I know it is low, like around 8%. However, if it were constant, why are the oil companies swimming in cash right now? If demand goes down, which it does when prices get this high, profits should go down as well, not break records. The point of my rant was that I personally could not in good conscience, make that kind of obscene profit at the expense of an entire economy.
8% is a terrible profit margin. The companies are “swimming” in cash because the volume is so high.
The government makes far, far more on each gallon sold than the actual oil companies do. How does the government sleep at night with these embarassing riches?
Several points:
1 - It is around 10%. That is an average profit margin. If a company turns in much less than that on a regular basis, investors will sell their stock - people invest based on expected rate of return, not ‘total profit’.
2 - Profits are up because demand it up, not down. Remember, demand is worldwide. China and India are using a lot more oit than they used to, and producers are not producing a whole lot more.
3 - 10% profit on $100/barrel is twice what 10% profit is on $50/barrel. So while total profits are up, percentage profits are not.
4 - If their percentage of profits go down, so will their investors. Why would an investor invest in an oil company making a 5% return if the average business is getting 10%? No investors, no cash to develop new supplies.