now it's $2.20; a decrease of 46%. Crude oil peaked at $147 and it's
median price last week was about $62, a drop of 58%. That's not an
insignificant difference but you've got to expect the pump price to lag
crude prices on the way down. One thing that hasn't changed long term is profit as a percent of
sales for integrated oil companies, e.g. Exxon Mobil and Chevron which
reported 10.8% and 10% respectively 10/31/08. These profits as a
percent of sales figures are little changed from 2 and 3 years ago when
oil traded for around $60/ barrel. The long and short of earnings for
integrated oil companies is that revenues AND costs follow the price of oil
and, while high oil prices make for large profits, those profits remain
proportional to sales. Because record oil prices produce record profits, 'big oil' is an easy
target for demagogues. But just because a profit is big doesn't mean
it's inordinate or 'obscene' (which the long term stability in profit as a
percent of sales demonstrates). And keep in mind that the taxes oil
companies pay are far larger their profits.
 Chance favors the informed |
