective or ineffective.
April 2, 200818 yr Exxon better pump a few billion into the McCain fund... if a dem gets in office they are going to attack big oil with a punch to the face. Very interesting campaign, gas prices is about 40% of most peoples concerns. I wanna see what happens between 2009-2012, if they don't get the gas down I wouldn't get comfy. If that happens, then you will think that $4.00 a gallon is cheap. Interesting...why? Oil companies aren't going to respond to a "punch in the face" (which I assume is a tax increase) by lowering prices. I can't think of any effective methods of forcing oil companies to lower their prices, because most methods would dramatically lower the quantity and quality of the supply (similar to rent control). Anyways, Republican or Democrat in office, I don't see why prices won't climb to $4.00. I, for one, can't wait till alternative fuels are developed, to at least foster some competition in the area of energy. But obviously it isn't cost-effective right now or someone would have done it already.
April 2, 200818 yr Would it make you feel any better if Exxon-Mobile split up into 50 smaller companies, each making less than $1 billion/year in profits? Some of the largest companies in the world are oil companies. Well, yes, actually it would. More suppliers = more market competition and lower prices for consumers. The oil companies have been allowed to merge to such an extent that there are now a relatively small number of very large and powerful competitors.
April 2, 200818 yr I love reading peoples rants about the big mean nasty oil companies. Their profit margin, for the most part, is a little under 9%. Pretty modest profit margin IMO. Oil Industry Taxes Have Outpaced Oil Industry Profits Since 1977. You guys simply aren't looking at this correctly. The profitability of an industry is defined by it's Return on Equity, that is, the rate of return on invested capital. The "profit margin" or Return on Sales (ROS) as many have been referring to, only tells part of the story. The Return on Equity is defined by the Du Pont Identity as: ROE = Return on Sales X Asset Turnover X Financial Leverage or ROE = (Net Profit / Sales) X (Sales/Assets) X (Assets/Equity) There are examples of industries with very high profit margin products (an example would be a jeweler, who sells diamond rings with very high profit margins, but must maintain a large inventory of expensive goods that don't turn over very often). There are examples of industries with very high Asset Turnovers (example is a supermarket, which makes very low profit margins of 1-2% on the groceries it sells, but turns over its inventory at a very rapid rate). There are examples of industries with high financial leverage or debt levels relative to their shareholder equity (example would be the banking sector). Bottom line is, you can't just look at "profit margin" or Return on Sales to judge the profitability of an industry. Here are some Return on Equity figures for various major industries posted on Yahoo Finance: Discount, Variety Stores (example: Wal Mart) ROE=17.4% Drug Manufacturers (example: Glaxosmithkline) ROE=20.2% Electrical Utilities (example: Duke Energy) ROE=12.2% Biotechnology Companies (example: Amgen) ROE=5.1% Cable TV Services (example: Comcast) ROE=7.1% Money Center Banks (example: Bank of America) ROE=11.2% Aerospace/Defense Product & Services (example: Northrop Grumman) ROE=18.3% Residential Construction (example: Pulte Homes) ROE=0.0% Auto Manufacturers-Major (example: Toyota) ROE=0.0% Life Insurance (example: MetLife) ROE=14.7% Food-Major Diversified (example: Kraft Foods) ROE=11.7% Major Integrated Oil & Gas (example: ExxonMobil) ROE=24.5% Bottom line is, the major oil producers are extremely profitable compared to other sectors in our economy (especially given the size of the industry).
April 2, 200818 yr You guys simply aren't looking at this correctly. The profitability of an industry is defined by it's Return on Equity, that is, the rate of return on invested capital. The "profit margin" or Return on Sales (ROS) as many have been referring to, only tells part of the story. The Return on Equity is defined by the Du Pont Identity as: ROE = Return on Sales X Asset Turnover X Financial Leverage or ROE = (Net Profit / Sales) X (Sales/Assets) X (Assets/Equity) There are examples of industries with very high profit margin products (an example would be a jeweler, who sells diamond rings with very high profit margins, but must maintain a large inventory of expensive goods that don't turn over very often). There are examples of industries with very high Asset Turnovers (example is a supermarket, which makes very low profit margins of 1-2% on the groceries it sells, but turns over its inventory at a very rapid rate). There are examples of industries with high financial leverage or debt levels relative to their shareholder equity (example would be the banking sector). Bottom line is, you can't just look at "profit margin" or Return on Sales to judge the profitability of an industry. Here are some Return on Equity figures for various major industries posted on Yahoo Finance: Discount, Variety Stores (example: Wal Mart) ROE=17.4% Drug Manufacturers (example: Glaxosmithkline) ROE=20.2% Electrical Utilities (example: Duke Energy) ROE=12.2% Biotechnology Companies (example: Amgen) ROE=5.1% Cable TV Services (example: Comcast) ROE=7.1% Money Center Banks (example: Bank of America) ROE=11.2% Aerospace/Defense Product & Services (example: Northrop Grumman) ROE=18.3% Residential Construction (example: Pulte Homes) ROE=0.0% Auto Manufacturers-Major (example: Toyota) ROE=0.0% Life Insurance (example: MetLife) ROE=14.7% Food-Major Diversified (example: Kraft Foods) ROE=11.7% Major Integrated Oil & Gas (example: ExxonMobil) ROE=24.5% Bottom line is, the major oil producers are extremely profitable compared to other sectors in our economy (especially given the size of the industry). I know very little about it, but isn't ROE more effective in comparing businesses within an industry? ROE= Net Income / Shareholder's Equity Profit Margin= Net Income / Net Sales Revenue It would seem that ROE would just reveal how much income a company can make based on their capital, where as Profit Margin depends more on the actual pricing, amount of goods sold, and costs/expenses. I could be wrong, though.
April 5, 200818 yr Case 1: Big Oil profit margin on 1 gallon of gas = 9% Cost of 1 gallon of gas excluding Big Oil profit = $2.00 Big oil profit per gallon = $0.18 Total cost of 1 gallon of gas = $2.18 Case 2: Big Oil profit margin on 1 gallon of gas = 9% Cost of 1 gallon of gas excluding Big Oil profit = $3.00 Big Oil profit per gallon of gas = $0.27 Total cost of 1 gallon of gas = $3.27 Comparison of Case 1 versus Case 2: Difference in profit margin = 0% Increase in total Big Oil profits = 50% Total increase in price of 1 gallon of gas = $1.09 Increase in price of 1 gallon of gas due to Big Oil Profit = $0.09
April 5, 200818 yr Oil companies aren't going to respond to a "punch in the face" (which I assume is a tax increase) by lowering prices. I can't think of any effective methods of forcing oil companies to lower their prices, because most methods would dramatically lower the quantity and quality of the supply (similar to rent control). Anyways, Republican or Democrat in office, I don't see why prices won't climb to $4.00. I, for one, can't wait till alternative fuels are developed, to at least foster some competition in the area of energy. But obviously it isn't cost-effective right now or someone would have done it already. I think you will be surprised, in a good way of course, you are a consumer like me. Remember this upcoming president only has a 4 year lease, in a recent CNN poll, 42% of Americans voted gas prices#1 in their voting concerns. If gas goes up anymore and if they can't get it down at least 50 cents I wouldn't get comfy if I were them. The Bush admin has done little to try to lower gas other than ask the Saudis for more oil. Lets be honest the dollar gas days are gone but there is no reason why we can't get in in the low 2's. The democratic president will clash with them and really take it to them making it so that they have to get oil down to around 50-60 (where it should be now). Making gas about 2.20, which is still comical because that will still equal billion dollar profits for big oil. The question is are they going to continue to have record profits, or just really strong profits.
April 5, 200818 yr I think you will be surprised, in a good way of course, you are a consumer like me. Remember this upcoming president only has a 4 year lease, in a recent CNN poll, 42% of Americans voted gas prices#1 in their voting concerns. If gas goes up anymore and if they can't get it down at least 50 cents I wouldn't get comfy if I were them. The Bush admin has done little to try to lower gas other than ask the Saudis for more oil. Lets be honest the dollar gas days are gone but there is no reason why we can't get in in the low 2's. The democratic president will clash with them and really take it to them making it so that they have to get oil down to around 50-60 (where it should be now). Making gas about 2.20, which is still comical because that will still equal billion dollar profits for big oil. The question is are they going to continue to have record profits, or just really strong profits. Big Oil would lose billions if they sold gas at the price you describe as "still comical". With all due respect, your statements that seem to indicate that oil companies could significantly reduce the price of gas anytime they wanted leads me to believe that you are clueless on the ecomomics of Big Oil. The three biggest factors in setting the price of a gallon of gas in the US right now are supply (controlled mostly by Arab states, Russia, and a few other countries), global demand (which is increasing because of China and India), and the weak US dollar.
April 5, 200818 yr Big Oil would lose billions if they sold gas at the price you describe as "still comical". With all due respect, your statements that seem to indicate that oil companies could significantly reduce the price of gas anytime they wanted leads me to believe that you are clueless on the ecomomics of Big Oil. The three biggest factors in setting the price of a gallon of gas in the US right now are supply (controlled mostly by Arab states, Russia, and a few other countries), global demand (which is increasing because of China and India), and the weak US dollar. While I think you are right about the factors involved I'd like to address the first one bolded. John Anthony makes an interesting observation about putting political pressure on the Saudis and others. I've felt that the biggest problem I've had with both Bush's during the presidency was their unwillingness to put severe pressure on certain countries. (George 1 merely looked the other way when China cracked down on the freedom protests in Beijing) The current President hasn't put a lot of pressure on the Saudi's to bring the prices down and supply up. Many say they have us and there's nothing we can do. To some extent that's true. However the truth is that the Saudi's oil barons and leaders are propped up by the US presence. If we threaten to remove our protection there would be severe tensions with Islamic extremists who would push for change or revolution. Sometimes you have to use the only chip you've got and for us it is our backing of the current Saudi structure that isn't all that popular with people there. Just a thought.
April 5, 200818 yr I think you will be surprised, in a good way of course, you are a consumer like me. Remember this upcoming president only has a 4 year lease, in a recent CNN poll, 42% of Americans voted gas prices#1 in their voting concerns. If gas goes up anymore and if they can't get it down at least 50 cents I wouldn't get comfy if I were them. The Bush admin has done little to try to lower gas other than ask the Saudis for more oil. Lets be honest the dollar gas days are gone but there is no reason why we can't get in in the low 2's. The democratic president will clash with them and really take it to them making it so that they have to get oil down to around 50-60 (where it should be now). Making gas about 2.20, which is still comical because that will still equal billion dollar profits for big oil. The question is are they going to continue to have record profits, or just really strong profits. The government cannot control prices without creating severe shortages and a black market. Nixon tried it, Castro tried it, Hugo Chavez tried it, a long series of Soviet leaders tried it. Never does forcing retailers to sell goods and services at a lower prices have the intended results. Such proposals seem to work politically (see Nixon's WIN campaign) because the American electorate as a whole is ignorant of history and Capitalism 101. Americans also seem oblivious to the "fool me once, shame on me, fool me twice, shame on you" rule.
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