Eschew Obfuscation: Do Oil Companies Make Too Much Money?

Do Oil Companies Make Too Much Money?

Max Dunn — Thu, 12 Jun 2008 08:08:00 -0700

According to the accounting firm Ernst and Young, in 2007 the average manufacturing company made 8.9 cents per dollar of sales. The U.S. oil industry did slightly worse at 8.3 cents per dollar of sales, even though this was a record year for them. Contrast that to beverage and cigarette companies that earned 19.1 cents and drugmakers that earned 18.4 cents. So even though oil prices have skyrocketing, are oil companies really making too much money?

(Source: Forbes June 2, 2008 Page 30 Shooting Ourselves in the Foot)

"Do Oil Companies Make Too Much Money?" by Ron Parmele

Wed, 15 Oct 2008 20:14:53 -0700

Corporations don’t pay taxes! They add it to the cost of their products and we who buy it pay the added cost.

The owners of the Corp pay taxes from the money they personal are paid for their service to the corp just the way we all do.

If the taxes are to high the corp can’t exspand, nor can they compete with foreign companies and have to go off shore to stay in business. The jobs are lost to the USA.

To say you want to tax the big Corps only rises the cost to those whom you claim you aren’t rising taxes on.

"Do Oil Companies Make Too Much Money?" by nikki R.

Thu, 11 Sep 2008 10:45:31 -0700

im only 11 yet i already hate oil companys they are mking to much money!!! people send all there mony on gas!

"Do Oil Companies Make Too Much Money?" by SigTau

Thu, 28 Aug 2008 06:24:30 -0700

Well played Max.

"Do Oil Companies Make Too Much Money?" by Max Dunn

Thu, 26 Jun 2008 14:31:12 -0700

Another interesting fact: Government makes more on each gallon of gas than do the oil companies.

Oil companies make about 13 cents on a gallon of gas. Government makes much more. The federal tax is 18.4 cents per gallon. Mrs. Clinton’s New York collects 42.4 cents a gallon. Forty-nine states - all but Alaska - make more than the oil companies do on every gallon.

(Ref: Washington Post)

"Do Oil Companies Make Too Much Money?" by Max Dunn

Wed, 25 Jun 2008 07:38:15 -0700

It is interesting that you talk about “unfair” success. Under this definition Google should be called to congress to defend why it is not monopolistic and subject to windfall profit taxes because their profit percentage is much higher!

Actually with public companies, it is very hard to manipulate their profit. Every company’s financial statements must conform to standard GAAP accounting rules and are publicly published and scrutinized by the IRS. So any shenanigans will be quickly caught.

The reason why gross profits are so high for oil companies is that this number reflects only their extraction costs, which is less than 1/3 of their total costs. Then they subtract the bulk of their costs which is for exploration and development costs to get their net profit.

"Do Oil Companies Make Too Much Money?" by J.R.

Wed, 18 Jun 2008 20:55:21 -0700

Yeah, but isn’t profit easy to manipulate? These companies don’t want to show a big profit (and attract anti-monoplistic legislation) – instead they buy back shares to drive capital appreciation in the stock. Thus they could still be having “Unfair” success, in spite of any profit calculations.

"Do Oil Companies Make Too Much Money?" by Max Dunn

Tue, 17 Jun 2008 08:09:20 -0700

Gross profit is simply revenue minus cost of revenue, which isn’t that significant a number. For instance, Google last year had revenue of $16B and gross profit of $10B, but a net income of $4B.

Here is ExxonMobil’s Annual Income Statement that breaks out the difference between their gross profit of $172B and net income of $41B.

"Do Oil Companies Make Too Much Money?" by J.R.

Sat, 14 Jun 2008 22:25:39 -0700

From the Yahoo Finance summary: http://finance.yahoo.com/q/ks?s=XOM From there it appears that the $40 billion is the share of net income that is available to common stock holders. But the company’s gross profit is listed as $171 billion. The difference between the two is confusing, but it might include outrageous executive salaries (like the $400M severance Lee Raymond got), and maybe even stock buybacks ($23B in 2006 alone) – perhaps a great place to hide their windfall profits.

It can indeed be a difficult to compare apples to apples, but if one looks at Anheuser-Busch the same way, their gross profit is about $.34 per dollar of revenue – much less than the $.44 Exxon is getting.

"Do Oil Companies Make Too Much Money?" by Max Dunn

Sat, 14 Jun 2008 12:13:01 -0700

J.R. – where do your numbers come from? On the ExxonMobil site, their 2007 revenue is stated as $390 billion but their net income is only $40.6 billion. This is 10.4 center per dollar, so is higher than the industry average but not as high as the 44 cents you mentioned.

"Do Oil Companies Make Too Much Money?" by J.R.

Sat, 14 Jun 2008 00:22:43 -0700

Hmmm. ExxonMobile had $390 billion in revenue in the last twelve months, and their profit was $171 billion. That’s $.44 per dollar of revenue! Perhaps Forbes is not so good at seeing thru the oil lobby’s favorably spun numbers (or they don’t care to be).