Aug 1, 2008

So Tar and Feather Me...

ExxonMobil made record profits this quarter and they are being villified in the press for it. Here's NPR's short piece on the news:

Exxon Reports 14 Percent Rise In Quarterly Income

Morning Edition, July 31, 2008 · The world's biggest private oil company has shattered its own record. Exxon announced Thursday morning that its net income rose 14 percent in the recent quarter, to $11.7 billion. It's more money than any other U.S. company has ever made in a single quarter.

Okay. Sure. $11.7 billion is A LOT of money, but everyone take a breath and think this through. What really matters, and what the media deliberately avoids taking about, is profit MARGIN. That's what's left after the investment and operating expenses are taken out of the balance sheet. Now, how expensive do you think it is to develop LNG terminals in Qatar, build proprietary tankers to move LNG and crude oil all over the world, and support the operations of one of the biggest companies in the world? ExxonMobils profit margin the last time I saw the statistic was about 6 - 7%. To help you put that in perspective, Walmart's profit margin runs around 78%.

Why the difference? Operating expense. ExxonMobil builds large projects, pays living wages, conducts research, etc. whereas Walmart pays minimum wage, builds cheap pre-fab stores and negotiates it's suppliers to the bone.

The media and our elected official have never been big on the facts, however. Nobody is in a big hurry to call the Walmart executives in the explain their obscene profits or justify being successful because energy is a hot-button topic right now and when you are Big Oil no one has your back.

Yes. I understand that gasoline is expensive. What do you expect when demand increases on a finite resource? I am actually amazed it does not cost more. Oil companies make about 6% on a gallon of gasoline, by the way. I bet your liquor store makes something like 90% on a 6-pack of beer.

So, there it is. Get the tar and feathers and have a kick at me, but that's the facts.

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