This post is about gas
Yes I understand that geo-politics plays a role. I also understand that one of the many arguments for war against Iraq was the carrot of cheaper gas prices. It made sense - we invade a country with a lot of oil, it's ours!
Additionally, I understand that the whole ethanol changeover has an effect, as well as many other factors of which I do not understand.
However - how do the oil companies increase their profit at a much higher rate than their gross earnings?
For instance, during 2005-3Q, ExxonMobil increased their revenue by 32% to $100.7 billion. Am I remiss to think that their profit would increase at a similar rate? Apparently so, as their profit rose 75% to $9.92 billion. That's an increase of 7.4 cents for every dollar earned to 9.9 cents per dollar, an increase of 25%.
I don't have a problem with rising profits in proportion to rising revenue as a result of more product sold. As a businessman, I also don't have problems with rising profitability.
I do have a problem with rising revenue coming from higher prices timed with rapid profit acceleration in a business that every single person in this country depends on. 25% profitability increase in 3 months?
Those three months oversaw Hurricane Katrina, mind you. We can't forget what a cluster-poop that situation is. Remember when the high electricity prices in California were written off as simple economics, only to discover that Enron was manipulating prices? Combine that industry with the fact that Kenneth Lay was best friends with the current President along with Mr. Bush's ties to the oil industry (gee, why are all these companies headquartered in Texas?), I apologize if I'm just a tad skeptical.
I'll be the first to admit I'm not smart enough to comprehend the complexities of the oil market, but I'm not that dumb to simply roll over and not ask questions.