http://www.kenniffonline.com/profits-sense/
Oil Co. Profits, it doesn’t make sense to me, please explain.?
Okay, so, the oil companies are paying more per barrel, so they pass that additional cost onto the consumer. If they were passing ONLY the additional cost per barrel on to the consumer, how is it they are making record profits? Is there something else that gets added on? Anyone know how this really works?
thank you!
My answer will oversimplify this because of the entire nature of oil being a commodity and traded on the futures market (which NO ONE understands….)
Like any product oil companies have a profit margin built into their products. Their goal is not to make 5 cents a gallon, but to make a percentage on every gallon. Assume that percentage is 2% when a gallon of gas sells for $1.00 they make 2 cents, when it sell for $4 they make 8 cents.
Everyone looks at their profits in times like these and forgets the billions of dollars in capital at risk to run a company. They invested in South America and Hugo Chavez confiscated their equipment and assets. The have billions of dollars of equipment in the gulf of Mexico which was nearly wiped off the map a couple of years ago due to hurricanes. If they don’t find a renewable supply someplace they can build soon then investors may loose all their investment.
Right now it’s a great investment, but bet out before the next hurricane, or nationalization, or big taxes.
BUT…if you think oil companies are just huge profit machines then take every dime you can get your hands on and buy big oil stock. You should soon be able to fill your tank off your profits.
Climate Change common sense; Monsanto systematically destroying competition