No, not a dobie. But the title and comparisons seemed apt to the Wally World thread.
Brief Summary: Exxon / Mobil posted record (overall record, not just company record) profits this quarter, to the tune of 9.92 billion dollars (up 75%). BP and other oil companies have (or are expected) to make similar announcements. The article implies the companies are trying to downplay these profits, and that's probably not a bad idea.
This article / issue has hit a sour note with me. At work a few of us have discussed this, and had expected very similar levels of profits as are being reported (in other words, record profits). I'm far from the most liberal (progressive, left-leaning, whatever phrase is accepted these days) person on these boards, but the actions of all the oil companies are simply absurd.
So, the question is what should be done about it? I know with Bush in the White House, it's likely nothing will be done, but if something were to happen, what do you all think it should be? Windfall taxes like the murmurs coming from Congress? Force the oil companies to reinvest the money into alternative energy sources? Force the oil companies to return the money to the people they took it from (this is assuming some level of price-fixing or price gouging)?
Ideas? Rants?
Feyd Baron, DoC
EDIT: For Grammar.
Posted by Goo Boy (Member # 7752) on :
Yeah.
Posted by Farmgirl (Member # 5567) on :
Well, my favorite brother-in-law works for Exxon/Mobile, so I would have to abstain from this vote.......
Posted by Lyrhawn (Member # 7039) on :
A lot of those Big Oil companies are starting to think of themselves less as "Big Oil" and more as "Big Energy." BP and Shell especially are diversifying beyond just oil. BP is getting into solar and wind. Shell is heavily investing in the tar sands of Canada where production is ramping up now that it's becoming more economically feasible to do so.
More and more oil companies are spreading out into alternative energy forms. Many of the big oil companies are looking into liqueified coal, which isn't yet cost effective, but could mean virtual energy independence for American for the next thousand years or so, though the environment would never sustain such pollution.
It's a slow change, but the energy companies are spreading out. With tax incentives, wind energy is now competitive, and they are leaping at the opportunities. There are dozens of new energy technologies being explored by these companies.
I don't think any government money at all should be used to help these companies to drill or explore or research. They have enough cash on hand to do all that by themselves.
Posted by ricree101 (Member # 7749) on :
At best they're a neccessary evil. Considering the price raises we've seen, these companies have some explaining to do.
Posted by sndrake (Member # 4941) on :
Well, with the mood of the American public getting increasingly ugly over this (and it may get uglier over winter heating bills), even traditional supporters are being critical (from the article linked in first post):
quote:Earlier this week, House Speaker Dennis Hastert said the oil companies must show they are acting responsibly to avert legislative efforts to go after the profits.
"Oil and gas companies are enjoying record profits. That is fine. This is America," Hastert said.
But he added: "Our oil companies need to do more to inform the American people about what they are doing to bring down the cost of oil and natural gas. When are new refineries going to be built?"
I saw a clip of Hastert saying this and it looked physically painful for him to get the words out. Calling on business to act responsibly is not something that comes naturally to him.
::Lives in Hastert's state, but not his district::
Posted by Architraz Warden (Member # 4285) on :
Lyrhawn,
I am quite happy the change from big oil to big energy is happening. My particular qualm at this time is I highly doubt that their investment into alternative enegies increased by even remotely the levels that their profits did. Personal observation, the only thing oil related that I saw rise by 75% lately is the price I pay to fill my car. I suppose that's what's chapping me off.
Posted by aspectre (Member # 2222) on :
Considering that Americans burn ~60% more energy than WesternEuropeans, it's hard to work up any outrage against BigOil when their customers like to waste money to waste fuel to waste the environment.
When combined with the Republican USSenators' and Republican USRepresentatives' opposition to any and all energy conservation measures -- with outright encouragement of burning more gasoline per passenger mile -- and the DubyaAdministration's non-reaction to the massive fraud which created the California"EnergyCrisis", high energy costs are exactly what people voted for in 2000, 2002, and 2004.
[ October 27, 2005, 03:43 PM: Message edited by: aspectre ]
Posted by Lyrhawn (Member # 7039) on :
Warden -
Yeah I know. I'm not trying to excuse their behavior, I'm just glad they are trying at all without being forced to by legislation. I think it's in part because they realize the era of oil profits is coming to a head, and they'd better use the money to ensure their future while they have it, rather than later when it could be disastrous. It's a smart business move, and it's good for the nation.
So far as sndrake's quote from Hastert. New refineries aren't being built because for most refinery owners they aren't profitable. There's no drive to build more, becuase they won't make any real money off them. Oil companies see no need to spend money to icrease supply when they have enough to meet demand, or enough to drive prices slightly higher for themselves.
I wouldn't mind more refineries being built, though not many, just enough to make sure that a single disaster can't cripple our supply. But building too many is going to give us false hope of alleviating the situation.
Posted by Kettricken (Member # 8436) on :
I’ll go with a necessary evil. The world has serious problems about the amount of fossil fuels being burnt, but in the short term there are economic gains to be had by burying our heads in the sand. Everyone should be thinking about how they can reduce the amount of fossil fuels they are using. Governments should be doing everything they can to encourage energy conservation, alternative sources for electricity and alternative fuels for cars.
Many of the technologies exist, but they are not as profitable as burning vast amounts of fossil fuels. All our futures depend on governments being brave and making short term sacrifices to ensure long term survival. People living in democracies should reward politicians who show this bravery. Unfortunately short sightedness is not limited to politicians and I suspect that if any party in power in the West did what was necessary to move away from our dependence on fossil fuels they would be rewarded by loosing their next election.
Posted by sndrake (Member # 4941) on :
Well, Frist has hopes of making a presidential bid in 2008, which is being complicated by a current investigation into his own finances and the unpopularity of many of this administration's policies. So it could be he's working on his image with that in mind.
It could also be a stalling measure for what the Democrats already want to do:
quote: Democrats have already introduced several proposals to outlaw oil price profiteering. The nationwide average retail gasoline price topped $3 a gallon soon after Hurricane Katrina hit and crude oil soared to a record $70 a barrel.
Posted by aspectre (Member # 2222) on :
Let's see, Frist is trying to blame the oil companies for the effects of the policies that he helped engineer... Yep, really admirable behaviour.
Posted by firebird (Member # 1971) on :
The last time oil companies made 'record' profits for the era was in the last oil boom which was promptly follwed by a huge crash. For the next 20 odd years oil price was low and these companies only stayed in business because they had big cofferes to fall back on.
I look at these current profits as short terms gains, in 3-4 years the oil price will fall agin to much lower levels as new supply capacity and new refineries come on stream and oil companies will be back to making minimal returns for the investment and risk that they take.
Posted by sndrake (Member # 4941) on :
firebird,
I just did a quick search and the last "record profits" - for Exxon, at least wasn't 20 years ago.
quote:DALLAS - Exxon Mobil Corp. saw fourth-quarter earnings jump 63 percent as it benefited from higher prices for crude oil and natural gas.
Exxon Mobil, the world's largest publicly traded oil company, said Thursday that it also set a record for earnings in one year, $21.51 billion, nearly double its profit for all of 2002.
Posted by Sterling (Member # 8096) on :
Right now, I'll vote for "wounded T-Rex."
Big, vicious, long the dominant predator; now angrily heading for inevitable extinction and tearing up everything in their way in a rage of refusal to accept their fate.
Posted by Lyrhawn (Member # 7039) on :
quote: I look at these current profits as short terms gains, in 3-4 years the oil price will fall agin to much lower levels as new supply capacity and new refineries come on stream and oil companies will be back to making minimal returns for the investment and risk that they take.
I wouldn't take these things for granted. New refineries will only be built if the government agrees to subsidize it, which I would find an apalling waste of tax payer dollars. They aren't profitable enough for oil companies to build them just for the heck of it.
As for an increase in supply capacity, that number isn't going to jump up either. Saudi Arabia can't increase production, Iraq won't have increased productionf or awhile, and the pumps in Iran are starting to pump out less per pump site than their peak years. The United States doesn't have a dozen oil derricks that can compare with one Saudi pump, so no increased supply there. Envionmentalists will keep drillers away from nature preserves and coastal waters.
Tar sand oil extraction will increase, but slowly, and as it increases, production in other areas of the world will start to fall, even while demand in China and India is skyrocketing.
Supply will never outnumber demand again.
Posted by erosomniac (Member # 6834) on :
Oil = plastic = modern sanitation and medicine.
Necessary, and not evil, really.
And much like Walmart, the businesses are just businesses, maximizing profit when they see an opportunity. I'd call that evil, but...well, it's just good business, especially when you have a captive audience.
Posted by ricree101 (Member # 7749) on :
quote:Originally posted by erosomniac: Oil = plastic = modern sanitation and medicine.
Necessary, and not evil, really.
And much like Walmart, the businesses are just businesses, maximizing profit when they see an opportunity. I'd call that evil, but...well, it's just good business, especially when you have a captive audience.
I disagree. Collectively, a handfull of companies have almost total control over a resource that is vital to our society.
When they cause fairly substantial price raises, yet have record profits, something needs to be done.
Posted by Shanna (Member # 7900) on :
My dad works for Shell and seeing the work he does, I've always had the best impressions of the company. He actually lead a big project on the east coast starting up a new branch of energy supplies and research for Shell.
I don't know what kind of numbers Shell is expected to post considering HQs were in New Orleans and they pretty much lost everything. For two weeks after Katrina, people were just making up numbers so they could have something down on the books.
I don't doubt that some people are using the recent crisis as an opportunity to cheat customers, but watching my dad work seven days a week because barrel prices keep soaring into scary territory...I think they're suffering as much as the consumers.
Posted by Lyrhawn (Member # 7039) on :
quote: I think they're suffering as much as the consumers
Based on what? They're being paid for their work. Where as customers are doing the paying.
Posted by King of Men (Member # 6684) on :
Yay, oil companies! Higher oil prices = bigger future pensions for Norwegians.
Posted by Shanna (Member # 7900) on :
They're getting paid exactly as much as they were before things got crazy, but to avoid falling into debt, they're having to work much harder. I remember hearing messages on our answering machines from agencies demanding the return on their million-dollar contracts because they don't think the companies can recover from the disasters.
Its not hard to sell gas, but its getting hard to find it. Its getting more expensive to procure and with all the drills in the Gulf now gone, its a mess. You can't sell and profit if you can't get your hands on the product.
I, personally, don't like people who complain about gas prices (especially owners of SUVs, I just laugh at them.) This country has had to well for too long as far as gas prices go. I hate paying $8 more each time I fill up my tank, but I've actually saved on gas this year because I've learned to conserve.
Posted by Lyrhawn (Member # 7039) on :
Oil workers in the northwest are being paid obscene amounts of money. I think it depends entirely on where you are when it comes to suffering oil workers. It's a little bit of hyperbole to say that all the drills in the gulf are gone. There were more than 200 platforms and drills in the Gulf before the hurricanes rolled through, and there are still more than 150 there, most of which I believe are operational.
Maybe things are getting a little harder, but oil companies have more than enough money to pay for diversification, which will only increase their profits in the long run, and they have enough money to survive in the short term as well. If the workers are having a problem, the problem is with the oil corporation they work for, not with the hurricanes or environment.
Posted by Beren One Hand (Member # 3403) on :
quote:Exxon Mobil, the world's biggest oil company, has announced record fourth-quarter profits of $5.12bn compared with $2.7bn the previous year.
The US oil giant attributes the huge growth in profits to soaring oil and gas prices.
And full-year profits climbed to $17bn, hitting a world record.
BBC
Posted by firebird (Member # 1971) on :
sndrake ... I think you missed understood what I meant to say.
We are in a 4-5 year phase of record profits (2003 is within that horizon) as profits sore because there has been insufficient investment in oil and gas infrastructure as nothing was commercially viable at $30 oil any more. But before this latest set of great profits there were about 20 lean years.
Supply reduced, demand increased (china) and so prices have risen to a level where there will be an is substancial re-investment in new fields / refineries / alternative techonologies (Tar sands, Gas to Liquids, Coal to Liquids). I think Shell is touting a figure of about $10 billion of new investment every year just to stay in business, $5 billionb to shareholders with not that much extra to put in the coffers for a rainy day. None of this will come on stream for about 4-5 years ... but it is definately being built.
[ October 28, 2005, 04:13 AM: Message edited by: firebird ]
Posted by twinky (Member # 693) on :
I'd just like to point out that US$3 per gallon isn't exactly a lot to pay for gasoline.
Added: That is to say, it's the lowest price in the Western world.
Posted by calaban (Member # 2516) on :
Consider that, despite the vilification of oil entities, they tend to be the leading researchers and contributers of reaserch funds for alternate and more efficient energy sources.
Then factor into that, that a barrel of crude hardly produces X amount of gas, diesel, tar, benzine or propane. In fact the diverse sulfer levels alone can cause massive headaches in the refinement process.
The needed environmental changes that have been made to the refinement process have cost each company within the industry billions. It's not their responsibility to cover that cost, it's ours as the consumer.
And when we finally do convert to alternate fuel sources these companies will be the ones footing a great deal of the bill for the implementation of the infrastructure.
Before a blanket vilification of a complex and diverse industry can be made I think we need to look at all the factors in the production of oil and that constitutes a lot of information most of us don't have.
Finally, over the last few decades we've payed far less of an inflationary rate for gasoline than we have for bread, cars, even soda.
Maybe we should get the stupid soda czars.
One question though; How is profit deined, is it money after investors are payed or before?
Posted by KPhysicsGeek (Member # 8655) on :
I would probably say Big Oil is at best good and at worst a neccesary evil. It clear with our present technology we need energy and big corperations are the most efficient ways to do it. It is also clear that we need to be developing alternative energy sources now (10-15 years ago would have been better) since oil from drilling has nearly reached a peak and as India and China continue to industrialize demand will continue to grow. Though the oil corperatoins did not start serious research early in the game, they are one group of only two I can think of that can fund such research (the other being the national government). Are the oil company's going to put profits above public welfare? Of course, that's what corperations need to do to compete, but it is not like they are intentionally bilking the public for no reason.
Posted by Architraz Warden (Member # 4285) on :
quote:Originally posted by twinky: I'd just like to point out that US$3 per gallon isn't exactly a lot to pay for gasoline.
Added: That is to say, it's the lowest price in the Western world.
Now see, I don't have an issue paying $3 a gallon for gas (I've spent collectively about 6 months in various bits of Europe, so I know it's far far from the highest). I'd just rather see the increases I'm paying go to something other than record profits (profits fine, record profits less so).
Oh, and profits are money made by the company (revenue) over what they paid to produce their product (cost). Profits can either be reinvested into the company, given to charity, or paid out to the stockholders as dividends.
Posted by etphonehome (Member # 999) on :
quote:Originally posted by ricree101: When they cause fairly substantial price raises, yet have record profits, something needs to be done.
Nobody's stopping you from starting your own oil company and undercutting the competition.
Posted by twinky (Member # 693) on :
quote:Nobody's stopping you from starting your own oil company and undercutting the competition.
The cost of entry is prohibitive.
Posted by etphonehome (Member # 999) on :
If the profits really are that unreasonably high, I would think there would be tons of investors jumping at the chance to enter the market. If that isn't the case, do we really have a right to complain about the existing oil companies getting a healthy return on their investment?
Posted by fugu13 (Member # 2859) on :
Yep. In fact, we have considerable right to complain. Any company more than occasionally making significant returns which are not plowed back into the company (such as the dividends and stock buybacks are not) is trivially shown to be a case where the market is not operating properly.
Posted by Will B (Member # 7931) on :
If you believe that oil companies regularly make such huge profits -- and maybe they do -- the rational thing to do would be to buy shares. Or form a new company to sell things cheaper, and eat their market share.
Posted by fugu13 (Member # 2859) on :
I don't have money for shares, and I certainly don't have the money to form a new company.
I can complain about the demonstrable market failure, since any company regularly making profits its unable to reinvest internally is clearly not operating at market equilibrium.
Posted by fugu13 (Member # 2859) on :
Oh, and I can also suggest to my representatives ways in which the market failure can be ameliorated.
Sort of like how company tentativeness to invest in R&D reduces market efficiency (if you compare producer and consumer surplus), and thus government investment in R&D and incentives to invest in R&D improve the operation of markets.
I'm not sure what the proper course of action would be in this case, yet, but I can recommend some action be taken (after investigation by economists) and investigate on my own.
Posted by twinky (Member # 693) on :
quote:Originally posted by etphonehome: If the profits really are that unreasonably high, I would think there would be tons of investors jumping at the chance to enter the market.
I'm sure there are, but none of them can actually afford the cost of entry -- even if they pool their resources.
Posted by Lyrhawn (Member # 7039) on :
quote: If the profits really are that unreasonably high, I would think there would be tons of investors jumping at the chance to enter the market. If that isn't the case, do we really have a right to complain about the existing oil companies getting a healthy return on their investment?
Alright, I'll just invent a way to create oil out of thin air. How do you start a new company when oil fields are already mostly owned and operated by other oil companies? The current Oilopolies control the flow of oil in the world. Breaking into the business means either spending prohibitive amounts of money to try and find a new oil field, or trying to get into the company that already exists.
Also, no, $3 a gallon isn't that bad considering what the rest of the world pays, but, we aren't used to paying that much, let alone more. When you balance your finances around a set amount to pay for everything, it's hard to adjust to sudden increases. Rent costs a certain amount, food costs a certain amount, and so does gasoline. And you only have a set amount of money to pay for these things, and that amount only goes up to cover inflation for most people.
So you can imagine how hard it is when one of those expenses suddenly goes up dramatically in price, regardless of how low that price is compared to the rest of the world. If the price crept up much slower, over a longer period of time, we could adjust, and there wouldn't be as much complaining.
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