Dec
5
When are people going to figure out that its not the lack of oil causing gas prices to soar Its just greed?
Filed Under Best Trading Strategies
The combined profit for the two companies was close to $17 billion—$9.08 billion for Shell and $7.6 billion for BP. These figures include earnings attributed to the rise in oil prices. If this rise is factored out (as is done in the so-called current cost of supplies figures), Shell’s profits were $7.8 billion and BP’s were $6.6 billion. That is, at least $2 billion in profit for the two companies can be attributed solely to the recent rise in oil prices.
Analysts expect the profits for Exxon Mobil, the largest private energy company, to soar to $11.2 billion in the first quarter, an increase of 22 percent over 2007. If the company’s profits exceed expectations, however, it could beat its fourth quarter profits from 2007 of $11.66 billion—the record for a US company.
Of course, the top executives and investors will benefit enormously from these windfalls. Exxon CEO Rex Tillerson received an 18 percent raise in 2007, pulling in $21.7 million. The oil companies will also give back billions to investors in the form of stock buybacks and dividends.
The news from Shell and BP came as a surprise to analysts, who have been concerned about profit troubles in the refinery component of production, which transforms crude oil into useable products like gasoline and diesel. Giants like Shell and BP, and US companies Exxon and Chevron, are vertically integrated, including in their operations both oil extraction and refining.
While the Bush administration cites a lack of refineries for energy shortages, internal oil industry documents show that five years ago companies were looking for ways to cut refinery output to boost profits.
It takes about four years to build a large refinery so any substantial additional new capacity from new plants would have had to begin by the mid-1990s, energy experts acknowledge.
Internal documents from some of America’s biggest oil companies suggest higher prices at the pump may, in part, be a result of a deliberate strategy to limit domestic gasoline production,”These documents say point blank, look if you really want to boost your profits, you have to reduce refinery capacity,” said Sen. Wyden. “This industry went to great lengths to limit refinery capacity, control markets, restrict supply to boost their profits, increase costs to consumers, and then argue we should relax environmental laws.”
One Chevron memo warns the oil industry would never see higher profits, if it didn’t reduce the amount of gasoline being refined.
“If the U.S. petroleum industry doesn’t reduce its refining capacity, it will never see any substantial increase in refinery margins (profits),” said an internal Chevron document in November 1995.
The memo cited warnings given about refinery profits by a senior analyst from the American Petroleum Institute, the industry trade group, at an industry conference that year.
API spokesman Jim Craig said Thursday, “We don’t know about these alleged internal company memos, but the idea that the API would warn member companies on profits is ludicrous.”
A year later, an official at Texaco, in a memo marked “highly confidential,” called concerns about too much refinery capacty “the most critical factor” facing the refinery industry - resulting in “very poor refining financial results.”
The Texaco memo, written in March, 1996, concluded that “significant events” were required to deal with the excess refinery capacity problem and suggested one solution might be to get the government to lift clean air requirements for an oxygenate in gasoline. Removal of the additive would require more gasoline to be used in each gallon of fuel, tightening supplies.
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8 Responses to “When are people going to figure out that its not the lack of oil causing gas prices to soar Its just greed?”
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Have you so much as walked by an economics class.
Take a class or something. How do you get so off track?
Okay lets try this again, you have a dozen eggs every store has lots of eggs the eggs sell for $2.00. Suddenly there is a chicken shortage, you have the only eggs in town the price goes up to $50.00 for the eggs. Get it. Economics 101 more product lower price. Drill Here, Drill Now Lower prices.
i think you make a very compeilling argument here. the first good one i’ve seen. we can all explain the price of crude as being out of their control, but you focused on the price of refined oil. very interesting.
Yeah yeah, I love the simple economics answer. BS. I figured it out just after katrina. Ever since then, when the wind blew the price went up. Excuses after excuses. It is simply that. Greed.
Greed and FEAR
Actually, it’s not. It’s supply and demand.
China and India are producing record numbers of cars all while environmentalists prohibit new supplies of gas to be introduced to the US economy. High demand, low supply, and prices go up.
We’re all greedy. You’ll take a similar job that pays twice as much because you’re greedy. Most of the profits of the oil companies are going to pension owners like school teachers and your grandparents.
If you’re convinced that they’ll continue to make so much money, buy their stock.
Okay lets try this again, you have a dozen eggs every store has lots of eggs the eggs sell for $2.00. But you have the truck that brings the eggs to the stores. You puncture a hole in the tire and there are less eggs in the store. In addition, instead of using real dollars, everyone is using monoply money which has no gold backing. Now the price for eggs go up to $50.00. Economics 101 currency devalue means higher price. Drilling will not do anything except mess up the beaches.