Exxon Drowning In Profits

Exxon Mobil Corp. made an $8.4 billion profit in the first quarter. And even though that's a 7 percent increase over last year analysts were disappointed with the numbers. Net income only rose to $1.37 per share for the January-March period from $7.86 billion or $1.22 per share last year. Wall Street analysts were looking for 1.47 per share. Too bad for poor Exxon-Mobil.

If only they could figure a way to make more profit!

Well the Senate is interested in their profits, too. Seems the Senate Finance Committee is seeking the Income Tax records of the oil behemoth. Senator Grassley (R) of Iowa said, "I want to make sure the oil companies aren't taking a speed pass by the tax man."

My guess is that there will be the usual grandstanding and then the whole thing will again be swept under the table. The inner workings of the oil companies and their insane profits will continue to be opaque and we may never know the truth.

I found it interesting that last night on the Daily Show, Jon Stewart was interviewing a Wall Street Journal columnist (I cannot remember her name). He tried to get her to tell him how the oil companies could be making record profits without price gouging and she kept telling him he just didn't understand how business worked.

Bear with me for a moment. This is a very greatly simplified example but I suspect this is why Stewart and myself are so confused. Try this equation: X + Y = Z

X= price per barrel of oil
Y= cost of refining gasoline
Z= price at the pump

Now if oil prices go up, the cost of gas increases, however the cost to refine it doesn't change. So one would think that the profits of the gas companies would remain stable, since the amount of gas purchased doesn't change and they are passing the additional oil cost along the way. So why the record profits, even with increased costs?

Here's my suspicion, they use a mark-up formula that is based on a percentage of the cost of the oil + the refinery costs. Therefore, not only is the extra cost passed on, its marked up an additional percent, so the higher the oil prices, the more profit for the oil companies. For them it's a win/win situation and for us it’s another chance to be screwed by big business.

Simple isn't it? They pass on the cost and increased profits and we pay. Now why couldn't Jon Stewart understand that? What could be better? Well Bush has suspended the environmental restrictions for the refineries, so they can pollute the air even more, make gas a little cheaper and still keep those record profits rolling. What a country!