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Originally posted by ODC:
Elasticity has nothing to do with this, and neither is the product. Both corporations are in the business of selling a product.
Corporations work the same way, they sell products at a margin. I'm just illlustrating that although the final value is big, the percentage of profit:revenue is quite small.
Elasticity has a huge amount to do with it from a customer standpoint. There are no subsitute goods for most oil products (gasoline for example), so if price goes up you can only use less. If Microsoft decides they want to charge $1000 for Vista, what will happen? Nobody will buy it, they'll pirate or, switch to linux, or Apple or choose a bunch of other options.
ExxonMobil has huge amounts of fixed costs (tied up in a lot of PP&E) where as Microsoft has a lot more variable costs. You can't compare the industries for a logical argument.
While most Americans don't understand why, they see that Oil companies are making record profits and they are paying record prices. When they put the two together they are understandably pissed.
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Originally posted by Mid Life Crisis:
It was the biggest profit ever posted by the Texas-based oil behemoth in the first quarter, but it still fell short of Wall Street forecasts.
Since it fell short.......they could declare a LOSS....
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Originally posted by WestCoastAjax:
Originally posted by Mid Life Crisis:
It was the biggest profit ever posted by the Texas-based oil behemoth in the first quarter, but it still fell short of Wall Street forecasts.
Since it fell short.......they could declare a LOSS....
Can I say I planned to make $1,000,000 last year and since I didn't, can I say that was a loss? Cause that would be awesome on my taxes.
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The problem is that we have been led to believe and the speculators are profiteering from is that the supply is far more fragile than it is. The chances of supply disruption from Iran and Venezuela are extremely small, and Saudi Arabia has said they can easily supply another 4.5 to 5 million barrels per day.
I also love they claim a refining shortage and a crude shortage. You either have enough raw material for the processing capacity or you have enough processing for the raw material. You can't have it both ways.
I would also be interested to see the margins of the oil companies before discretionary costs. This is a real indicator of their profitability, and they are merely choosing to spend more and reducing their net income.
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Originally posted by Zoom Zoom Diva:
The problem is that we have been led to believe and the speculators are profiteering from is that the supply is far more fragile than it is.
Well, the do set the price of gas and oil for the most part and known reserves have been revised downward in many areas...
I'm thinking they are responding to more than just hype, though that is playing into the equation.
Originally posted by Zoom Zoom Diva:
The chances of supply disruption from Iran and Venezuela are extremely small, and Saudi Arabia has said they can easily supply another 4.5 to 5 million barrels per day.
I entirely disagree with you on both points; with the supply-side of the equation tightening due to increased demand in Asia, ANY disruption, no matter how small is going to have an adverse effect. Think back to the hurricanes of last Summer; our Gulf supply of oil is a joke compared to what is pumped out of the Middle-East and other areas. Look at what that event by itself did to oil and gas prices...
Sure, Saudi and other OPEC nations almost surely build in a "fudge" factor when stating peak pumping capacity, but for Saudi alone to be able to counter both Iran and Venezuela (if they pull away from Western markets) is a tall measure. With China pushing Iran HARD on oil contracts, we aren't the only game in town anymore. On top of it all, with the IAEA issue coming to a boiling point and Iran being thrown in front of the UN Security Council for possible sanctions, the risk factor further rises...
Originally posted by Zoom Zoom Diva:
I also love they claim a refining shortage and a crude shortage. You either have enough raw material for the processing capacity or you have enough processing for the raw material. You can't have it both ways.
It's fairly common knowledge that refining capacity is a contraint, but I have yet to hear that anyone has talked about a short-term oil constraint. I have heard and read about how certain large fields have been revised downward in terms of their estimated yield, but that's about it on the crude side.
Originally posted by Zoom Zoom Diva:
I would also be interested to see the margins of the oil companies before discretionary costs. This is a real indicator of their profitability, and they are merely choosing to spend more and reducing their net income.
This is a possibility, but it would require collusion at an international level and among not only the oil companies, but their supply and infrastructre providers as well...
I think it would be tough to keep the lid on such a secret.
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I'm not claiming any secrets on oil company spending. I'm expecting these discretionary items to be legitimate, overt and nothing to hide. Net income does not tell the whole story.
The information I received the Saudi Arabia figures from are direct from the U.S. Department of Energy. I consider that to be a reliable source. Even if Iran pulls from Western markets, if they sell all that oil to China, it's the same thing. If they pull out completely, they will be committing suicide. Venezuela would also be collapsing their own economy if they didn't supply oil. Even if someone else is buying it, it's still on the market. I see the realistic chances of them disrupting real supply to be next to nonexistent. It's all rhetoric.
Again, the hurricanes caused paranoia. Saudi Arabia had even offered to make up the difference in production, but it was the restriction of refining capacity that ended up making the question moot. Added crude wasn't going to do any good, yet the price of crude still went up.
Yet the short term oil contracts have gone through the roof, despite no short term oil constraint. That makes no legitimate sense. I could see longer term contracts adding a premium, but it should have no effect on the price today.
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Originally posted by JaTo:
Originally posted by Pete D:
Originally posted by ODC:
Exxon's profit margins are slightly above 10%. That means they sold about 80bn worth of gasoline.
That's pretty low margins for any industry. For comparo's sake, Microsoft makes 30%-40% profit margins off it's software.
Comparing Microsoft with Exxon (or any petrol company) is absurd, they aren't in the same industry, have totally different cost structures and don't have similiar products just to start. Not to mention that the demand for gas is largely inelastic and that gas is a commodity....
Margins are margins and profit is profit; no, MS is not a commodity-based company, but for people screaming about the amount of money being made (a few pennies on the dollar) in gas sales vs. at least HALF of a dollar going to the bottom-line on SW, it again BEGS the question of people's perception on what "screwing" really is.
You are absolutely right; COST STRUCTURE does play a HUGE role in margins and therefore profits. What kills me is that these companies are building equipment to find oil (no mean feat in of itself) and once it's found, they build equipment that plows MILES through rock, mud and sand to suck up oil, pipe it or transport it sometimes thousands of miles away which after getting piped through refractionating towers and "crackers", then makes it's way through yet another form of transportation to the gas station where the consumer fills up.
It takes a s**tload of investment to do the above and the fact that it's still only $2-3/gallon amazes me.
MS sold 17 million copies of XP in the first 2 months after rollout. IRC we consumers buy 250 million gallons of gas a day. When's the next time you'll buy a new OS compared to your next fill up. Would you rather get 30% every 2 or 3 years or 8% every 3 days?
As far as supply manipulation goes Enron(with electricity)did it so it's not beyond the realm of possibility. He11, big oil could be helping to feed the uncertainty in the speculators!
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Originally posted by RT and his SE:
Originally posted by JaTo:
Originally posted by Pete D:
Originally posted by ODC:
Exxon's profit margins are slightly above 10%. That means they sold about 80bn worth of gasoline.
That's pretty low margins for any industry. For comparo's sake, Microsoft makes 30%-40% profit margins off it's software.
Comparing Microsoft with Exxon (or any petrol company) is absurd, they aren't in the same industry, have totally different cost structures and don't have similiar products just to start. Not to mention that the demand for gas is largely inelastic and that gas is a commodity....
Margins are margins and profit is profit; no, MS is not a commodity-based company, but for people screaming about the amount of money being made (a few pennies on the dollar) in gas sales vs. at least HALF of a dollar going to the bottom-line on SW, it again BEGS the question of people's perception on what "screwing" really is.
You are absolutely right; COST STRUCTURE does play a HUGE role in margins and therefore profits. What kills me is that these companies are building equipment to find oil (no mean feat in of itself) and once it's found, they build equipment that plows MILES through rock, mud and sand to suck up oil, pipe it or transport it sometimes thousands of miles away which after getting piped through refractionating towers and "crackers", then makes it's way through yet another form of transportation to the gas station where the consumer fills up.
It takes a s**tload of investment to do the above and the fact that it's still only $2-3/gallon amazes me.
MS sold 17 million copies of XP in the first 2 months after rollout. IRC we consumers buy 250 million gallons of gas a day. When's the next time you'll buy a new OS compared to your next fill up. Would you rather get 30% every 2 or 3 years or 8% every 3 days?
Would you rather pay 10% of each paycheck in taxes or just pay 10% of your gross in April all at once? It's the same thing. 30% is 30%, 8% is 8%.
If it'd make you feel better, you can ask Exxon if they'd be willing to shave 8% off the price now and just bill you in 2009 for 8% of all the gas you've pumped the past 3 years. It'd be exactly the same amount of money either way.
Or, better yet, let them hit you for 30% 3 years from now. After all, it's okay to pay 30% if you've only got to pay it every 3 years. 
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Originally posted by sigma:
Originally posted by RT and his SE:
Originally posted by JaTo:
Originally posted by Pete D:
Originally posted by ODC:
Exxon's profit margins are slightly above 10%. That means they sold about 80bn worth of gasoline.
That's pretty low margins for any industry. For comparo's sake, Microsoft makes 30%-40% profit margins off it's software.
Comparing Microsoft with Exxon (or any petrol company) is absurd, they aren't in the same industry, have totally different cost structures and don't have similiar products just to start. Not to mention that the demand for gas is largely inelastic and that gas is a commodity....
Margins are margins and profit is profit; no, MS is not a commodity-based company, but for people screaming about the amount of money being made (a few pennies on the dollar) in gas sales vs. at least HALF of a dollar going to the bottom-line on SW, it again BEGS the question of people's perception on what "screwing" really is.
You are absolutely right; COST STRUCTURE does play a HUGE role in margins and therefore profits. What kills me is that these companies are building equipment to find oil (no mean feat in of itself) and once it's found, they build equipment that plows MILES through rock, mud and sand to suck up oil, pipe it or transport it sometimes thousands of miles away which after getting piped through refractionating towers and "crackers", then makes it's way through yet another form of transportation to the gas station where the consumer fills up.
It takes a s**tload of investment to do the above and the fact that it's still only $2-3/gallon amazes me.
MS sold 17 million copies of XP in the first 2 months after rollout. IRC we consumers buy 250 million gallons of gas a day. When's the next time you'll buy a new OS compared to your next fill up. Would you rather get 30% every 2 or 3 years or 8% every 3 days?
Would you rather pay 10% of each paycheck in taxes or just pay 10% of your gross in April all at once? It's the same thing. 30% is 30%, 8% is 8%.
If it'd make you feel better, you can ask Exxon if they'd be willing to shave 8% off the price now and just bill you in 2009 for 8% of all the gas you've pumped the past 3 years. It'd be exactly the same amount of money either way.
Or, better yet, let them hit you for 30% 3 years from now. After all, it's okay to pay 30% if you've only got to pay it every 3 years.
There's a flaw in your math.
Let's say you buy a copy of full XP home for $149 and keep it for 3 years. MS profits $44 year one and nothing in year 2 or 3.
You put $20 in the tank. The oil company profits $1.60 (assume 8 cent profit per dollar). 3 days later you do the same thing and so on for a year = $197 x 3 years = $597.
Now imagine profiting 24 cents (assuming $3 a gallon) on 250 million gallons every day of the year!
Consumable vs durable goods.
Make more sense now?
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Originally posted by RT and his SE:
Originally posted by sigma:
Originally posted by RT and his SE:
Originally posted by JaTo:
Originally posted by Pete D:
Originally posted by ODC:
Exxon's profit margins are slightly above 10%. That means they sold about 80bn worth of gasoline.
That's pretty low margins for any industry. For comparo's sake, Microsoft makes 30%-40% profit margins off it's software.
Comparing Microsoft with Exxon (or any petrol company) is absurd, they aren't in the same industry, have totally different cost structures and don't have similiar products just to start. Not to mention that the demand for gas is largely inelastic and that gas is a commodity....
Margins are margins and profit is profit; no, MS is not a commodity-based company, but for people screaming about the amount of money being made (a few pennies on the dollar) in gas sales vs. at least HALF of a dollar going to the bottom-line on SW, it again BEGS the question of people's perception on what "screwing" really is.
You are absolutely right; COST STRUCTURE does play a HUGE role in margins and therefore profits. What kills me is that these companies are building equipment to find oil (no mean feat in of itself) and once it's found, they build equipment that plows MILES through rock, mud and sand to suck up oil, pipe it or transport it sometimes thousands of miles away which after getting piped through refractionating towers and "crackers", then makes it's way through yet another form of transportation to the gas station where the consumer fills up.
It takes a s**tload of investment to do the above and the fact that it's still only $2-3/gallon amazes me.
MS sold 17 million copies of XP in the first 2 months after rollout. IRC we consumers buy 250 million gallons of gas a day. When's the next time you'll buy a new OS compared to your next fill up. Would you rather get 30% every 2 or 3 years or 8% every 3 days?
Would you rather pay 10% of each paycheck in taxes or just pay 10% of your gross in April all at once? It's the same thing. 30% is 30%, 8% is 8%.
If it'd make you feel better, you can ask Exxon if they'd be willing to shave 8% off the price now and just bill you in 2009 for 8% of all the gas you've pumped the past 3 years. It'd be exactly the same amount of money either way.
Or, better yet, let them hit you for 30% 3 years from now. After all, it's okay to pay 30% if you've only got to pay it every 3 years.
There's a flaw in your math.
Let's say you buy a copy of full XP home for $149 and keep it for 3 years. MS profits $44 year one and nothing in year 2 or 3.
You put $20 in the tank. The oil company profits $1.60 (assume 8 cent profit per dollar). 3 days later you do the same thing and so on for a year = $197 x 3 years = $597.
Now imagine profiting 24 cents (assuming $3 a gallon) on 250 million gallons every day of the year!
Consumable vs durable goods.
Make more sense now?
There's no flaw in the math. So, Exxon makes more profit? There's a whole lot more work and costs in supplying you with 2000 gallons of gasoline over 3 years than supplying you with a piece of software.
Over the course of 3 years you paid MS $149 and they pocketed $44 in profit. Over the same 3 years, if you pumped $20 in gas every 3 days as in your example, you paid Exxon more than 6 thousand dollars for their goods, 40 times what you paid MS. They should, and BETTER be making more than the same $44 you gave MS.
Go to your bank. Ask them to borrow $6000. Tell them that, after 3 years, you'll pay them $6,044 -- an extra $44 for their help. Tell them that "MS only made $44 off me the past 3 years, that should be good enough for you too." See how quick they are to take you up on that.
Or, let's say that you own a small business. You need 40 copies of XP @ $149 each (roughly $6000, the same that you paid for your gas). MS just pocketed $1700 in profit on the same sales of just $6000 where Exxon only pocketed $597. Which company do you want to invest in?
What's your solution? That Exxon should only make 0.5% margins because, over 3 years, that's about the same dollar amount of profits that MS would make with 30%? It's clear that you've never invested a dollar in your life.
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