Big Rise in Profit Places Oil Giants on the Defensive

NY Times ^ | 10/28/5 | Jad Mouawad and Simon Romero

[Crackingham]

Exxon Mobil, the world's largest oil company, said yesterday that its third-quarter net income jumped 75 percent, to $9.92 billion. Its profit in the first nine months of this year - $25.42 billion - already equals its full-year earnings for 2004. This year's sales, which topped $100 billion in the last quarter, are expected to exceed those of Wal-Mart.

Another oil giant, Royal Dutch Shell, reported a 68 percent jump in profits yesterday, to $9.03 billion. Chevron is expected to post a profit of more than $4 billion today.

This year is shaping up as an exceptionally lucrative one for the oil industry, thanks to strong global demand, tight supplies and high prices for oil and natural gas. While the idea that the Bush administration was considering imposing a windfall profits tax was knocked down yesterday by officials, longstanding resentments against Big Oil are resurfacing and could end up imposing some additional burdens on the industry.

SNIP

Today, Republicans and Democrats alike, aware of the politically sensitive issue of high energy prices, are putting increasing pressure on the oil and gas industry to return some of its profits. The ideas include forcing the industry to invest in more refining capacity or to increase inventories to cushion energy shocks.

SNIP

Senator Bill Frist, the Republican leader, said yesterday that executives of major oil companies will be summoned to Capitol Hill to testify about high energy prices. Some of Mr. Frist's language harked back to the 1970's and early 1980's when cries of price gouging at gasoline pumps were common.

"If there are those who abuse the free enterprise system to advantage themselves and their businesses at the expense of all Americans," he said, "they ought to be exposed, and they ought to be ashamed."

[houeto]

No doubt they were gouging.

10% profit off sales of a product would seem to be a reasonable goal to me. If I were selling something, I personally would set a goal higher than that. Wouldn't you?

[houeto]

Just the fines alone....

Exactly. Rohm and Haas purchased Morton (you know, the salt people) a few years back. No sooner had the ink dried on the sale, there was an incident at the Moss Point, Ms. plant.

By the time OSHA and the EPA were finished, the fines exceeded $40 million. R&H was forced to shut the plant down. It was the largest employer in Moss Point.

[mysterio]

They aren't reinvesting, because they don't want to build refineries. Building refineries is difficult due to excessive legislation. But most of the reason is that more refineries means less supply interruption, and supply interruption means huge profits.

Remove legislative barriers to refinery building. Remove boutique blends. See what the oil companies do then. I bet they would build a couple for public relations purposes at least.

And all of these milk references are crap. No one has to buy milk. Most have to buy energy no matter what it costs. I have argued this time and again with the oil company workers and investors here, and they don't get it. They still think most of us could stop buying gas if we don't like the price.

I don't support government price controls. I have changed my outlook, though. I think they will be forced to drop prices after this winter. I think after most people get their heating bills, there will be public outrage, and the oil companies will have to do something to avoid torch-bearing mobs of angry citizens.

And let's not forget that the biggest "gouger" is government. And it's controlled by Republicans. They are doing nothing to remove legislative barriers, and they are just posturing and finger pointing.

[Proud_texan]

What kills refineries, other than NIMBY and the all seeing all knowing goobermint, is when oil goes to $10 a barrel it's hard to stay in the oil bidness. Try it sometime and see if anybody hands you a crying towel or talks about giving you money because of windfall losses.

Lets say there is no competition. What's your proposed solution?

[SZonian]

Agreed, the boutique blends are one of the biggest problems with supply. You can't ship gas from Nevada to Ca. and vice versa because of dumbass state smog requirements. There should just be one fuel requirement nationwide. Then you wouldn't need special "approval" to ship fuel to different states during Katrina type disasters or any other time there is some disruption in localized supply.

As for not buying gas, I wouldn't mind having that option when required, just that I live twenty miles from work, no mass transit, no bike paths on very dangerous two lane roads and there is no interest in the local community for other options such as carpooling. There are "no wood burning" days here so a wood stove is not completely out of the question but is not a viable option.

So yes, we're stuck. We have to buy energy, we cut back on other expenses and entertainment, but that's impacting our quality of life as well.

For those who say suck it up...You do remember "quality of life" right? That's where you have a few extra dollars in your pocket to buy a CD, go to a movie with your spouse, eat out once a week instead of once a month (dates with your loved one), buy a good book, buy mountain bike parts ;-), save for that vacation or special trip, etc. These are all things that get impacted when you pay higher energy costs.

Just some more thoughts.

Cheers!

[southlake_hoosier]

I was thinking of railroads. How does crude get to Whiting, Indiana? Must be something other then pipelines. I have no problem with starting to drill in ANWR. Everyone here seems to think that all these companies are going to jump as soon as they got an OK to go. Not happening. They are making tons of money right now with their existing infrastructure.

You really think demand has gone down? There has been an abundant supply this whole year, and price has been going up. Supply and demand are not driving prices in this market anymore.

Also, I know the industry employees a lot, but why are most of the people along the Gulf Coast where all these refineries are receiving lower wages then most of the US?

And, no I would not want to leave these operations in the Gulf open during a Hurricane. You are bordering on a personal attack (If you have any sense), I would hope this conversation could continue without that.

As far as the government getting involved in anything, I think they are already too involved in everyone's life. We have no voice anymore, and we have no representation. They are their own entity, and it is controlled by greed and money.

[southlake_hoosier]

Forgot about OHSA. Trump card played. I concede.

[Leisler]

Well, what do you expect. We have had over a hundred years of socialism, world wide. And you expect "true capitalism"? If you think that American companies aren't, eventually, subject to the iron laws of economics, then I have some Hudson Motor Car Company bonds to sell you. (I'll have some GM ones later) As to Exxons "profit" what do you think happens with it? You think they go do coke for a weekend? They either A. Give it to public stockholders who spend it in their communities. B. They put it in the bank, which then lower their interest rates because they got to get that money out the door working for them to pay the interest to Exxon. Which means people buy things like cars, boats, degrees, homes. This is good. C. They invest it in new plants, ships, science. Pick any one, they are all good. Of course we could take the money from them and give it to Frist and Billery..we can trust them..they know better...they'll help us poor little people. Honest.

[Reaganwuzthebest]

"If there are those who abuse the free enterprise system to advantage themselves and their businesses at the expense of all Americans," he said, "they ought to be exposed, and they ought to be ashamed."

That would be an impressive statement if not for the fact you, Chucky Schumer and the rest of the Senate are doing nothing against those businesses who hire illegal aliens "at the expense of all Americans." Aren't they abusing the free enterprise system as well? This sounds like nothing but political posturing coming from both parties.

[Leisler]

Bigger than having to buy fuel, as a motivation and force in the market, is having to sell fuel. You think these companies aren't running massive debts and interest payments every month? You think one company trusts another company to watch the price of energy increase, supposedly by collusion and reducing supply, and that another company isn't going to swoop in and make cash right then and there? OPEC hasn't been able to get any of it's members to stop cheating for decades. Saudi Arabia has seen it's per capita income, decrease in half over the last twenty years. And no one, publicly knows their debts. Russia, Mexico the rest, they are more cash junkies then we are oil. They know we pay. They trust us to pay. They don't at all, in any way trust themselves or each other. You, and others got it backwards. We got them, we got the good cards.

[thackney]

How ethical is it for a company to increase profits behind the screen of hurricanes?

Yeah, those companies are just pouring in the profits. When was the last time you considered less 10% profit ripping people off.

Company..............Profit..........Sales.........% Profit
Exxon Mobile......$ 9.92 B.....$ 100.7 B.....9.9%
Shell....................$ 5.37 B.....$ 76.44 B.....7.0%
BP.......................$ 6.53 B....$ 65.76 B......9.9%
Chevron...............$ 3.60 B....$ 54.46 B......6.6%
ConocoPhillips.....$ 3.80 B.....$ 49.66 B......7.7%
Marathon............$ 0.77 B......$ 17.25 B......4.5%

[thackney]

They are not re-investing

They are investing huge amounts of dollars in Alaska.

[thackney]

What seems out of line to me is EOM's profit increasing by 75%. This profit is clearly larger than what would be derived from merely passing along the increased cost of their crude oil.

Their profit is less than 10% for 3rd quarter. When the biased liberal media plays games in reporting the numbers, you should not assume the the worse.

Do you believe that <10% is a indication of taking advantage of the consumer? How low a profit margin would you operate a business, especially in a high risk area. Go look up oil prices in 1998.

[southlake_hoosier]

They are? What about this report:

http://www.freerepublic.com/focus/f-news/1497483/posts

I know that is a specific area, and Alaska covers a lot of ground, but is there something happening that is not being reported? And, if it is, why would the Oil Companies remain quiet about it? Especially now.

[thackney]

I have no problem with starting to drill in ANWR. Everyone here seems to think that all these companies are going to jump as soon as they got an OK to go. Not happening. They are making tons of money right now with their existing infrastructure.

I do not think you understand how oil field deplete and how continued expansion is needed just to maintain the flow rate.

[AxelPaulsenJr]

From the story at the head of this thread:

Exxon Mobil, the world's largest oil company, said yesterday that its third-quarter net income jumped 75 percent, to $9.92 billion.

Unless I read this wrong their profit for the third quarter was up 75%.

[thackney]

Yes, they are.

Both ConocoPhillips and BP Invested approximately 800 million in Alaska this year.

And look at http://www.freerepublic.com/focus/f-news/1497483/posts?page=22#22 in that thread.

[marktwain]

Unless I read this wrong their profit for the third quarter was up 75%.

Your are correct. Their profit went from 5.7% in the second quarter to 9.9% in the third quarter, an increase of 75%.

[thackney]

Yes, it increased 75%. That brought it up to 9.9% profit. Not exactly honest reporting.

[mcshot]

Those of us on very limited incomes are having a difficult time trying to budget fuel expenses as are our children and visits are no longer possible. Unfortunately, we do not have an alternative but if and when one becomes available we will remember how we were unnecessarily gouged and consume accordingly.

mc