Oil Company Executives Defend Profits

[KrazyHorse]

And if it is the latter, then saying that they paid 100 billion in taxes is sort of disingenuous, given that a large chunk of that is equivalent to paying residents of a region for the right to deplete a non-renewable resource. IOW it's a transaction, not really a tax.

[RGBVideo]

Originally posted by Verto
Every company sells their product at a profit, or at least tries to. People need to stop this bull**** about making oil companies sell oil at cheaper prices, or building more refineries, and all that, and come to terms with the fact that excessive consumption is what put them in their current situation. If we hadn't allowed ourselves to continue growing more and more dependent on these commodities, we wouldn't be dealing with this in th first place.

The industry is supposedly in crisis, yet look at the profits. There's no real competition. When smaller players try to offer lower prices, they'll quickly get eaten alive. There's an obvious trust between the giants. I'm glad I'm not an American consumer.

[JohnT]

Originally posted by KrazyHorse
What do you mean, "cost of oil"?

I thought Exxon was a producer as well as refiner and distributor?

If so, then there are two main categories of costs involved:

1) Production expenses (drills, wages etc.)

2) Drilling rights payments (royalties etc.)

Saying "the cost of oil" doesn't make any sense here. Does that so-called "cost of oil" include merely production costs or does it also include the payments to governments for the right to produce the oil? If it doesn't include the latter then are those costs included in the taxes etc.?

The 10k is as available to you as it is to me (I thought I already linked to it this thread). It'll do a far better job of answering your questions and "making sense." But I'll give it a whirl... any other questions can be taken to Investor Relations.

There is a line item on their income statement, the very first item listed under "Cost" called "Crude Oil and Product Purchases" of $52 billion these past three months.

Production costs are another line item (again, this is easily available for you), this of $6.5 billion.

Drilling rights (royalties) are covered under taxes, which I already quoted. As a matter of fact, with the exception of a lawsuit in Alabama, the 10k doesn't use the word "royalties", "fees", or "rights" to describe its business relationship with the worlds' governments - it lumps all that under "taxes", and rightly so.

[JohnT]

Originally posted by VJ

The industry is supposedly in crisis, yet look at the profits. There's no real competition. When smaller players try to offer lower prices, they'll quickly get eaten alive. There's an obvious trust between the giants. I'm glad I'm not an American consumer.

How many oil companies exist in your country, VJ? Here is a partial list of the oil services and product providers here in Knoxville, a city of 350,000 people:

Oils - Petroleum (these are the companies that provide the industrial fuels needed to power UPS trucks, delivery vehicles, school buses, etc - you never see an industrial vehicle filling in a typical American gas station):

Arrow Gas & Oil
BP Products North America
Calloway Oil Company
Citgo Petroleum Terminal
Clinton Tire and Oil
Coffman Oil Co
Kelso Oil LTD*
Magellan Terminal Holdings
Pilot Corp
Regal Petroleum
Tennessee Pang and Equipment
Tri-County Oil Services (This organization does the government vehicles)
Williams Energy Ventures

Oil - Lubricants (cars and trucks)

Elf Lubricants
Finish Line Express Lube
Kelso Oil Co
McNutt Oil Co
Mr Transmission
Shell Oil Lubricants
Tri-County Oil Services
Whitefield Oil Company

Oils - Fuels (Home heating oil. Let it be known that Knoxville has had 2 snow days since my arrival in 1998)

Energy Oil Company (only in TN, home of the "National Coal Corporation")
Kelso Oil
Knoxville Lawn Care ( )
Tri-County Oil Services

So far, I'm noticing quite the opposite of your claim: There's plenty of competition and most of it coming from the little players. Even some bum**** company like Williams Oil is doing quite well. And we haven't even gotten to the plethora of companies that provide gasoline to our cars:

BP
Shell
Pilot
Conoco
Exxon
Marathon
Cargo Oil (own brand)
Amoco
Direct Oil (own brand)
Chevron
Raceway (own brand)
Race Trac (own brand)
Kelso Oil (own brand)
Texaco
Citgo
Phillips 66

16 companies, all with their own oil distribution systems, all competing with each other. And Pilot, a company you probably never heard of before today, is the market leader here in Knoxville - a private company, beating the big boys.

So this is what we have in our relatively small market - 31 separate oil companies in just four categories (21 local/regional players, 11 "big boys"). And you want to tell me that the small oil player is being wiped out.

Really? Is this something you know based on personal experience, living here in America, or is it an opinion you just pulled out of your ass because you wish it to be so?

*Despite the fact that he's being crushed out of existence by the big oil companies and their ruinous ways (and Pilot too!), Mr. Kelso put his $1.2 million house on the market to upgrade to a $3.4 million dollar place. I know this because I saw the original home when my parents were house hunting, and met the man. Damn that BP and Exxon for giving him such a forbidding future!

[KrazyHorse]

Originally posted by JohnT
Drilling rights (royalties) are covered under taxes, which I already quoted. As a matter of fact, with the exception of a lawsuit in Alabama, the 10k doesn't use the word "royalties", "fees", or "rights" to describe its business relationship with the worlds' governments - it lumps all that under "taxes", and rightly so.

Bull****.

Governments by default own the drilling rights to areas under their control. They hold these rights for all citizens. Selling the right to drill for a non-renewable resource is a completely different thing than is collecting a gasoline tax or income tax.

[JohnT]

Tell it to Exxon.

Now you may be entirely correct and that duties are lumped in the $54 billion they paid for oil (line 1).

However, that doesn't change the fact that they also paid over $100 billion in taxes this year. (page 26).

Again... if you don't like it, give Investor Relations a call. I'm not the one who wrote the thing.

[RGBVideo]

Originally posted by JohnT
Really? Is this something you know based on personal experience, living here in America, or is it an opinion you just pulled out of your ass because you want it to be so?

I thought you noticed the "I'm not an American gas consumer" -disclaimer, so why to ask?

Trusts doesn't mean the same thing as a monopoly, so a large range of companies really doesn't prove anything. In fact, that was exactly the point of my original post, nothing more or less. But you're absolutely right, the consumers in the local area are the only real experts and they should be the ones who do the whining since they're the only ones who can know if they're getting screwed or not.

[JohnT]

VJ, "Trust" has a very definite and specific legal meaning here in the US. Now if you can prove that there is a pool of ownership in the US oil industry that moves the market at its whim, you will be first in line for the Pulitzer.

Until then, any claims of an "oil trust" is just foolish conspirarizing.

[KrazyHorse]

Originally posted by JohnT
Tell it to Exxon.

Now you may be entirely correct and that duties are lumped in the $54 billion they paid for oil (line 1).

However, that doesn't change the fact that they also paid over $100 billion in taxes this year. (page 26).

Again... if you don't like it, give Investor Relations a call.

I don't want to give "Investor Relations" a call. I want to give you a wake-up call. The oil company might find it advantageous to list all payments to governments under a certain heading for accounting purposes, but it doesn't make any sense in the context of a discussion about the societal value of oil companies.

[JohnT]

The "societal value" is $100 billion because that's what the governments claim it is and tax accordingly.

[KrazyHorse]

Hardly. Excise taxes, income taxes etc. are the government's "profit". Sale of assets doesn't add anything to the government's net financial position...

[KrazyHorse]

Let's see: Company A makes widgets and sells them. It makes profits of 1 billion dollars and is taxed at the government's comically flat corporate tax rate of 10%, giving the government 100 million dollars.

Company B buys 100 million$ of gold bullion from the US Treasury at market rates and resells it for a profit of 1 million dollars, paying 100k to the government in taxes.

Yeah, I can really see why the government or its citizens should feel that company B is just as important to the government's financial well-being as company A.

[Dinner]

This is just some interesting data I ran across which is only tangentially related to the topic at hand but someone else might be interested as well. World oil output in 2004.

Total world output 75,340,000 bbl per day (all figures bbl/day)

1. Saudi Arabia 8,711,000
2. United States 8,054,000
3. Russia 7,286,000
4. Iran 3,804,000
5. Mexico 3,590,000
6. Norway 3,408,000
7. China 3,300,000
8. Venezuela 3,080,000
9. Canada 2,738,000
10. United Arab Emirates 2,566,000
11. UK 2,541,000
12. Kuwait 2,270,000
13. Nigeria 2,256,000
14. Iraq 2,200,000
15. Brazil 1,561,000

http://www.photius.com/rankings/economy/oil_production_2004_0.html

[Kuciwalker]

Originally posted by JohnT
Cite on the $100 billion (page 26). (That should be $100 billion - looks like I hit the wrong key twice).

Of course, this figure includes all taxes, paid to governments all across the globe, not just the US and especially not just US income tax (which is about 6% of all taxes taken out of Exxon).

Oooooooooh. I was thinking, isn't that a rather significant portion of the entire federal budget?

[flash9286]

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