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Oil Slick

Well, the heads of the big oil companies got called before Congress yesterday to explain why the hell the price of gas is so high. And it wasn't pretty.

I'd like to join the chorus of those slamming Big Oil. I'd really like to, especially since I'm probably gonna pour about $50.00 down Mongo's gullet today when I cruise by the gas station.

But there are these stubborn things called "facts" that get in the way. So I'm going to skip slamming them around, and instead go after one of my preferred targets -- politicians.

First up, let's look at those "obscene" profits of Exxon Mobil. Yes, they made assloads of money last year. But they took in cubic assloads of revenues. It's a matter of scale -- if you make huge sales, your profits are likely to be huge, too -- even if they're only a small percentage.

Exxon Mobil's profits last year were around 9% of total revenues. That's pretty mediocre, especially when compared to a non-profit like Planned Parenthood, who made about an 11% return.

But Planned Parenthood isn't a for-profit corporation, with publicly-traded stock. And it's my understanding that a lot of Big Oil stocks are owned by retirement funds -- whose owners are pretty much the demographic opposite of Planned Parenthood's targets.

Here's a cartoon that shows another appalling aspect of Congress' little temper tantrum. I dearly wish that even one of the Big Oil CEOs had said "tell you what, Congressman -- we'll cut our profit markup in half, if you'll do the same to your taxes." After all, if Congress really wants to cut the price of gas, wouldn't they be willing to take a bit less in taxes?

Nope. The big move is to INCREASE gas taxes, to "punish" people who drive fuel-inefficient vehicles (like me, with my early-90's SUV).

OK, here's another fun point. The Democrats (who ran this hearing) are big for pushing for American energy independence, for subsidies and tax breaks for alternate and renewable energy sources. A good chunk of those are given to -- surprise! -- energy companies, who are already set up to do that kind of work.

Energy companies like Big Oil, who were lambasted for accepting these bennies.

People are also awfully upset about the rise in the price of crude oil, which is currently over $100.00 a barrel. So, naturally, they are kicking the sellers of the oil for gouging.

Whoops, my bad. No, they're kicking the BUYERS of the oil. The Big Oil companies are the ones who have to fork over that money per barrel, because they buy the crude, refine it, and then sell the products to us. So, essentially, we demand they convert the crude into the stuff we want, and get mad because the people who sell them the crude are making the oil companies pay through the nose for the crude.

Let me see if I can paraphrase Congressman Markey's (D-MA) position:

"Big Oil, how DARE you pay huge prices for crude oil, refine them in old refineries because we won't let you build new ones, distribute them all over the country, and sell them to the public, while making about 9% total profit? How DARE you, Exxon Mobil, pay more in taxes than the entire bottom 50% of American taxpayers combined? How DARE you allow the price of gas to reflect the fact that we, the government, take almost five times as much in taxes as you take in profits? How DARE you take over 15 billion dollars over ten years in tax breaks from us for developing nuclear power, renewable energy research, and fuel-efficient vehicles and buildings? And how DARE you actually raise the price of gas at the same time we're talking about raising taxes on gas to encourage people to use less?"

Oh, those evil, evil, evil oil companies. I'm gonna call up my 401K plan manager and demand he sell off any stocks in them immediately.

Works Cited:

Say Anything

Protein Wisdom

California Energy Commission

Doubleplusgood Infotainment


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Comments (18)

Seems to me like Congress i... (Below threshold)

Seems to me like Congress is only willing to give tax breaks to companies that'll take 'em - and not produce anything useful.

Actually, this was a classic example of Congress trying hard to be visible doing something to please their anti-business base. Because the high price of gas can't be because the base material is more expensive, less available because countries like China and India are consuming more of it - it's gotta be because of greed.

Any way we could just wall the DC area off from the rest of the country? I don't know what it is - the water or some airborne pathogen - but there's too many folks in positions of responsibility there that are just plain disconnected from reality.

Here, here. The real gouge... (Below threshold)
WildWillie:

Here, here. The real gougers were holding the hearing. Both sides. ww

Cant find an article I read... (Below threshold)
GianiD:

Cant find an article I read several yrs ago that stated that 'Big Oil' invested into R&D and exploration over 100% of its profits.

I dont see what the big issue is with their somewhat miniscule 8-9% profit margin. Banks make far more, lawyers make far more, etc etc.

Dems are always about having a 'bad guy', someone to point the finger out. ALWAYS, unless a Dem is the offender.

Anytime I hear the left whining about something else, I think about 'Scarface' and this Tony Montana quote:

What you lookin' at? You all a bunch of f****** assholes. You know why? You don't have the guts to be what you wanna be? You need people like me. You need people like me so you can point your f****** fingers and say, "That's the bad guy." So... what that make you? Good? You're not good. You just know how to hide, how to lie. Me, I don't have that problem. Me, I always tell the truth. Even when I lie. So say good night to the bad guy! Come on. The last time you gonna see a bad guy like this again, let me tell you. Come on. Make way for the bad guy. There's a bad guy comin' through! Better get outta his way!


Some perspective:C... (Below threshold)
iurockhead:

Some perspective:

Crude oil is currently priced at $2.40/gallon (42 gallons in a barrel). So for $0.80/gallon, it is refined into gasoline (and you don't get a full 42 gallons of gas from 42 gallons of crude), transported to your local gas station, and sold at 26% over the cost of the crude. Oh, wait, what about taxes? State and federal taxes average $0.50 per gallon, so that means that for $0.30 per gallon, they get the oil from the ground into your tank, so only 9 percent is tacked on over the cost of crude. Take out transportation and profit taken by the retailer, and oil companies make about 10 cents per gallon. Now if only the farmers could do this well with corn flakes, we could all eat for pennies per day.

When the politicians offer ... (Below threshold)
SPQR:

When the politicians offer to ramrod a new refinery through local opposition, then I'll believe that they are serious about gasoline prices.

Until then this is just more socialist attacks on business.

This is a real hot button f... (Below threshold)
COgirl:

This is a real hot button for me. I used to work for an oil and gas company so I know a fair bit about the business.

It's world markets that set the price of crude, not the big oil companies. If you don't like that then complain to OPEC. At $100 a barrel, the raw cost per gallon is nearly $2.40. Then it's got to be transported, refined, transported again. They've got to pay federal AND state taxes too. The last time I gassed up, I paid $3.21 for mid-grade. I don't think there was much profit in that gallon.

What people lose sight of is the size of the total investment that oil companies have made to get those "obscene" profits. JT is right, Planned Parenthood makes more than an oil company does. Even the New York Times had a 23% return on equity. Now I ask you, what can you do without in your daily lives -- an abortion, the NYT, or a gallon of gasoline.

If Congress was serious about doing something about energy prices, they would develop a comprehensive energy plan that involves developing domestic oil reserves and encourages conservation. You CANNOT replace the entire automobile inventory overnight, it takes years. And the cost to industry will be exorbitant. And whether the Dems like it or not, it's industry and business that employ the people of this country.

"If Congress was serious ab... (Below threshold)
JLawson:

"If Congress was serious about doing something about energy prices, they would develop a comprehensive energy plan that involves developing domestic oil reserves and encourages conservation."

Yet they have spastic conniptions whenever someone mentions drilling in ANWR. They're not serious - they're just playing "See how effective we are!"

Personally, I'm getting tired of the pointless, ineffective posturing.

I have a problem with the c... (Below threshold)
Oaf:

I have a problem with the cartoon. If gas is 3.20 a gallon, then 9% of that is $0.29, not $0.09.

Therefore your paraphrased Markey statement would be "How DARE you allow the price of gas to reflect the fact that we, the government, take almost one and a half times as much in taxes as you take in profits?"

Agree with the rest and the gist of it, just think it should be more accurate.

OafThe oil companies... (Below threshold)
Wayne:

Oaf
The oil companies don't make 9% of the cost on each gallon of gas but 9% on their investment. Even taking 9% of the raw material cost would be wrong which would be $.21. Keeping it somewhat simple, if you invested $1000 and made $90 over the year you would have made 9% profit. It doesn't matter if you bought one widget and sold it once or if you bought one widget and sold it then bought another widget and sold it and repeated the process a thousand times. The cost of the widget could be $900 with additional expenses of selling it. Saying the company makes 9% of $900 o 9% of $1000 on each of the thousand sales would be wrong.

If Congress was serious ... (Below threshold)
Peter F.:

If Congress was serious about doing something about energy prices...

Good post COgirl!

But I think if Congress and state legislators were truly interested in helping out the economy and consumers, they would call for a 3-month halt on collecting taxes--something they could do at the drop of a hat as I understand it. Here in WA that would be .54 a gallon, bringing the PPG to $2.77 from it's current $3.31 at my local pump this morning.

But of course the fed and state governments couldn't pay for all of those wasteful government program, so there's that....

Jay's article stated that t... (Below threshold)
Oaf:

Jay's article stated that the oil companies make 9% of total revenues. Not of investment. That is pretty standard for the way to measure your margin. Total sales, less costs equals your margin. If the article stated they were making 9% total ROA or ROE, I would agree with you.

Now granted, individual dealers are the ones selling it at $3.20 a gallon, so, even if the oil companies are selling to their dealers for $2.50 a gallon the profit per tank of gas to the oli companies would be $0.23, not $0.09.

I worked for Shell Oil 22 y... (Below threshold)
Maggie:

I worked for Shell Oil 22 years, and can
remember the days of 10 dollar a barrel oil.
I can also remember the lay offs.
This caterwauling the congress is doing is
hypocritical.They are the reason for
our energy problems, and now they are using the
very companies who bring us our energy that keeps us mobile and level of living decent as scapegoats.
How would they like the idea if these companies
threw their hands up in defeat and closed their doors permanently?

Jay: Your understanding of ... (Below threshold)

Jay: Your understanding of what's happening in Congress is impressive. Excellent post. I'm sure you know that yesterday a house committee agreed to restrict more U.S. coastline from drilling.

Too bad Oaf's attention was on your arithmetic instead of Washington's deceit. The fact is, combined state and federal gasoline taxes average 43.2 cents to 29 cents of profit. Markey and the other hoods in Washington are talking about raising the federal portion by 50 cents which would make it 93.2 cents compared to 29 cents per gallon. So Congress, which is a net drag on the production of gasoline, wants to take more than three times as much as the stock holders. That's the comparison that should be made and it's obscene.

Oaf My bad for not s... (Below threshold)
Wayne:

Oaf
My bad for not seeing revenues. Maybe I shouldn't blog when I'm sick. I would agree with statemens about the government making more money off a gallon of gas sold and that 9% isn't a high profit margin compare to other industries.

Forget those numbers. Ask ... (Below threshold)

Forget those numbers. Ask yourself this: how many SUVs were manufactured and bought between $2/gallon gas and today? How many low-mileage high-capacity vehicles are on the roads that were not at that time?

If people buy houses that they can not honestly afford, foreclosure is their future.

If people buy cars they cannot afford to fill, empty gas tanks are in their future.

It's exactly the same; except most of us didn't realize when we bought our cars that gas would be higher in ten years or less.

By the way, Dennis Miller h... (Below threshold)

By the way, Dennis Miller has been ranting against the oil companies for two days. Call him and enlighten him; he is, after all, a solid conservative, and a witty and smart man.

WHEN WILL THE AMERICAN PUBL... (Below threshold)
DOUGLAS K. SHARP:

WHEN WILL THE AMERICAN PUBLIC DEMAND DRILLING FOR OIL IN THE UNITED STATES? WE HAVE ENOUGH OIL TO STOP IMPORTING OIL FROM THE MIDDLE EAST. ALL THE LIBERALS AND TREE HUGGERS WANT TO SEE THIS COUNTRY COME TO A STANDSTILL. WE ARE DESTROYING THIS COUNTRY BY LISTENING TO ALL THESE IDIOTS.

WHEN WILL THEY TAKE ALL COMPANIES THAT MAKE A PROFIT BEFORE CONGRESS?

By ignoring the wishes of c... (Below threshold)
Mike K.:

By ignoring the wishes of congressional leaders to invest in reusable resources and alternative fuels, these big oil companies continue to take advantage of the american people. Any company that makes $40 billion dollars in profit can certainly reduce their mark up on gasoline products, and certainly has the money to invest in switchgrass and other alternatives. Instead they choose to continue down the same paths for profit. I am glad some congressional leaders are willing to at least ask these companies why they refuse to invest time and more importantly money on alternatives to crude. That is the primary focus of today's hearings. If you think the major oil and gas companies don't have a say on gas prices, then I think you are buying into big oil's agenda.

Also here is a link from, "The Center for American Progress" that explains how big oil has taken advantage of crude increases to increase their mark-up percentage. Sick shit yo, if oil companies used the same mark up percentages relative to crude today as they did in the 90s and 80s then a a gallon of gas today at $3.22 would only cost $2.43. But they are greedy, so you are paying $3.22!

This link is a year old but the data rings even more true today:

http://www.americanprogress.org/issues/2007/05/your_pain.html


Think about this as well. Right before the 2006 congressional elections, gasoline prices dropped an unprecedented 82 cents over a four-week period. This drastic and unexplained price drop was obviously related to the upcoming elections, with the hopes to limit pessimism over the economy by temporarily reducing gas prices.. Large energy companies certainly feel they have an interest in maintaining Republican control of the government. No presidential administration has ever been so closely tied, personally and financially, to the interests of the energy giants as the current one. Thanks Bush family. Between Cheney's War in Iraq for Halliburton, and Bush's oil company buddies, we are all getting royally fucked in the ass!

Oh and after the elections were over, guess what happened. The gas prices went back up immediately. Once the American people proved to the oil companies that we will continue to consume the same amounts of gas at $3.45 a gallon (today's US average) that we did in 2004 at $1.75 a gallon, then why would they ever lower the price again? It's economics 101. Once Big Oil determined we would pay twice as much as we were a couple of years ago, then why would they ever lower prices and cut us some slack? That's how Exxon makes the largest profit ever in the history of this country, by fucking you right up the ass every time you fuel up your car.




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