“Dude—what is up with gas prices??”
This is the question on all of our lips in one form or another. Different people will give you different answers. – “It’s the damn OPEC countries!” “It’s the evil oil execs!” “Stop the speculators!” And so on.
At the end of May, the Bigwig Execs of all major American oil companies attended a Senate Judiciary Committee hearing on price gouging in the oil market.
Oil Exec J. Stephen Simon had this to say:
In 2007, the average price per gallon of regular gas was $2.80. About 58% of this price reflects the cost of crude oil. 15% of the price reflected taxes, the remaining 27% goes to refining, marketing and transportation translating to “earnings of only about 10 cents per gallon of product sold”.“Since last year, the increase in gasoline price – and more – can be attributed to the rise in the cost of crude oil.” Other product prices have not risen as much therefore Exxon’s margins have been reduced. Current earnings are down to only 4 cents a gallon.
According to Simons, therefore, we should feel sorry for the poor oil companies—and should see them not as immoral pocket liners but rather as brave American businessmen, competing in a tough international market for the good of the country.
If his take seems a tad bit skewed—congratulations—it is! In February 2008, Exxon Mobil made history by reporting the highest quarterly and annual profits ever for a U.S. company—$11.66 billion during the fourth quarter of 2007. It also set an annual profit record of $40.61 billion.
Apparently Mr. Simon and his Exxon buddies inhabit a world in which billions and billions of profits can still represent a loss. What a world. Read More »
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