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In my business, the gross margin is always affected by expenses. It goes up and down depending upon how efficiently you run your business. In a competitive marketplace like the one I'm in, you generally cannot index your prices to achieve a desired gross margin.

In my original reply, I stated that the oil companies are passing on more to the consumer than just the added price in oil. They are protecting their gross margins as well! Not that there's anything wrong with that. Just calling a spade a spade.

Nobody on the thread has mentioned a huge contribution to Exxon-Mobil's reported profit, which is the increase in inventory value.

Most people, even businesspeople and some accountants, tend to think in terms of profit on what is sold. However, that is not the only source of bookkeeping profits and losses. There is also gains and losses on the balance sheet that must be considered.

Exxon-Mobil always had a large inventory of oil and oil products on hand. Much of this is "baseline" -- it is tied up in their entire supply chain. Right this second, they have oil in tankers, oil in storage tanks, oil in refineries, oil products in storage, gasoline, etc.

As the price of crude rises, the value of all of this baseline inventory rises. The other side of the entry is an increase in shareholders' equity -- which is reported as a gain in the quarterly reports. This affects all companies with inventory, but particularly affects any commodity-based companies with large inventories (such as chemicals).

When the price falls, these companies will take hits. Of course, at that point the general public isn't paying attention.

The oil companies are reluctant to invest in drilling and refining because they fear the current high price will not last. They have been burned before on production investment that came on stream after prices fell.

Still, adjusting for inflation, gas is still much cheaper than Jimmy Carter Days.

I'm far from being an accountant ( so if I'm wrong please tell me) but my understanding of how vertical corporations work is that

Production sells the oil to refining
refining sells the gas to marketing
marketing sells the gas to the gas stations
and we buy it from the gas stations

quoting from the article

" Oil and gas production fell 4.3 percent, as maturing oilfields and maintenance activities offset higher crude production"

"Oil and gas production volumes (and earnings) were disappointing in the quarter, but this was offset by a now-familiar bonanza in the refining and marketing division - particularly in the U.S.," Credit Suisse First Boston analysts said in a
research note."
(underline is mine)

So even though production is down for the second quarter profits are up 32% due to the efforts of the refining and marketing arm

So if marketing is making a "bonanza" couldn't you be suspicious that they may be manipulating the final cost of gasoline ala Enron and electricity in California.