http://www.kenniffonline.com/profits-record-profits/
Why are oil companies that set gas prices make record profits every year?
How does that continue to reason to raise gas prices every year, more and more, using poor excuses and say that will have big losses, but end up with huge benefits each year? Are they really not worth much more than their actions? That is, are the companies billions dollar only worth as much when they traded for what benefits do not really mean the same thing? If they were to take heavy losses, would the economy collapse?
AS an example, say that of all gross income of a company for one year equals $ 1,000,000. That is a million dollars. This company invests $ 930,000 to bring in the millions. difference between million and the $ 930,000 is $ 70,000. That is your gain. Divide the $ 70,000 million and you get 0.07, or 7%. That's their profit margin. Now let's say that next year the company sold twice as much product brings the second year and two million dollars. Say also that the cost of making products and …… double to $ 1,860,000. How much money you have left? You have more than $ 140,000 left. That is your gain. Wait! Your winnings are doubled! How dare? What are you doing, rising prices? These are the benefits of the franchise – windfall profits – and the government should intervene immediately and take them away from you, greedy capitalist pig! Keep … before being carried away by our little diatribe higher prices, we will get new calculators. Divide the $ 140,000 in benefits by $ 2,000,000 in gross revenues and what do we have? Why, think the answer is again 0.07, or 7%! The benefits have been doubled, but the profit margin remains exactly the same! The problem here is that, through education horrible the vast majority of Americans have received at the hands of government, few people know the difference between profit and profit margin. When you read that oil company profits have risen no educational basis in which to balance the fact that revenues from the oil companies have also increased … thanks to the increase in the price of crude oil. Incomes rise. The benefits go up. It is not really so difficult to understand. Now, as I said, that the explanation is rather simplistic. The tragedy is that most Americans not understand the concept of profits and profit margins, even at this basic level. Now someone will come along and point out that oil company margins benefits have been rising along with profits. They are right. You see, the costs do not necessarily double when revenues do. There are some fixed costs that remain even when prices of raw materials (crude oil) increase. This means that the profit margins also increased, although not anywhere near as much the benefits themselves. Is this necessarily a bad thing? I think not. Just when you think that energy companies, including oil companies, get the money they need to explore new sources of oil, construction of new refineries, and conduct research on additional energy sources or alternatives? That money comes from profits. If benefits increase due to high demand met by the shortage of products of the oil companies will be able to use the increased profits to increase production and the search for new sources of oil. If the government takes advantage of these benefits, as suggested by Hillary Clinton, and then those dollars would not be available for investment by the energy company in the expansion of our energy resources.
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