Major oil companies reported ginormous second-quarter profits this week, irking consumers and fueling harsh rhetoric from congressional Democrats. ExxonMobil reported a record-breaking profit of $11.68 billion -- the highest of any U.S. company ever -- besting its own previous record set in the first quarter of this year. Royal Dutch Shell raked in $11.56 billion, BP hit $9.5 billion, and ConocoPhillips posted $5.44 billion in profits; Chevron will release its earnings on Friday. Consumers are enraged that oil companies are making crazy-high profits while they pay record-high gasoline prices, and Democrats in Congress are trying to stoke that anger, pointing out that oil-company profits rose even as production declined. Democrats have also stressed that a huge proportion of the companies' profits have been invested in buying back billons of dollars worth of their own stock in order to drive up its value instead of investing in renewable-energy research and development. "It's the most selfish group of companies that I've ever seen," said Sen. Charles Schumer (D-N.Y.).
source: The New York Times, Reuters, Forbes, The Hill, The Wall Street Journal
see also, in Grist:Exxon spent millions fostering climate-change confusion, report says
E.U. pushes China further after pledge to slow carbon intensity
Obama headed to Copenhagen, sets the bar for success
Comments
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perk Posted 2:06 am
01 Aug 2008
2). A corporation has a legal responsibility to its shareholders to, usually, maximize net income. Sometimes that is "selfish". Just like a union is "selfish" when it asks for raises for its members, rather than investing in alternative energy. If your mutual fund owns Exxon (many do), you benefit from this.
3). Oil company profits are based on sell price minus cost of production. Sell price is determined by world-wide supply versus demand.
Solution to the profit "problem":
If the world uses (demands) less oil, the profits turn to losses as the sell price drops and production cost remains constant.
The blame is resting squarely on the people of the industrialized world who use/benefit from oil. Yes, WE are the demons. Misplaced blame won't fix it, but it if it makes you feel better, go ahead and blame Evil-Oil-Bush-Rove-Cheney.
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mooncoyotemom Posted 2:30 am
01 Aug 2008
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Gustavion Posted 2:48 am
01 Aug 2008
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perk Posted 3:04 am
01 Aug 2008
So here goes:
The investing public ARE the owners of a public company like Exxon. So driving up the value of its "own" stock, is simply raising the value of the stock held by the public investor that did not choose to sell it back to the corporation.
In a stock buyback, the net worth of the company is unchanged, because they spend cash (an asset) to buy Treasury stock (another asset). However, since there are fewer shares traded, the book value per share of the stock outstanding will higher, and this book value increase usually results in a market value increase.
When a company buys back its own stock, it is telling the investors/shareholders "we have no place to put this money to give you a better return on investment, so we are giving it back for you to invest elsewhere"
Microsoft has been doing the same thing. They are wildly profitable and have been buying back their own stock. They have run out of profitable ideas.
Not to defend big oil, but two of the world's biggest suppliers of solar panels are BP Solar, as in British Petroleum, and Shell Oil.
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Wolverine Posted 3:53 am
01 Aug 2008
However, those with more money and power are more responsible, because they're making the big decisions. When oil company executives conspire to, for example, dismantle electric public transportation in order to get people into private autos and buses, they are far more responsible than the general public that was duped into allowing this to take place.
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JohnS Posted 5:40 am
01 Aug 2008
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rrecroc Posted 12:22 am
02 Aug 2008
If a hurricane even goes near the gulf, that's an excuse for higher gas prices ...... or there's a leak in a pipe, etc.
The problem is lack of competition ....
20 years ago, the FTC disallowed both vertical and horizontal mergers to maintain the maximum number of suppliers and thus increased competition.
The emasculation of the FTC by the congress under the direction of their corporation masters has led to the creation of oligopolies in every major industry in this country.
Ex ...... back in the late 80's, there were 8 to 10 major drug companies ........ now there are 3 .........
Oligopolies don't compete ....... it is not in their interests to do so ......they "sit around a table" and set prices.....
The govt failure to represent the best interests of the people got us where we are .....
The FTC is now a worthless regulatory agency ...... like most other regulatory agencies which have been stripped of their powers and funding by "pro-business" republicans ....
They can't even effectively regulate the deceiving advertisements that you see on tv, let alone in print media and on the internet.
Their is no doubt the american people must change their lifestyles and addictions ....
But that really is a separate issue from what is occuring now with the oil companies ....... i.e., they are indeed taking advantage of the situation while pointing their fingers at the sheiks ....
If they were simply passing along increased costs, their profits would not be soaring ...... they are adding their own price hikes to the oil in addition to the hikes coming from the oil supplying countries for crude.
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