black gold
Why is oil so expensive? I wanted to know myself and I did the smallest amount of research possible to try to find out.
Its aparently pretty easy... Supply and Demand. The supply has not gone up, but due to china and india begining to use gas and oil, the demand does go up. High demand, low supply and bam! High prices. "But" you will say " Big oil has posted record profits across the board." Indeed they have. however, Profits and profit margins are not the same thing and yet, one is perhaps a more fair way to judge a buisness than the other.
For simplicity, we'll say profit = total revenue - total expense. In the case of the oil company conoco phillips they made $3.3 billion dollars in profit. However, their profit margins are only around 3.5%.
Profit margins, as the link will tell you, = revenue/cost. So lets do the math shall we? If conoco phillips made $3.3 billion in profit, and that represents 3.5% of their investment, then they invested...
$94 billion dollars.
Now, I don't really sympathize with them or anything, but I will say that I can make more than 3.5% on an investment... its called a SAVINGS ACCOUNT. (Which, by the way, if you want an ING account, just ask me and we can both make a few bucks) So if you are mad about oil companies, I suppose you are really only mad about them being so rich in the first place.
Now, I have been told that Oil Refineries which may or may not be controlled by Big Oil (so lets call the refineries "little oil") might be the culprits. Their profit margins might be closer to 20 or 25%.
anyway, im too tired to research anymore. You do it.
posted by InterestingPhysics @ 11:31 PM
4 Comments:
I'm mainly mad about federal subsidies to the oil companies.
That's wierd, I was just having this exact same conversation. Exxon-Mobil, has the smallest profit margin on the S & P 500, which you already said so I won't belabour the point. And by the way, 20-25% isn't really a high profit margin either. Most products work on a 50% margin.
I heard that Microsoft made record profits last quarter too and I guarantee that their profit margins are closer to 50% (though I don't have the time or the desire to look that up) but no one is demanding any inquiries.
What we should be mad about is that state and federal governments collectively take around $.50 Isn't that a travesty in and of itself? Or what about the fact that we get most of our oil from the Middle East and have made no attempts to become independent? I think there's definitely something to be mad about but it certainly isn't "big oil". Of course it's not that you care since you get like 400 mpg on your new death machine.
we go. So my numbers were off. It looks more like Big oil is in the ~10% regime while Big healthcare had the highest profit margins reported (~18%).
Hey man, what are you doing Friday? Andie's going out and if I can find a babysitter I want to too, what do you think? Call me, or IM me.
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