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Windfall Profits, so where is the rape of the consumer?

Net Profit Margins for Various Companies

2nd Quarter 2008

(Source: Google Finance)
Microsoft - 27.13%
Visa - 26.29%
The Mosaic Co. - 23.90%
Google - 23.24%
Coca-Cola - 15.72%
Capital One - 13.81%
AT&T - 12.22%

Now OIL companies:

Exxon Mobil - 8.46%
BP - 8.64%
Shell - 8.94%
Chevron - 7.20%
ConocoPhilips - 7.41%
Murphy Oil - 7.50%
Marathon Oil - 3.48%

So could somebody please explain to me - EXACTLY WHAT IS A WINDFALL
PROFIT? Some oil companies actually had DECLINING net profits
compared to last quarter. Last quarter, Exxon's net profit was over 9%

Not our fault they can't control expenses.

Maybe if they had less margin they'd be motivated to operate more efficiently.

It's like corporate welfare with the public footing the bill.

If we keep it up they'll never learn to stand on their own.

The difference is technological innovation. The product delivered by computer/electronics firms has advanced at a tremendous rate in just a few years.

The product delivered by the oil co.s is nearly static (yeh, there are better additives now).

The other issue not noted above is that oil exploration is an extremely high risk venture. Should they get something for that?

Drug co.s also face extremely high risks. Of course, they also get to use a huge amount of tax payer funded research - conducted in our universities and at NIH, etc.

Quote:

Originally Posted by stomachmonkey (Post 4108215)

It's like corporate welfare with the public footing the bill.

No, it's public welfare. Take those subsidies away and the price goes up overnight by a commensurate amount. Hey, I'm all for it. But it won't punish the oil companies one penny. It'll demonstrate to the public that they're really the ones being subsidized.

Quote:

Originally Posted by billyboy (Post 4108193)

So could somebody please explain to me - EXACTLY WHAT IS A WINDFALL
PROFIT?

Windfall Profit - Profit earned by a company in an industry that people don't like. Opportunistic politicians exploit this and single out unpopular companies for windfall profit taxes. The politician then gives the windfall profits to people in exchange for their votes. Some voters find this a just and satisfying arrangement, viewing the politician as a Robin Hood hero.

This only works with companies that people don't like. Singling out popular companies for windfall profit taxes would be viewed as unethical, unjust, and unamerican.

If Robin Hood had stolen from good people, he too would have been simply a thief.

Quote:

Originally Posted by stomachmonkey (Post 4108215)

Eddited: the following is a joke I played on myself by not realizing his post was sarcastic. I erroneously took it as serious.

OMG. The most uninformed, erroneous, ridiculous post ever.

Refining is THE most efficient production sector in the history of man.
They produce a very clean, very complex fuel for an operating cost average of around 20 cents a gallon, delivered. That is with raw materials (crude) approaching $3 a gallon.

To make this fuel requires an incredibly complex, huge plant with a replacement cost of around $5 BILLION.

Production of refined fuels requires temperatures exceeding 900 degrees, pressures over 2000 psi, flow rates of up to 5 million gallons per day, catalysts that cost thousands of dollars a pound, you really have no idea.

Gas and diesel are CHEAP when compared to just about everything else you buy when you factor in how much it takes to make it.

if anything, the government has done much to keep the prices and margins down over the past 25 years, I have no idea which fantasy world you dreamed up that it's corporate welfare. Just the opposite is true. maybe you were referring to bizzaro world.
Exxonmobil paid nearly $50 billion in taxes last year, and had a net profit of around $44 billion. They paid more taxes than they made.
If you got home with 45% of your paycheck because of taxes, would you call that welfare?.

The margins have historically been low due to COMPETITION. Refining is a very competitive sector and except for a short period has by design always had excess capacity. They historically made as much as they could possibly sell and could have made more but didn't because they couldn't sell anymore. That competition for the consumer kept the prices and margins down, not inefficiency.

I'll let you get back to your $1 bottle of filtered water now.

Quote:

Originally Posted by Rick Lee (Post 4108475)

OK, I need a little help here. I've heard politicians talk about oil subsidies, I've heard lots of people on this board talk about oil company subsidies, please, just for one, GIVE ME AN EXAMPLE!

Folks are convinced that there are oil company subsidies. Tell me what they are. I dare ya.

There were subsidies for small refineries (under 50,000 bbls/day) but that was stopped in the early 80's. most of them closed down soon after because they couldn't compete with the bigger and more efficient refineries.
Please tell me which subsidies you are talking about now, and if you can't then please stop spreading the myth.
If you suggest there are subsidies then someone else will read it and think it's true.
The sky is not purple, the moon is not made of green cheese, and the oil companies do not get big bad subsidies. They are something that politicians like Hillary and Obama made up to get votes from the mush-heads.
Thanks.

I don't even know that there are subsidies, per se. Maybe they're really tax breaks, which can be called a lot of other things depending on one's politics. Whatever it is, if it disappears, the money will be made up somewhere else and not by cutting into the profit margin.

Quote:

Originally Posted by sammyg2 (Post 4108933)

OMG. The most uninformed, erroneous, ridiculous post ever.

Refining is THE most efficient production sector in the history of man.
They produce a very clean, very complex fuel for an operating cost average of around 20 cents a gallon, delivered. That is with raw materials (crude) approaching $3 a gallon.

To make this fuel requires an incredibly complex, huge plant with a replacement cost of around $5 BILLION.

Production of refined fuels requires temperatures exceeding 900 degrees, pressures over 2000 psi, flow rates of up to 5 million gallons per day, catalysts that cost thousands of dollars a pound, you really have no idea.

Gas and diesel are CHEAP when compared to just about everything else you buy when you factor in how much it takes to make it.

if anything, the government has done much to keep the prices and margins down over the past 25 years, I have no idea which fantasy world you dreamed up that it's corporate welfare. Just the opposite is true. maybe you were referring to bizzaro world.
Exxonmobil paid nearly $50 billion in taxes last year, and had a net profit of around $44 billion. They paid more taxes than they made.
If you got home with 45% of your paycheck because of taxes, would you call that welfare?.

The margins have historically been low due to COMPETITION. Refining is a very competitive sector and except for a short period has by design always had excess capacity. They historically made as much as they could possibly sell and could have made more but didn't because they couldn't sell anymore. That competition for the consumer kept the prices and margins down, not inefficiency.

I'll let you get back to your $1 bottle of filtered water now.

Obviously you did not get the joke.

Quote:

Originally Posted by sammyg2 (Post 4108938)

OK, I need a little help here. I've heard politicians talk about oil subsidies, I've heard lots of people on this board talk about oil company subsidies, please, just for one, GIVE ME AN EXAMPLE!

* royalty-free (or nearly free) leases

* tax subsidies

* If using the US military to acquire and secure your operations abroad isn't a subsidy, I don't know what is.

Quote:

Originally Posted by widebody911 (Post 4108966)

* If using the US military to acquire and secure your operations abroad isn't a subsidy, I don't know what is.

Please tell me where this is going on. Have we seized Canada's and Mexico's oil fields? Are we taking oil from Iraq without paying for it? Where are we doing what you claim?

Quote:

Originally Posted by Rick Lee (Post 4108475)

So what you are saying is that the big oil companies are presently holding back on what they could be charging for their product, simply because of the tax-breaks and royalty-free leases that the U.S. tax-payer provides them(??) Out of the goodness of their hearts? And that if their operating expenses went up, (w/o the expenses changing for non-U.S. companies), they could then adjust their prices to whatever point they desire and still sell as much?

I thought that you guys were always using the old supply/demand argument to explain the price of anything, what gives? You make them sound more like an oligarchy. :rolleyes:

[QUOTE=speeder;4109014]So what you are saying is that the big oil companies are presently holding back on what they could be charging for their product, simply because of the tax-breaks and royalty-free leases that the U.S. tax-payer provides them(??) QUOTE]

Do you doubt for one second that the price we pay will jump overnight if these "subsidies" go away? If not, then you're admitting that WE are the ones being subsidized, aka we are paying less for gas because of them. Oil companies will get their 8-10% margin either way. Again, I don't have a problem with removing these tax breaks or charging more for the leases, etc., but only because I'd like for folks to realize we're the ones being subsidized.

Quote:

Originally Posted by stomachmonkey (Post 4108948)

Obviously you did not get the joke.

Sorry, my bad. I thought you were serious. This internets thing is complicated.

Quote:

Originally Posted by widebody911 (Post 4108966)

* royalty-free (or nearly free) leases

* tax subsidies

* If using the US military to acquire and secure your operations abroad isn't a subsidy, I don't know what is.

No such thing. There is only one example that i know of and believe me I've looked.
in the late 90's IIRC the government was pushing the oil companies to INCREASE drilling in the gulf. The government wanted to lower the price of oil and prevent another embargo deal, and they also wanted the revenue.
There were some available leases in the gulf with proved oil, but they were not thought to be high quality producers and were deep, and expensive. The oil companies weren't sure it was worth it to pay the big $$$ for the leases and risk losing money on them. The government re-wrote the standard lease agreement and left out one little part, a part that is standard on most leases. It says something like "if oil gets over $70 a barrel the oil company has to pay an additional royalty above and beyond the standard royalty". Not sure about the number but that's basically it.

That omission was basically meaningless because no one ever expected oil to get that expensive.
s soon as it did, some democrats (like Hitlery) started screaming "we need that money! We need to spend that money! Quick! It's burning a hole in my pocket and I don't even have it yet!
The leases were a legal agreement and Hitlery wants to jones on the contract and amend it now that the leases are profitable. typical sleazy lawyer.

There is your subsidy. that's it, that's all there is.
So please, stop being pawns repeating the myth that oil companies get subsidies and tax breaks. The opposite is true. They don't get breaks at all, they get taxed to death, they get charged for something every time they take a breath.
They are free game because they aren't popular. Just like cigarettes, the politicians can stick it to them on a daily basis and no one will complain or defend them. The term cash cow comes to mind.

Just because a few democrats made something up and lied to all of us about some mythical subsidies that don't exist to get votes from the mentally challenged, doesn't mean we have to swallow their lies.
We're better than that.

editted to correct specific numbers.

Quote:

Originally Posted by sammyg2 (Post 4108933)

If you got home with 45% of your paycheck because of taxes, would you call that welfare?.

No, I'd call it living in Maryland.

Buh duh bum :p

This is what I'm talking about. Now you must remember that the following article is from the new York times so many of the details are just plain wrong.

Try not to get hung up on their sensationalistic use of works like subsidy and tax break and read what;s really there,. The government "accidentally" left out a part that made the deepwater leases attractive enough for the oil companies to take a risk and spend Billions and when it turned out OK on SOME leases (not all, some of em were dead but they don't like to talk about that) the government is trying a money grab.

From the new Jork times:

Quote:

WASHINGTON, June 21 — Facing angry lawmakers from both political parties, executives from three major oil companies — Royal Dutch Shell, Chevron and ConocoPhillips — indicated on Wednesday that they might be willing to give up sizable taxpayer subsidies for drilling in the Gulf of Mexico.

But one of the most active players in the gulf, the Kerr-McGee Corporation, showed no signs of compromise and told a House hearing that it was entitled to the subsidies — known as royalty relief — even if oil prices remained above $70 a barrel. And Exxon Mobil said it saw no reason for the subsidies to be changed.

The sharp split among some of the world's biggest energy companies highlighted the political and legal difficulties that Congress and the Bush administration face in correcting an error that could cost the government as much as $10 billion in royalties over the next 25 years from oil and gas produced in publicly owned waters.

Republicans and Democrats are both seeking to prevent the giveaway, even as House Republicans pushed ahead on Wednesday with a separate bill to open up vast areas along the outer continental shelf to natural gas production.

On Wednesday, the House Resources Committee passed a measure that would lift the 25-year-old federal ban on natural gas production that covers most of the nation's coastal areas. Individual states that oppose such drilling, like Florida, would be allowed to impose their own prohibitions.

In theory, the federal government is supposed to collect a royalty of 12 or 16 percent on all oil and gas produced in federal waters. But under a program aimed at encouraging production in the Gulf of Mexico, the Interior Department allowed companies to escape royalty on much of the oil and gas they produce.

And in a mistake that is now the subject of multiple investigations, the Interior Department omitted a key restriction for leases signed in 1998 and 1999 that requires companies to pay full royalties if oil and gas prices climb above certain thresholds.

Testifying before a House subcommittee on government reform, executives from Royal Dutch Shell, Chevron and ConocoPhillips said they were ready to discuss a change in their leases.

"Shell does not believe deepwater royalty relief is necessary in the current commodity price environment," said John Hofmeister, president of Shell's operations in the United States. Saying his company is willing to "make a change," Mr. Hofmeister said Shell began discussions with the Interior Department on Tuesday.

Executives at Chevron and ConocoPhillips said they were open to discussions as well.

Exxon Mobil said it was "happy to participate" in discussions, but insisted that "we expect the terms of existing leases to be honored."

By far the toughest stance came from Kerr-McGee, which is not only refusing to concede any errors in its leases but also is suing the federal government to greatly expand the incentives it already offers.

If Kerr-McGee wins its court fight, the Government Accountability Office has estimated that the government could lose an additional $60 billion over the next 25 years.

"We don't believe there was a clerical error or any other kind of error," said Gregory F. Pilcher, senior vice president and general counsel at Kerr-McGee. In a suit filed earlier this year, Kerr-McGee contends that Congress never authorized the Interior Department to impose the price-based restrictions on incentives in any leases signed from 1995 through 2000.

"It would be unfair and unwise for Congress to take a step toward changing the rules," Mr. Pilcher told members of the House subcommittee. "Ultimately, the courts should decide whether we are right or whether we are wrong."

Representative Darrell Issa, chairman of the House Government Reform subcommittee on energy, accused Kerr-McGee of acting in "bad faith."

"I call it 'bad faith' if someone signs a contract voluntarily and does not object to the provisions, yet when the time comes to pay, they object and file suit," Mr. Issa said in a statement at the end of the hearing. "That sounds like a violation of contract sanctity to me."

Still unexplained is how Interior officials during the Clinton administration made the mistake, and why they never alerted Congress to the problem.

Testifying under oath, two current and one former Interior official who worked on the leases told lawmakers they had not noticed the omission until 1999 — and even then did not write a memo about the problem.

"My review was pretty much an executive-level review," said Milo Mason, a senior lawyer in the solicitor's office of the Interior Department. When he found out about the omission, Mr. Mason said, he never wrote about it. "It didn't seem like a big deal, as it is now," he said.

But at least two oil executives told the panel that their companies had noticed the omission almost immediately.

"We assumed they were creating an additional incentive," said A. Tim Cejka, president of Exxon Exploration. Paul Siegele, Chevron's vice president for deepwater development, said his company had asked Interior officials about the omission in 1998 and were told — incorrectly, it turned out — that the restriction was part of a new federal regulation rather than in the leases themselves.

In May, the House approved a measure proposed by Democrats that would punish companies that refuse to renegotiate their leases by barring them from acquiring any additional leases. Oil companies and the American Petroleum Institute are lobbying to kill the measure, which was attached to the Interior Department's spending bill, before it emerges from a House-Senate conference committee.

The House Resources Committee, meanwhile, approved a bill on Wednesday that would seek to pressure oil companies by imposing a stiff "conservation fee" on companies that refuse to pay full royalties when oil prices climb above $40 a barrel and natural gas prices exceed $6.75 per million B.T.U.'s .

The Bush administration is seeking to persuade oil companies to change their contracts voluntarily.

"If industry wanted to voluntarily talk about it, we'd be willing to talk," Johnnie M. Burton, director of the Interior Department's Minerals Management Service, told Bloomberg News last week.

Funny how the department of interior committed a "clerical error" on purpose even though congress didn't authorize it, and everyone knows it was on purpose, and that it came directly from the white house.

Now before the knee-jerk liberals start screaming about the president taking care of his rich oil buddies, remember that the president who did this was William Jefferson Clinton.

Quote:

Originally Posted by sammyg2 (Post 4109182)

So please, stop being pawns repeating the myth that oil companies get subsidies and tax breaks. The opposite is true. They don't get breaks at all, they get taxed to death, they get charged for something every time they take a breath.

http://www.ajc.com/blogs/content/shared-blogs/ajc/opiniontalk/entries/2008/04/01/tas_breaks_for.html

Oil companies argue that tax breaks help spur exploration and therefore keep prices down but some elected officials aren’t so sure.

There are tons of similar quotes out there. If there are no tax breaks, then what are they arguing to keep? And why do they spend $300M a year lobbying?

Also: what would Exxon's profits look like if they hadn't spent billions on buying back their own stock? They're currently spending more $$ on their own stock than they are on exploration.