| SBrentnall |
| If it's really just about the supply and the cost of crude, how come oil company PROFITS are going up? Not income--profit. That has nothing to do with the price of oil. Unless, of course, they're taking advantage of the current emotional climate and gouging us. |
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| keremoner |
quote:
Originally posted by SBrentnall
If it's really just about the supply and the cost of crude, how come oil company PROFITS are going up? Not income--profit. That has nothing to do with the price of oil. Unless, of course, they're taking advantage of the current emotional climate and gouging us.
If the cost of something goes up, so does the profit in dollar terms. Example:
Before: Pencil costs (COGS including indirect costs) $1, Sells for 1.20 Sales Volume: 1 million units. Revenues: $1 million. Profits: ($1.20-$1.00)*1 million=$200,000 or 20% of revenues
After: Inflated pencil cost: $5, Sells for $6.00 Same units sold. Revenues: $5 million. Profits: ($6-$5)*1 million= $1 million or 20% of revenues
In the above example, profits went up 5 fold but the profitability is the same!
You can only look at profit as % of revenues in the financial world. Oil companies average around 9% profits which is less than many other industries. There is no gouging going on as you say. Just check their financials on Yahoo or somewhere else. When barrel was selling for $30 four and a half years ago, you were paying on the average $1.50 at the pump. Noiw that a barrel is near $140, you are paying $4 per gallon. I would not call that gouging. |
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| SBrentnall |
Right, but the profit PERCENTAGE is going up, not just the dollar figure.
"Chevron Corp. put yet another exclamation point on the oil patch's long run of prosperity Friday with a first-quarter profit of $5.17 billion, or $2.48 per share. That was up 10 percent from net income of $4.72 billion, or $2.18 per share, last year.
The performance exceeded the lofty expectations of analysts, helping lift Chevron shares 38 cents to $95.32.
It was the second-highest quarterly profit in the company's 129-year history and marked the most money that it has ever made during the January-March period. That puts the No. 2 U.S. oil company on track for its fifth straight year of record earnings." |
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| keremoner |
quote:
Originally posted by SBrentnall
Right, but the profit PERCENTAGE is going up, not just the dollar figure.
"Chevron Corp. put yet another exclamation point on the oil patch's long run of prosperity Friday with a first-quarter profit of $5.17 billion, or $2.48 per share. That was up 10 percent from net income of $4.72 billion, or $2.18 per share, last year.
There is little change in profitability (as calculated by profits/revenues). The key in the above statement you posted was 1st. Q profit is up as measured by what happened to net income. As I posted in my example before, profits do not equal profitability. They made 9-11% five years ago and they are making that now. What that 9-11% represents however has gone from around $1.5b per Q to 5 billion per quarter.
If these companies were not maintaining their profit margins, do you have any idea what would happen to your 401K balances?
If we tax these profits further as some want, one of two things will happen:
Either the tax will be passed onto us as even higher prices OR your oil company stocks that you hold in your various investment vehicles such as mutual funds that make up your 401K will suffer greatly. At the end it is us who will pay the price. |
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| jhue |
quote:
If these companies were not maintaining their profit margins, do you have any idea what would happen to your 401K balances?
The most common stock valuation model uses the value of the future earnings stream discounted to the present time. The two variables determined by the company in this model are earnings per share and the expected earnings growth.
Profit margins as a percentage are not part of that model.
Keremoner, if you're not capable of any more sophisticated analysis than what you've shown so far, you really aren't adding anything to this discussion. |
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| jhue |
quote:
Originally posted by SBrentnall
If it's really just about the supply and the cost of crude, how come oil company PROFITS are going up? Not income--profit. That has nothing to do with the price of oil. Unless, of course, they're taking advantage of the current emotional climate and gouging us.
Most oil companies are involved in exploration, refining, and retail. Their actual costs to pump oil out of the ground don't increase when oil prices increase. The transfer cost paid by the refining division of their company to the drilling division are likely based on the price of futures contracts, so those do go up, and the exploration and drilling division of the company experiences huge profits. Often, oil companies need to purchase additional oil for refining on the open market so there they are paying increased costs. |
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| keremoner |
quote:
Originally posted by jhue
The most common stock valuation model uses the value of the future earnings stream discounted to the present time. The two variables determined by the company in this model are earnings per share and the expected earnings growth.
Profit margins as a percentage are not part of that model.
Keremoner, if you're not capable of any more sophisticated analysis than what you've shown so far, you really aren't adding anything to this discussion.
I hope you are not a financial analyst because if you are, someone is getting the shaft.
EPS uses net earnings in its calculation. That is after corporate taxes among other items such as depreciation. If you impose the additional taxes congress wants, and the cost of taxes are not recouped, guess what is lowered....yeah EPS !!! Furthermore, what does that tell the investor if we are going the way of the european socialists? How do you think that will affect their longer term expectations? |
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| keremoner |
quote:
Originally posted by jhue
Keremoner, if you're not capable of any more sophisticated analysis than what you've shown so far, you really aren't adding anything to this discussion.
I am still waiting to see your come back to my last post. ooops I forgot. Libs never have any substance to their arguments, just like you displayed with your ignorance of financial basics. |
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| jhue |
Your simple-minded analyses are contributing nothing. Come back when you can derive Black-Scholes from Ito's lemma (hell, for that matter, when you know any calculus at all) and I might be interested in what you have to say. Until then you're just an irritant.
You seem to have a fixation on profit margin as a determinant of stock price. It's earnings that matters, not profit margin. Toss out 75% of your revenue by eliminating all but your highest margin products and you'll have higher profit margins, but I guarantee you that the market will take a dim view and your stock price will not be rewarded. |
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| Needsdecaf |
quote:
Originally posted by SBrentnall
If it's really just about the supply and the cost of crude, how come oil company PROFITS are going up? Not income--profit. That has nothing to do with the price of oil. Unless, of course, they're taking advantage of the current emotional climate and gouging us.
Why are profits going up? Because an oil company can make money selling OIL, not just gasoline.
As was noted above, the downstream portion of said oil company actually SUFFERS when prices of crude goes up. |
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| Fabvsix |
| this is making my head pound. Sounds more like a CLUSTER f$$K !!!:o |
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| HwyRogue |
| Gas today converts to $5.55 US/gallon, but I'm drivin' in style! :D |
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| Needsdecaf |
quote:
Originally posted by Fabvsix
this is making my head pound. Sounds more like a CLUSTER f$$K !!!:o
It's actually pretty easy when you break it down.
Think of an oil company as two different oil companies...upstream and downstream. Upstream is everything to do with finding and getting oil.
Downstream is taking that oil, refining it and selling the products.
In reality these companies operate separately. Most downstream capable oil companies in this country (I'd say all but I don't know for sure) have to buy oil on the open market to make product. The upstream component does not find enough oil to satisfy the downstream compnonent, and it does not sell all that it makes to itself either. The downstream company pays open market prices, whether it's paying the upstream portion of it's company or buying on the open market.
THe price of gas at the pump is made up of the cost of the raw product, the cost to manufacture that product, the cost to distribute that product, taxes, and profit for all that touch it. More or less everything has stayed level. It's not costing much more to produce, no one's making a bunch more money, and the cost of transport has gone up but not that much.
It's the cost of the raw good that has changed. |
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| keremoner |
quote:
Originally posted by jhue
You seem to have a fixation on profit margin as a determinant of stock price. It's earnings that matters, not profit margin. Toss out 75% of your revenue by eliminating all but your highest margin products and you'll have higher profit margins, but I guarantee you that the market will take a dim view and your stock price will not be rewarded.
Net earnings and profit margin are unavoidably related. You are talking about product mix in generating your revenues. I am saying who cares what you sell as long as you maximize your earnings, and profitability, therefore your EPS. I agree that some product lines have a higher profit margin than others. Corporations invariably maximize their profitability according to market demand for different products. But, just because product A has the highest profit margin, volume of transaction involving that product cannot exceed market demand. So, net revenues being what they are (ideally maximized), profit margin and EPS have a direct relationship. |
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| bimmerguy288 |
Here we go again....Bashing Exxon is a popular sport, especially when gas hits over $4. I too would like to pay $2 instead of $4 but here are some facts about the reocrd profit Exxon made in the best year of its history, 2007, forget about the many many years in which they didn't make much:
Exxon in 2007:
1. Revenue: $390 billion ( for those who don't know what revenue is, it's the total sales, NOT profit)
2. Income tax : $30 billion ( Note: this is not the sales tax you pay at the pump, this is the income tax on Exxon's earnings)
3. Net income: $40 billion.
Before the the $30 billion in income tax, Exxon also paid $31 billion in sales-based tax.
OK, let's look at the $40 billion in net profit, it's HUGE! but it's from $390 billions of sales! it's about 10% of the revenue. Can we honestly say a 10% profit is "windfall"? Many many companies routinely make more than 10% net profit, some much more. Why is Exxon's 10% profit margin (in their best year) so evil? When Exxon pays dividends to its shareholders, using its already taxed earning, the shareholders are taxed again.
At the end of the day, the governments milk more from Exxon's business activities ( in forms of sales tax you pay at the pump, sale-based tax and income tax Exxon pays, dividend tax its shareholders pay) than Exxon makes.
BTW, in case you don't know, Exxon controls about 3-4% of the worldwide oil production and it has to pay higher and higher price for a lot of the crude it buys too. Don't lay the blame on Exxon, Exxon has little to do with gas going up to $4.
Why is the oil price so high? In short term, it's more than just supply and demand, it's rampant oil future speculations by traders and investors, falling US$ and a host of other reasons, somehow big oil is the scapegoat because the media and the politicians know they can score political points by bashing oil companies. If there should be a "windfall" profit tax, it should be for the speculaters, not the oil companies that actually do all the hardwork to make 10% profit in their best year while already paying tens of billions in taxes.
We are all guilty for not driving more fuel efficient cars. The ones who are really ripping big $$$ are the Russians and the Arabs. I can afford $4.5/gallon but I am also planning/combining my trips better and I don't just drive for the sake of driving for fun anymore.
In a long run, energy prices will trend higher simply because 2.5 billion people in China and India, plus people in other emerging countries, also want to live the life style we here take for granted. And more and more of them will have the economic means to do so. You better believe that. Someone from a BMW forum of which I am a member visited a BMW plant in Germany some months ago and on the day he was there, he was told every single BMW 760 (V12) on the assembly line was going to China.
When more and more people are competing for the same resources, the price will only go up. We better get used to it and find alterntives. As much as I don't like paying $4.30, as least I can pump anytime, anywhere I need...before the govenment does something stupid. Bashing oil companies is just like mental masturbation.... |
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| keremoner |
Amen brother !!
quote:
Originally posted by bimmerguy288
Here we go again....Bashing Exxon is a popular sport, especially when gas hits over $4. I too would like to pay $2 instead of $4 but here are some facts about the reocrd profit Exxon made in the best year of its history, 2007, forget about the many many years in which they didn't make much:
Exxon in 2007:
1. Revenue: $390 billion ( for those who don't know what revenue is, it's the total sales, NOT profit)
2. Income tax : $30 billion ( Note: this is not the sales tax you pay at the pump, this is the income tax on Exxon's earnings)
3. Net income: $40 billion.
Before the the $30 billion in income tax, Exxon also paid $31 billion in sales-based tax.
OK, let's look at the $40 billion in net profit, it's HUGE! but it's from $390 billions of sales! it's about 10% of the revenue. Can we honestly say a 10% profit is "windfall"? Many many companies routinely make more than 10% net profit, some much more. Why is Exxon's 10% profit margin (in their best year) so evil? When Exxon pays dividends to its shareholders, using its already taxed earning, the shareholders are taxed again.
At the end of the day, the governments milk more from Exxon's business activities ( in forms of sales tax you pay at the pump, sale-based tax and income tax Exxon pays, dividend tax its shareholders pay) than Exxon makes.
BTW, in case you don't know, Exxon controls about 3-4% of the worldwide oil production and it has to pay higher and higher price for a lot of the crude it buys too. Don't lay the blame on Exxon, Exxon has little to do with gas going up to $4.
Why is the oil price so high? In short term, it's more than just supply and demand, it's rampant oil future speculations by traders and investors, falling US$ and a host of other reasons, somehow big oil is the scapegoat because the media and the politicians know they can score political points by bashing oil companies. If there should be a "windfall" profit tax, it should be for the speculaters, not the oil companies that actually do all the hardword to make 10% profit in their best year while already paying tens of billions in taxes.
We are all guilty for not driving more fuel efficient cars. The ones who are really ripping big $$$ are the Russians and the Arabs. I can afford $4.5/gallon but I am also planning/combining my trips better and I don't just drive for the sake of driving for fun anymore.
In a long run, energy prices will trend higher simply because 2.5 billion people in China and India, plus people in other emerging countries, also want to live the life style we here take for granted. And more and more of them will have the economic means to do so. You better believe that. Someone from a BMW forum of which I am a member visited a BMW plant in Germany some months ago and on the day he was there, he was told every single BMW 760 (V12) on the assembly line was going to China.
When more and more people are competing for the same resources, the price will only go up. We better get used to it and find alterntives. As much as I don't like paying $4.30, as least I can pump anytime. anywhere I need. Bashing oil companies is just like mental masturbation....
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| keremoner |
This is exactly the problem. A little info is always dangerous unless there is a strong foundation of, in this case macro and micro economic, basic building block information to make it relevant and true. I've got a few friends like you who trade in the stock market based on technical analysis. I laugh everytime they lose money because they do not really understand the fundamentals of the marketplace
quote:
Originally posted by jhue
Your simple-minded analyses are contributing nothing. Come back when you can derive Black-Scholes from Ito's lemma (hell, for that matter, when you know any calculus at all) and I might be interested in what you have to say. Until then you're just an irritant.
will take a dim view and your stock price will not be rewarded.
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| jhue |
quote:
Originally posted by keremoner
This is exactly the problem. A little info is always dangerous unless there is a strong foundation of, in this case macro and micro economic, basic building block information to make it relevant and true.
Hey Hillbilly,
Thanks for demonstrating your ignorance. If you weren't so clueless you'd know that calculus is used in quantitative analysis, not technical analysis. Dumbass. |
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| Fabvsix |
:lurk: :lurk: :lurk:
PISSING CONTEST in the works now!
Lovely! |
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| keremoner |
First of all, I was born and educated through high school in Europe. I had calculus in 9th grade, which unless you are taking AP class here, you'd never do. So don't tell me about calculus.
Second, I was likening you to technical traders (not necessarily saying you are one) because of you mentioning black-scholes. Let me enlighten you. Black-scholes is a mathematical model which holds that equity price is a stochastic process. You being a simpleton, let me shed further light on the subject. Stochastic process is from probability theory. It deals with probability distributions. It amounts to a sequence of random variables. Without going into further boring statistical talk, it is, like most statistical/mathematical processes, useless (strictly in the context we are talking about) unless you have mastery of the fundamentals and basic financial and economic knowledge as well as good old logic.
So build/use all the mathematical models you want, unless you can show me how that has enriched you in the real world, it is all talk (like in the case of my technical trading pals).
quote:
Originally posted by jhue
Hey Hillbilly,
Thanks for demonstrating your ignorance. If you weren't so clueless you'd know that calculus is used in quantitative analysis, not technical analysis. Dumbass.
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| LionSpeed |
| I think jhue & keremoner both should meet in person for further expand their analysis. :1: |
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| HwyRogue |
| ..it seems as this thread has progressed into personal attacks which serve no purpose, that this thread should be locked... |
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| jhue |
quote:
Originally posted by keremoner
Black-scholes is a mathematical model which holds that equity price is a stochastic process.
Wow. You can cut and paste from Wikipedia. I'm impressed. Except you didn't get it right. It's an assumption of Black-Scholes that the price of the underlying equity is a stochastic process, not a conclusion.
Your moronic posts earlier in this thread "explaining" oil company profits speak for themselves and offer ample evidence of your cluelessness. I don't need to point out the stupidity, readers can read your posts and decide for themselves.
This article may help you recognize your problem:
http://www.apa.org/journals/features/psp7761121.pdf
You do have me beat on when you took Calculus. My high-school didn't offer AP Calculus, so I had to go to the local state university while I was still in high school. And I couldn't go until I was 16 and could drive myself there. So congratulations on that. |
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| keremoner |
I am done with this pissing contest anyways.
quote:
Originally posted by HwyRogue
..it seems as this thread has progressed into personal attacks which serve no purpose, that this thread should be locked...
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| Fabvsix |
| Great! Shake it well, zip it up and MOVE ON............:rolleyes: |
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| LionSpeed |
quote:
Originally posted by Fabvsix
Great! Shake it well, zip it up and MOVE ON............:rolleyes:
I forgot my reading glasses today. From a quick glance, your comment looks like:
Great! Shake it well, sip it up (marg), and MOVE ON .... to another menu (Chelada)?
Fab, it's still too early in the morning, you know? :2: |
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| Fabvsix |
Mind over matter......
Age doesn't matter as long as the MATTER doesn't age......
Is it FIVE yet ? |
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| JP422 |
| I didnt read all the replies to this thread.. but the original subject got my attention... especially after filling up my Accord yesterday for $80!!!! on REGULAR too!! :bonk: |
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