It Was Price Gouging (not really)

UPDATE: See below...

I think there's very little point in denying it now. While the American people were paying $3 and up for gasoline after the hurricanes in the fall, we were being taken advantage of. On the occasion that I watch Bill O'Reilly he had been ranting and raving that the oil companies should lower their prices out of good faith and kindness to Americans. I generally disagree with this idea; if there was a national shortage on corn and soybeans I wouldn't ask my dad to charge less to sell his goods.

However, as more profit reports come in it's no secret any longer that the oil companies jacked up their prices in order to line their pockets.

ConocoPhillips, the nation's third-largest integrated oil and gas company, said Wednesday its third-quarter profit surged 89 percent

Yup. And I thought they were just passing on the high expense that they had to pay...

On Tuesday, ExxonMobil, the world's largest publicly-traded oil company, announced net income of $9.9 billion for the most recent quarter, eclipsing analyst expectations and dwarfing the $5.68 billion reported for the same quarter a year ago. It was the largest quarterly profit ever for a U.S. company.

Hmmm... they made more money in one quarter than any company in US history. Great.

I suppose I'm just disappointed. I was naive enough to think that the oil companies were just passing on their expenses. To see that they inflated prices even more than the prices already were during a time of national emergency with the sole purpose of making a load of money is pretty disgusting. Oh, well...

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I'm not sure how to say it, I've been whooped on. From faithful reader Clint:

You can interpret financial data in many ways, usually depending on how you want to see it. $9.9 Bil (after tax) in earnings for 1Q is an astounding number, and as you've mentioned, it's the highest EVER in the U.S. But truthfully, Exxon had to make $100 Bil in revenues (sales) to make that $9.9 Bil. That means for every dollar of a product they sold they made 9.9 cents (aka margin). Compared to the 1st Qtr this year, they made slightly more money, but not much at a 9.6% margin.

Exxon is going to make (and has) 8-10% in lots of quarters...that's their target. In quarters that they make $10 Bil, they probably would clear around $1 Bil. Many large companies make more than that percentage-wise, but we never hear people bitching.

...

Bottom line - the price of gas goes up -> Exxon's revenues go up -> Exxon's profits (not margins) go up.

Indeed. I stand corrected.