In a remarkable example of an anti-business hit-piece called "Fueling Contempt" on the front page of the AZ Republic, the Republic leads with this line:
Reaction to major oil producers' staggering profits ranges from rage at
the pumps to calls for profits to be reinvested in exploration,
alternative-energy research or simply returned somehow to the public.
The article is mainly focused on the profit announcement at Exxon-Mobil, so I will use their numbers to put "staggering" into context. E-M announced profits of $9.9 billion on sales of $101 billion. For those who cannot divide, that is a profit margin of 9.9% of sales. Since when is a profit margin at a cyclical peak of 9.9% considered "staggering"? Microsoft makes 30%, in good times and bad, with a fraction of the investment or risk X-M takes. From this chart, you can see the average for all industry is about 8%, with the oil industry generally below this number in all but cyclical peak quarters and banks, pharma, software, semiconductors, financials, household products and many others all consistently over 10%. Procter and Gamble makes a margin of nearly 13% of sales selling toothpaste and detergent but we are going to begrudge oil companies 7.6% on average and 10% in their best quarters?
The article does absolutely nothing to put the profits in their proper context, though I was able to do it in one paragraph. This is the only context the article offers:
The oil companies assert that their profits are no larger than other
businesses and that they just look big because it is a big business.
Exxon Chairman Lee R. Raymond said in a statement that the company
"acted responsibly" in its pricing and said its fourth-quarter profits
would come nowhere close to the $9.9 billion in the third quarter.
That doesn't necessarily wash with Adrienne Valdez of Phoenix.
"I can't afford to buy socks because I am paying twice what I used to
for gas," she said. "It's not right that they should be making billions
at our expense."
In Phoenix, gas prices soared to $3.14 after Hurricane Katrina hit the
Gulf Coast. The average Valley price per gallon, which has been falling
in recent weeks, was $2.72 Thursday, according to AAA Arizona.
Bruce Trushinsky, owner of the former Moon Valley Exxon station at 1901
W. Thunderbird Road in Phoenix, called Exxon Mobil's $9.9 billion
quarterly profit "disgusting."
He became so upset at the $7.6 billion profit posted by the company in
the second quarter that he canceled a longtime branding agreement.
"I ripped down all the Exxon signs and threw them in the garbage,"
he said. Now, after 30 years, Moon Valley Exxon is Carmel Automotive
and Fuel. Trushinsky said the high wholesale prices charged by Exxon
were devastating to his business and that the last straw was when the
company canceled its dealer-incentive program.
"They cut us off, then they announced their (second-quarter) profit increased $2 billion."
This is populist crap, and is the reason the MSM cannot be taken
seriously when they say that they are neutral reporters. They are not
reporting, they are cheerleading an anti-oil company bigotry that has
existed for decades. I think that the E-M management should be embarrassed to make such a small return in their best quarter. Shareholders should take management to the woodshed for investing and risking so much in a cyclical business and making so little. For gods sakes, they make a lower margin than Jif peanut butter earns. Is anyone suggesting that we impose a windfall profits tax on Charmin?
I find the title of the article "Fueling Contempt" interesting - I am not sure if it was meant to refer to high oil company profits or if it was just a statement of intent for the article.
Since 1977, governments collected more than $1.34 trillion, after adjusting for
inflation, in gasoline tax revenues"”more than twice the amount of domestic
profits earned by major U.S. oil companies during the same period
This is just gasoline taxes - it does not include income tax payments, property tax payments, and oil lease royalty payments.