Exxon Mobil posts biggest US quarterly profit ever

[GT500-07]

what a surprise,

 

Exxon Mobil shatters own record for largest profit from operations by a US corporation

 

http://biz.yahoo.com/ap/081030/earns_exxon_mobil.html

[VaporDude]

That's not surprising, I knew they were gouging the consumers and Bush isn't going to do anything about that since his hands are in the oil pot as well.

[Guest markham51]

It will be interesting to see how they do next quarter with prices dropping so dramatically....

[GT500-07]

That's not surprising, I knew they were gouging the consumers and Bush isn't going to do anything about that since his hands are in the oil pot as well.

 

don't forget his side kick Cheney

[ejrail]

What's a guy to do? We need our 91 -93 octane fix at any price.

[moabman]

Just as before earlier this summer when you posted all of these stories GT500-07, I will be here and post not the story (because that wouldn't be politically correct to print and no one will print it), but the facts when their profits drop by 58% next quarter.

 

As for you VaporDude perhaps you and your keen intellect and insight into the industry can tell us why this gouging behemoth has lowered the price of gasoline for you to what it was last year? I guess they got tired of gouging and are now gifting?

[GT500-07]

Just as before earlier this summer when you posted all of these stories GT500-07, I will be here and post not the story (because that wouldn't be politically correct to print and no one will print it), but the facts when their profits drop by 58% next quarter.

 

As for you VaporDude perhaps you and your keen intellect and insight into the industry can tell us why this gouging behemoth has lowered the price of gasoline for you to what it was last year? I guess they got tired of gouging and are now gifting?

 

thanks for the stock tip, M

[SGT/SC#0471]

Just as before earlier this summer when you posted all of these stories GT500-07, I will be here and post not the story (because that wouldn't be politically correct to print and no one will print it), but the facts when their profits drop by 58% next quarter.

 

As for you VaporDude perhaps you and your keen intellect and insight into the industry can tell us why this gouging behemoth has lowered the price of gasoline for you to what it was last year? I guess they got tired of gouging and are now gifting?

 

 

Hey Moab, has gas price fallen to as much as it was when oil cost the same amount per barrell in the past? This is a real question not arguing your insight... Thanks!

[JeffIsHereToo]

Welcome to the REAL "redistribution of wealth"! :happy feet:

[Guest markham51]

Just as before earlier this summer when you posted all of these stories GT500-07, I will be here and post not the story (because that wouldn't be politically correct to print and no one will print it), but the facts when their profits drop by 58% next quarter.

 

As for you VaporDude perhaps you and your keen intellect and insight into the industry can tell us why this gouging behemoth has lowered the price of gasoline for you to what it was last year? I guess they got tired of gouging and are now gifting?

 

 

 

Hey moabman,

 

Exxon is clearly one of the big guys on the block with extensive world wide assets. They seem to make more when prices go up to their highest. Thats just an impression....the higher the prices, the more they make and not just small amounts more, big amounts more.

 

My question is this...how does Exxon profit more in a period of rising prices and your refiner Valero does not? You said Valero was having financial hardships with pricing bouncing around the way it was and I believe you, just not sure how that all works.

 

Please dont be defensive, I just want to learn more about the industry and specifically Valero.

 

Mark

[VaporDude]

I guess we'll have to do a little research for last year. Take the price of a barrel of oil a year ago versus the price of gas in that same period. I am betting we are paying 10-20 cents more per gallon now than they were at the prices of last year. It is only lately that the prices have really started to come down after they have taken most of our money.

 

Now if you take that oil production has not gone up and profits are up dramatically, then we need to do the math. The only thing that I can think of is that they are getting more per gallon then they have a year ago. I read an article that Exxon has not increased production in years and has not added any refineries but their profits seem to be skyrocketing.

[moabman]

Hey Moab, has gas price fallen to as much as it was when oil cost the same amount per barrell in the past? This is a real question not arguing your insight... Thanks!

 

Thanks for the question. When you take the average price of oil now versus in the past the margin is the same. There is a lag as prices fall but, and this will come as a surprise to most because this is another story that won't get printed, the prices have fallen faster on the way down than they rose on the way up. That's not due to the generosity of the oil companies but rather the prices of oil have fallen faster than they rose.

 

One other point, markets aren't perfect. They sometimes have upsets. The gasoline shortages in the SE this fall is an example. In that market served by one major pipeline, the pipeline wasn't able to supply all the gas needed to meet the demand because some of the refineries that were putting gasoline into the line were down or curtailed from Hurricane Gustav. Every pipeline transports dedicated product and free product. Dedicated product means ExxonMobil puts 1000 bbls into the line at the refinery and takes 1000 bbls of gasoline out at the other end. If however ExxonMobil puts 2000 bbls in and only takes 1000 bbls out for their stations, the other 1000 bbls is put up for sale by marketers. Obviously, if ExxonMobil can only put 900 bbls in and they need 1000 for their stations, they have to buy 100 bbls on the market. Independents are always buying on the market. This is what caused the price spike in the SE, too many people wanting to buy too few bbls. in that market.

 

Another story about the price spikes in the SE that will never get printed is that during the worst of it, the majors actually stopped buying. They knew they would be accused of gouging so they simply let their station run out. Some of you in the SE can confirm that most of the closed stations were major brand stations.

 

Given time, however, markets self correct and prices return to normal.

 

Thanks again for the question and your interest.

[SGT/SC#0471]

Thanks Moab it is an interesting dynamic. I am just happy to still get some fuel. It is what it is, I live close to work and do not drive too much. I also burn B99 in two of my rigs, but ain't nothing cooler than a well tuned v-8 gas engine. Well maybe a detroit diesel v-8 comes close...haha Thanks for your answer.

[mywickedshelby]

thanks Moab for your insight, it is enlightening to hear about some of these circumstances from someone in the industry. we all just get pissed cause these things have such a big impact on our everyday lives.

 

thanks again.

[moabman]

Hey moabman,

 

Exxon is clearly one of the big guys on the block with extensive world wide assets. They seem to make more when prices go up to their highest. Thats just an impression....the higher the prices, the more they make and not just small amounts more, big amounts more.

 

My question is this...how does Exxon profit more in a period of rising prices and your refiner Valero does not? You said Valero was having financial hardships with pricing bouncing around the way it was and I believe you, just not sure how that all works.

 

Please dont be defensive, I just want to learn more about the industry and specifically Valero.

 

Mark

 

Another good question, thanks markham51!

 

Exxon profits because they own a lot of oil in the ground. Their costs to find and pump that oil out are relatively fixed. Actually the lease operating expenses have gone up a lot over the last year because it costs a lot more for the energy to pump the oil out and fuel the operators truck as he makes his rounds to the wells as well as buy and transport most of the supplies needed to repair and keep those wells flowing. However, the lease operating expenses are usually a minor component (we still pay a lot of attention to them, however) in the overall cost to the company. The major costs are the cost to drill and complete the well, install the production facilities, and lay the pipeline to the market. A integrated comapny (defined as a comapny who produces, refines, and markets) will make a lot of money when the price of oil goes up and help cover the shrinking profit from their refining and marketing operations.

 

Valero doesn't own any oil in the ground so as the price of gasoline goes up, they have to pay more for the raw material coming in the front of the refinery. They also have to pay more for the energy to run the refinery so it is a kind of double whammy for them.

 

Keep in mind, however, that the oil reserves that the majors own makes up less than 25% of the worlds reserves. The rest is owned by nations (most of the 75%) and a few independent oil companies that don't have refineries or stations (probably about 1-2% although I don't have the exact number).

 

Finally, if you will please tell me what the price of oil will be in the future, it would make my job so much easier. Right now, companies are gambling billions of dollars on projects that they hope will make money. It will take, in some cases, ten years for the production to commence. We have gone to great lengths to try and understand the risks involved, but in the end, it is still a gamble. You have seen in ten months the price of oil double and then come right back down. That kind of volatility is hard to plan for and I hope you will excuse us for planning on prices staying closer to the inflation adjusted $70/bbl than the $140/bbl level.

[JeffIsHereToo]

So cutting through the mumbo-jumbo why is that the oil companies claim gas prices are so high due to factors beyond their control and cry that they are just as much a victim of supply/demand yet later report RECORD profits?!?!

 

You have company's really hurting, like Ford, and you have here an industry that claimed high prices were due to costs, yet they return the largest profit ever, and a spike due to storms with an actual impact that looks to be nothing more than rounding errors!

 

Suckers!

[moabman]

I guess we'll have to do a little research for last year. Take the price of a barrel of oil a year ago versus the price of gas in that same period. I am betting we are paying 10-20 cents more per gallon now than they were at the prices of last year. It is only lately that the prices have really started to come down after they have taken most of our money.

 

Now if you take that oil production has not gone up and profits are up dramatically, then we need to do the math. The only thing that I can think of is that they are getting more per gallon then they have a year ago. I read an article that Exxon has not increased production in years and has not added any refineries but their profits seem to be skyrocketing.

 

I'm still trying to help here. The average price of oil during the 3rd quarter last year was around $60/bbl. The average price for the 3rd quarter this year which started in June was around $120/bbl. I haven't read the article but increase in profits as a % are usually expressed over year ago time periods. Because the profits set a record, that means that there was also a second quarter to third quarter increase as well. The fourth quarter will be flat and show a quarter to quarter loss.

[moabman]

So cutting through the mumbo-jumbo why is that the oil companies claim gas prices are so high due to factors beyond their control and cry that they are just as much a victim of supply/demand yet later report RECORD profits?!?!

 

You have company's really hurting, like Ford, and you have here an industry that claimed high prices were due to costs, yet they return the largest profit ever, and a spike due to storms with an actual impact that looks to be nothing more than rounding errors!

 

Suckers!

 

Are you really this slow? The third quarter goes back to June. Since you were obviously asleep (hopefully not at the wheel - little Texas joke there) that was when the prices reached their peak.

 

 

Jeff, Jeff, Jeff..........

[Ford blue blood]

Exxon Mobil profit margins are very low when compared to Wal Mart and Microsoft. Both Microsoft and Wal Mart are out of sight with respect to proffit margins yet no one is calling for "wind fall" or "redistribution of profits" from them. The oil companies spend much more to make what they make, when you start with a really big number you end up with really big numbers. I don't remember the amount but 7% sounds familiar for the oil guys and Wally world was in the 35% range and Microsoft higher then that. Tried to find the article but no luck....

[Guest markham51]

Another good question, thanks markham51!

 

Exxon profits because they own a lot of oil in the ground. Their costs to find and pump that oil out are relatively fixed. Actually the lease operating expenses have gone up a lot over the last year because it costs a lot more for the energy to pump the oil out and fuel the operators truck as he makes his rounds to the wells as well as buy and transport most of the supplies needed to repair and keep those wells flowing. However, the lease operating expenses are usually a minor component (we still pay a lot of attention to them, however) in the overall cost to the company. The major costs are the cost to drill and complete the well, install the production facilities, and lay the pipeline to the market. A integrated comapny (defined as a comapny who produces, refines, and markets) will make a lot of money when the price of oil goes up and help cover the shrinking profit from their refining and marketing operations.

 

Valero doesn't own any oil in the ground so as the price of gasoline goes up, they have to pay more for the raw material coming in the front of the refinery. They also have to pay more for the energy to run the refinery so it is a kind of double whammy for them.

 

Keep in mind, however, that the oil reserves that the majors own makes up less than 25% of the worlds reserves. The rest is owned by nations (most of the 75%) and a few independent oil companies that don't have refineries or stations (probably about 1-2% although I don't have the exact number).

 

Finally, if you will please tell me what the price of oil will be in the future, it would make my job so much easier. Right now, companies are gambling billions of dollars on projects that they hope will make money. It will take, in some cases, ten years for the production to commence. We have gone to great lengths to try and understand the risks involved, but in the end, it is still a gamble. You have seen in ten months the price of oil double and then come right back down. That kind of volatility is hard to plan for and I hope you will excuse us for planning on prices staying closer to the inflation adjusted $70/bbl than the $140/bbl level.

 

Thanks for the info.

 

In summary;

 

In essence Exxon has some oil which has a low lost in its "asset base" so they get the full bump when prices go sky high. This oil is effectively home grown/drilled for by them and has a low historical cost base. Valero has to buy all of its oil from the world market at prevailing prices prior to refining it and has to pay increasingly higher prices as the go up.

 

eg: Exxon has its own wells that produce oil at say 30 dollars per barrel. Oil prices go to 150 dollars from 50. All of a sudden Exxon makes a pile more money (windfall) before they even add a refining margin.

 

Valero however has to buy the oil from the market at the higher 150 price and then adds its refining margin. It only gets to make money as a refiner...not as a producer.

 

Valero is at a distinct disadvantage to Exxon because it doesn't have any of the cheaper oil to cost average its margins.

 

So, where does this leave us in the argument that says "the oil companis are screwing us?"

 

Well in the spirit of "left and right"...

 

On one side.... (Oil companies)

 

Valero would likely argue as a "refiner" that their profits are not so large in times when prices spike beause they are paying market prices and therefore they are not gouging the consumer

 

Exxon makes money big time (just like OPEC) when prices rise and if OPEC doesn't have to give some of it back when prices rise, why should they? And besides, it is expensive to drill for future oil, the cheap oil is gone.

 

On the other side (consumers)

 

When prices go up it hurts and it always seems the oil companies/refiners are quick to raise prices and slow to lower them

 

So: who is right?

 

There is probably some opportunism at work (after all that's what making money is about...it drives exec comp etc) but that doesnt necessarily mean "unreasonable" profits. Exxon and Valero dont have the same cost base and so they are simply not comparable.

 

Then there is the natural skepticism of the public...just look at the political posts. We often believe what we want to believe. Obama vs McCain. This guys will do this...and that guy will do that...but of course they are all "Facts" and "the truth".

 

So even if someone finds a story supporting or refuting the "gouging" argument...ultimately people will believe what they want to believe. Thats been my experience.

[JeffIsHereToo]

Are you really this slow? The third quarter goes back to June. Since you were obviously asleep (hopefully not at the wheel - little Texas joke there) that was when the prices reached their peak.

 

 

Jeff, Jeff, Jeff..........

 

The oil companies said they could not hold the line on prices they know day by day what they are making! I get daily and monthly sales reports showing where my company sits. Are people trying to make the excuse that Exxon made it's profit early in the quarter or somehow justify this obscene profit as something they had no control over in pricing later in the quarter? I know at the end of every month in the quarter where I sit in revenue, profit, and the forecast. Unless someone has access to those records for Exxon this is all guessing and doesn't get to the core issue. The companies have been reporting larger and larger profits and have a ton of excuses why. You can't justify the subsidies, the lack of drilling on leases, etc., when they are making this much money.

 

Ok...so how about a rebate!

[AstroDan]

The oil companies said they could not hold the line on prices they know day by day what they are making! I get daily and monthly sales reports showing where my company sits. Are people trying to make the excuse that Exxon made it's profit early in the quarter or somehow justify this obscene profit as something they had no control over in pricing later in the quarter? I know at the end of every month in the quarter where I sit in revenue, profit, and the forecast. Unless someone has access to those records for Exxon this is all guessing and doesn't get to the core issue. The companies have been reporting larger and larger profits and have a ton of excuses why. You can't justify the subsidies, the lack of drilling on leases, etc., when they are making this much money.

 

Ok...so how about a rebate!

 

 

I too work in the Industry. An large, independant competitor to Valero.

What Moabman says is absolutely true. As independants, we are very subject to the daily ups and downs, particularly in the oil futures. We basically go to Exxon with our hat in our hand to tap a few tankers of oil from their supertanker. We pay the price and pass on to the consumer to make our profit tied closely to the crack-spread. Very volitile.

 

Exxon, on the other hand, doesn't make the "obscene profits" from refining. They make it from owning the oil and exploration.

There should be no appology required for a company in America that has stock-holders, that makes a profit. They (and we) provide tens of thousands of people with GOOD paying jobs, pay into local economies huge tax revenues and provide a crucial comodity to a thirsty country/world. No need to apoligize for that.

 

We don't make hamburgers or tax-shelters. We make gas and diesel that you demand and require. I am very proud of what I add to Americas economy. I personally have done things in my job, at crunch-time, that positively affected the entire US market! I don't feel I need to apologize for that.

 

It's very frustrating when Americans think we're evil because we make money.

 

Don't like the oil companies and want us out of business: Sell your gas-guzzling SUV's and muscle-cars and buy Toyota electric cars. I'm sure our economy would be in a much better place. The problem is that power plants mostly run on fossil-fuels too.

 

Did you ask Walmart for a rebate? How about your Pharmacy?

(I don't feel this is political, as much as a call for Americans to defend and support American industry.)

 

Dan

[Guest markham51]

The oil companies said they could not hold the line on prices they know day by day what they are making! I get daily and monthly sales reports showing where my company sits. Are people trying to make the excuse that Exxon made it's profit early in the quarter or somehow justify this obscene profit as something they had no control over in pricing later in the quarter? I know at the end of every month in the quarter where I sit in revenue, profit, and the forecast. Unless someone has access to those records for Exxon this is all guessing and doesn't get to the core issue. The companies have been reporting larger and larger profits and have a ton of excuses why. You can't justify the subsidies, the lack of drilling on leases, etc., when they are making this much money.

 

Ok...so how about a rebate!

 

 

Subsidies...what are those all about and why is the oil industry subsidized?

[Boss Doctor]

This is why we need to nationalize the whole energy industry!

[moabman]

Thanks for the info.

 

In summary;

 

In essence Exxon has some oil which has a low lost in its "asset base" so they get the full bump when prices go sky high. This oil is effectively home grown/drilled for by them and has a low historical cost base. Valero has to buy all of its oil from the world market at prevailing prices prior to refining it and has to pay increasingly higher prices as the go up.

 

eg: Exxon has its own wells that produce oil at say 30 dollars per barrel. Oil prices go to 150 dollars from 50. All of a sudden Exxon makes a pile more money (windfall) before they even add a refining margin.

 

Valero however has to buy the oil from the market at the higher 150 price and then adds its refining margin. It only gets to make money as a refiner...not as a producer.

 

Valero is at a distinct disadvantage to Exxon because it doesn't have any of the cheaper oil to cost average its margins.

 

So, where does this leave us in the argument that says "the oil companis are screwing us?"

 

Well in the spirit of "left and right"...

 

On one side.... (Oil companies)

 

Valero would likely argue as a "refiner" that their profits are not so large in times when prices spike beause they are paying market prices and therefore they are not gouging the consumer

 

Exxon makes money big time (just like OPEC) when prices rise and if OPEC doesn't have to give some of it back when prices rise, why should they? And besides, it is expensive to drill for future oil, the cheap oil is gone.

 

On the other side (consumers)

 

When prices go up it hurts and it always seems the oil companies/refiners are quick to raise prices and slow to lower them

 

So: who is right?

 

There is probably some opportunism at work (after all that's what making money is about...it drives exec comp etc) but that doesnt necessarily mean "unreasonable" profits. Exxon and Valero dont have the same cost base and so they are simply not comparable.

 

Then there is the natural skepticism of the public...just look at the political posts. We often believe what we want to believe. Obama vs McCain. This guys will do this...and that guy will do that...but of course they are all "Facts" and "the truth".

 

So even if someone finds a story supporting or refuting the "gouging" argument...ultimately people will believe what they want to believe. Thats been my experience.

 

You are right, people believe what they want to believe. Obviously, that doesn't make everyone right, however. For example, the perception that "oil companies/refiners are quick to raise prices and slow to lower them" just doesn't hold water. Prices have fallen faster this fall than they rose last spring. Just look at the chart which is straight from the Energy Information Agency of the Department of Energy. Notice how steep the fall in price has been compared to the slower rise during the spring. Also, if you look closely at the right side of the graph, you will see that the gasoline prices are now lower than they were last year at this time.

 

Before anyone gets on the windfall tax bandwagon, please remember two things: the companies are using those profits to invest in projects that will help keep your energy supplies more secure in the future. The other thing to remember is that by the time Congress could pass the legislation, there will not be any more windfall to tax.

 

Perhaps what bothers me the most is that over the past 50 years, the energy industry has delivered to all of us here in the United States the lowest cost of energy in the industrialized world and yet in way of gratitude we stereotype them and many revile them for it.

[moabman]

This is why we need to nationalize the whole energy industry!

 

Mexico just voted this week to de-nationalize their industry, PEMEX. The reason? Corruption permeating the entire structure and the inability to compete in the open marketplace.

 

Subsidy means the tax break given to all industries for depreciation. It's just that when you apply it to the oil industry, you get to call it a subsidy.

[svttim]

You are right, people believe what they want to believe. Obviously, that doesn't make everyone right, however. For example, the perception that "oil companies/refiners are quick to raise prices and slow to lower them" just doesn't hold water. Prices have fallen faster this fall than they rose last spring. Just look at the chart which is straight from the Energy Information Agency of the Department of Energy. Notice how steep the fall in price has been compared to the slower rise during the spring. Also, if you look closely at the right side of the graph, you will see that the gasoline prices are now lower than they were last year at this time.

 

Before anyone gets on the windfall tax bandwagon, please remember two things: the companies are using those profits to invest in projects that will help keep your energy supplies more secure in the future. The other thing to remember is that by the time Congress could pass the legislation, there will not be any more windfall to tax.

 

Perhaps what bothers me the most is that over the past 50 years, the energy industry has delivered to all of us here in the United States the lowest cost of energy in the industrialized world and yet in way of gratitude we stereotype them and many revile them for it.

 

Moabman, Jeff is a great guy but, he has that whole obama redistribution thing going on. They think we should all just get along and share money with those that sit on thier butts.

 

On the other hand, I have seen suppliers keep the rate of fuel up. Those are the locals that have a market sewn up. I have seen fuel in a small out of the way town, cheaper in thier prices than those with a ready supply and transportation. I think some also see that as "The oil companies"

[moabman]

How very true. We have stinkers just like everyone else, including, gasp, politicians.

 

I have mentioned before that I work next door to the "Enron" building. I am so thankful every day as I walk past it and watch as people are still photographing it, that I don't work for a company like that. Within the industry we have scoundrels and we have saints and we have people that are just trying to make an honest living. Most are the ones just trying to make a living.

[cloud9]

Thanks for the detailed breakdown of the industry moabman. Most people bitch about these things without ever doing any research. Hopefully some have taken the time to READ what you have posted.

 

My response to people that complain about big oil gouging has always been to buy the stock. If they are truly gouging and making "above market" profits given the risk they take, you can simply ride along as a shareholder. They are all public companies and their stock is as readily available as their gasoline.

 

Put up or shut up. Sell your Shelby and buy Exxon stock. The fact is they aren't gouging....or why would they ever lower the price....or for that matter not make it $8 or $10 a gallon if they could?

[JeffIsHereToo]

Perhaps what bothers me the most is that over the past 50 years, the energy industry has delivered to all of us here in the United States the lowest cost of energy in the industrialized world and yet in way of gratitude we stereotype them and many revile them for it.

 

Whoa! "gratitude"!?!?! I'm, a customer, they've made PLENTY of money off me that's all the "gratitude" I'm required to give. They have $16 billion on our "gratitude" and that's just Exxon! I would never even think a customer of mine should be grateful! Please, that's an insult to consumers.

 

Let's look at the recent earnings history of poor misunderstood Exxon:

 

In 2007, ExxonMobil had a record net income of $41 billion, an increase largely due to escalating oil prices as their actual oil equivalent production decreased by only 1%.

 

Financial Data USD millions

 

Year 2002 2003 2004 2005 2006

 

Total Rev 204,506 237,054 291,252 358,955 377,635

 

Net income 11,460 21,510 25,330 36,130 39,500

 

Energy costs are lower here NOT because of anything the oil companies do but because we don't tax energy the way they do in say the UK where the tax alone is about $3.80 US.

 

http://en.wikipedia.org/wiki/Gas_tax

 

Remember this is not a record in sales....this is a record in PROFIT.

 

What ever, I can't believe at a time when oil and gas pushed everything we buy into crazyville and pushed many companies out of business, you're all running to the defense of poor misunderstood Exxon...you're all suckers!

 

Let's keep showing Exxon our collective "gratitude" and give them more subsidies and more leases they will never drill on, as we give them more and more of our money until there is no more oil worth drilling for and they pack up and go home.

 

BTW: Exxon has invested less than 1% of their profits in alternative fuels research. Swell!