Contour Enthusiasts Group Archives Forums General Common Interests Total crap!!!

Originally posted by Pete D:

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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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Ten years ago the price per barrel of oil was around 45 dollars. The avarage price per gallan, for gasoline, was around 1.25 (regular). Now the price of oil is 75 dollars per barrel and gas is over 3 dollars. Do the math! The price per barrel has gone up 60%. Gasoline should therfore be about 2 dollars a gallon. NOT over 3.

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All the firgures I have given are from memory. They may be off a bit, but not alot!

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"Not alot"? You couldn't be further from the truth.

10 years ago today, the average price of a gallon of gas in the US was $1.31. The crude oil price on 04/29/1996 that day was $22.07 -- half of what you claim it was. In the time that crude prices have more than tripled, gas prices have only just doubled (most of this difference is due to taxes in the $1.31 that don't increase with the price of crude, so, in reality,the price of the crude portion of the gasoline cost has tripled as the cost of the crude itself has tripled).

Crude oil prices didn't hit $45 until July of 2004 -- not even 2 years ago. And it didn't get above $45 and stay there until barely a year ago. Either way, it wasn't even close to "10 years ago".

Here's a chart I made a little while ago with Pump vs. Barrel prices:

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Most people look to the Middle east and think thats where are oil comes from. IT DOES NOT! In fact the list of foreign oil goes something like this, Canada, Great Britain, Mexico, Venezuela and then the ENTIRE middle east region!

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The last report I saw (even in the NY Times it's hidden) only 20% of total foreign oil is from the middle east.

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The last report I saw (even in the NY Times it's hidden) only 20% of total foreign oil is from the middle east. This is were we get misled. The news will report that countries like Kuait (just one example) supply 7% of our oil. This seems like alot for one country, until you realize the 7% they are talking about is from total forein oil (wich again is only 30% of are oil use).

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. This is were we get misled. The news will report that countries like Kuait (just one example) supply 7% of our oil. This seems like alot for one country, until you realize the 7% they are talking about is from total forein oil (wich again is only 30% of are oil use). That's less than one quarter of one percent of our oil use. So someone tell me how they have any influance on our oil prices?

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Originally posted by Zoom Zoom Diva:

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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.

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Given the microscope that has been focused on the oil industry for the last couple of years, I tend to think that "creative profiteering" is probably at a minimum. The few 10K statements I've thumbed through do not show anything wild, but it would probably take a team of auditors digging through internal books to flush out the full story. Again, given the oversight (voluntary and otherwise) that the energy sector is going through right now, I feel pretty comfortable that they aren't buying all of their employees $6K shower curtains or in your own terms, grossly inflating discretionary expenses outside of historical values.

Originally posted by Zoom Zoom Diva:

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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.

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Then I find it interesting that OPEC has stated that they are pumping "flat-out" with little capacity left to spare; the "hedge" that Saudi possesses may be far greater that what OPEC is allowing for in their tally...

In any case, the oil that Iran sells ends up in Canada and Mexico from time to time and THEN is piped to the US; the totals that other countries plaster are quite often skewed to a degree this way. Iran is not the only country that serves as a "buffer" for any short-term supply distruptions that may take place, either; it seems like the entire Middle-East plays in this practice (i.e., OPEC).

This creates a domino effect if they start exclusively selling to other markets that consume it and will not resell the product to us; past that, the psychological effect ANY supply removal in this volatile market is going to have a "ripple effect" and one that magnifies itself quickly.

I do not see EITHER country putting a cork in their oil sales, but I can see them potentially trying to destabilize oil prices this way if we start playing hardball with them on nuclear capability (i.e., Iran) or for just being a complete and utter schmuck (i.e., Chavez in Venezuela).

Originally posted by Zoom Zoom Diva:

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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.

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OK, but if it's being sold on a market that we have no access to (i.e., back-channels or the BLACK MARKET), then for all intents and purposes it's not an available commodity to the US...

Speculators do not respond well towards any sort of supply restriction, real or imagined.

Originally posted by Zoom Zoom Diva:

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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.

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True to an extent, but when setting the price of oil for they day, speculators are not looking at refining capacity as the defining metric of setting price; they are looking at oil supply from available markets as one of the key indicators. Future availability (or the lack thereof) also played a significant part in setting price as well. There was also some very real damage done to many oil platforms out in the Gulf as well, so the distruption was more than just a temporary halting of operations due to people flying to safety; some platforms were sunk or blown off of their moorings...

Originally posted by Zoom Zoom Diva:

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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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The upcoming hurricane season, political instability, the yield of some larger fields being revised downward, ever-increasing demand from Asia...

...I see a lot that is starting to spike the price of crude.

Originally posted by Mid Life Crisis:

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Sorry...slow day at work so far...

NEW YORK (Reuters) - Exxon Mobil Corp. (NYSE:XOM - news), the world's largest publicly traded oil company, on Thursday reported quarterly profit rose 7 percent to $8.4 billion , pushed higher by the surge in crude oil prices.

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.

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Originally posted by sigma:

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Originally posted by RT and his SE:

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Originally posted by sigma:

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Originally posted by RT and his SE:

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Originally posted by JaTo:

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Originally posted by Pete D:

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Originally posted by ODC:

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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.

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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....

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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.

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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?

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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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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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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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Which one cost you more? My point is that to the individual consumables like gas at 8% are much more costly than durables at 30%. Is it becoming more clear yet?

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Whats good for business is not always good for the economy and visa versa. I don't need to tell you how many products are affected by fuel costs and how all oil related cost are passed on down the line. Increased consumer product cost leads to reduced consumption...blah, blah, blah, it's the 70's all over again. Big business didn't see it coming then(till it was to late) and I'm not sure they see it now.

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You'd have a point if the margins were significant enough to impact the economy. Simple fact of the matter is that if all the profit was taken out of gas it would still be expensive; few people would even notice the impact on their pocketbook. By your own math, even at exhorbitant pumping (20 gallons ever 3 days) you only paid $597 over three years. Average consumption is probably half that at best, so the average person is only paying about $100/year, less than $10/month, in direct profits to Big Oil. Ooohhh. Look out economy!

Figure everything else I spend in a month, and figuring the average margin of S&P companies is 9% (IIRC), I will pay out more than $300 in pure profit to numerous companies in a given month. That's not even counting whatever percentage of the interest all my lenders get to pocket in profit. So, figure that financial instituions make an average of 35% margins, and spending almost $2,000/month in interest payments; I'm spending a good $1,000 just in direct profit to various companies every single month. More than $12,000 per year. And Big Oil will get roughly $100 of that. Ohhh. We better knock that one out of there huh?! Let's go after one of the smallest contributors to my payouts in a year.

The fact my mortgage lender will make about $3,000 in profit on my house payments this year alone is okay, but that Exxon will make $200 on me this year is not? Or Food. Also a consumable. I'll probably spend more than $500/year in profit to various companies for food -- five times the profit that I'll pay to various companies for fuel. Oh, but let's go after the oil companies.

So gas profits amount to less than 1% of the total profits I pay out in a given month. But these are the ones that you're worried about? Even for a person not spending as much as I do, gas profits are still going to total an average of just $10/month. An amount, at best, of maybe 5% of the total profits that they paid out that month, and not a fraction of the total profits that they paid for food that month.

An added 24 cents onto a gallon of gas isn't going to make or break the economy, not even close, but it will make or break an oil company.

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So maybe a reduction in margin is not such a bad thing. Good for the economy over all and even with Wall streets twitchiness with margins cash in the bank will make them smile.

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