Thursday, February 12, 2009

This just takes the cake

First, I must apologize for the non-veterinary related post. It's just that some of the information contained in this article really yanked my chain.

I'm sorry, but the oil producers, who posted record profits again in 2008 are robbing Peter to pay themselves. In case you haven't noticed, gas prices are rising in spite of the nearly 5-year record low of crude prices. You'd think these low crude prices would cause gas prices to go down, right? Nope. Refiners are "trying to match supply to demand" by CUTTING PRODUCTION. This, of course, causes gas prices to go up, because there is less supply. If you read toward the end of the above linked article, there is a line or two about refiners trying to keep their [refineries] margins about the same as before, meaning that they want the same profit they've come to expect over the last year or two.

I'm sorry POS Big Oil companies, but when our country is in a severe recession, we have record unemployment, and it would be nice to save a little bit of money at the pump while driving around to put in applications trying to find a job, you are SCREWING us just like always. It would be nice if we could simply choose not to use your product. Unfortunately, you have us by the (in my case figurative) balls and you know it. So I have to vent on this blog (again, sorry for the non-veterinary post) and scheme of ways to turn vegetable oil into gasoline.

1 comment:

J-Ro said...

Speaking as one who works in the "oil bidness", maybe I can shed some light.

First, there is a difference between Big Oil and Refineries. Big Oil makes its money by selling crude oil to the refineries. Even if ExxonMobil owns a refinery, they are separate business entities, by law.

Second, the refineries are only able to process a certain amount of oil into gas at any given time. The article says the refineries are running at 81.6 percent of capacity - you can never run at 100% due to both scheduled and unscheduled maintenance, environmental regulations, etc. - so as they reach capacity, they take in less crude oil, which makes gas production seem to fall - in reality, it decreases as they reach capacity.

If the refineries can't take in more crude, then oil companies scale back production. When there is less crude oil available, the price of crude oil goes up. Simple supply and demand.

When the crude oil price goes up, it costs more for the refineries to buy the oil -yes, they actually have to buy the oil from Big Oil, so while their costs to refine that barrel of crude are fixed - it costs the same to refine no matter what the actual price of oil is - the increase in the price of the oil they buy is reflected in the prices we pay at the pump.

Third, as for Big Oil, while they may show record PROFITS, there is a big difference betwen Profit and Profit margin. Yes, XOM made $40.6 billion dollars in profit. But how much did they have to SPEND to make that money? The profit margin for oil companies is about 7.6 percent of revenues. Per the article I linked to below "That's not much higher than the 5.8 percent profit margin for all U.S. manufacturing, and if you exclude the financially troubled auto industry from that analysis, the oil industry actually appears less profitable than most manufacturers, which were earning 9.2 cents on every dollar of sales."

So when you compare what they spend to earn those profits, Big Oil is not so far out of line.

Trust me when I tell you that Big Oil spends HUNDREDS of MILLIONS of dollars to get that oil out of the ground. I am thrilled that they do, since I work for an oilfield service company, and they pay us to help them. That keeps me, and thousands of people like me, employed. Big Oil makes that investment UP FRONT in exploration and production costs - the oil does not come out of the ground easily, nor for free. If they hit a dry hole, no one gives them their money back - it is just a loss. A HUGE loss.

Plus, when was it ever a crime for a company to actually make a profit? Wal Mart makes a profit. Your goal as a business owner is to make a profit. Until we become more energy efficient in this country, oil companies - and their stockholders - will make money. I happen to be a stockholder in a few oil companies - and I am by no means a big fish. I am just an average American - but when Big Oil makes money, so do I! What is wrong with that? Isn't that the point?

I am not picking on you - I just have a different perspective on things. I certainly understand your frustration, but I think you should direct that anger at the banks and the politicians who made it so easy for people with no credit, no job, and no financial stability to get a loan they could not pay back in order to buy a house they could not afford.

Love your blog - I have a soft spot for animals and those who care for them...