Hannity and the 8 cent/gallon oil profit

[Narkos]

Watched some H and C with my wingnut BIL, Hannity claims that oil companies only make 8 cents/gallon sold. My wingnut BIL of course loved this, I claimed that I don't believe a thing Hannity says. Does anyone know what exactly oil companies make per gallon?

[tinrobot]

1. Who cares what they make per gallon.

All you need to know is that Exxon posted the highest profit of any corporation in history last year - $40.6 billion.

That's too much.

[93ncsu]

3. So how much should a company be allowed to make ?

You do understand that their profit margin is only ~10%, right ?

[tabasco]

6. LOL.

Your profit margin is calculated after the oil companies have paid enormously bloated salaries, bonuses, cashed out HUGE stock options, allocations for future Golden Parachutes and other ridiculous benefits to the senior executives and board members.

Factor the greed of these billions of dollars into your financial calculations and the profit margin is outrageous.

Plus, I don't trust the Exxon accounting any more than I would Enron.

[happyslug]

2. 8 cents in profit? That is high.

Remember we USE over 20.687 Million barrels A DAY. At 42 gallons a barrel, that comes to 868.854 Million gallons A DAY. At just 8 cents a gallon profit that comes to 6.950832 Million Dollars A day or 2.537053680 Billion Dollars a year.

The US Budget is only 3.1 Trillion Dollars (or 3,100 Billion Dollars), the whole US GDP is only 15 trillion dollars (or 15,000 Billion Dollars). Thus the total profit is only .08% of the US Budget and only .016% of the total US Economy, nothing else comes close.

20,687,000 barrels/day
http://www.eia.doe.gov/neic/quickfacts/quickoil.html

US budget:
http://origin.www.gpoaccess.gov/usbudget/fy09/pdf/budget/tables.pdf

Social Security outlays will be only 8 billion Dollars, in effect total profit will equal 1/4 of what we pay people on Social Security. Think about it, Social Security which is everyone who is working is paying into gets less than 4 times what the oil companies make as profit in a year. Note profit does NOT include the cost of refining or shipping the oil for your use, profit comes AFTER that is subtracted from total costs of the oil.

While the profit is small compared to the Defense Budget, (479.5 billion Dollars) the profit is still sizable at 2.5 billion dollars (i.e. only .5% of the Defense Budget).

In one way 8 cents per gallon is small, but remember that is pure profit, not for roads, research or exploration for new oil (all of which can be deducted as "Expenses" so NOT part of Profits). The people who gets more, the State and Federal Tax men, use the revenue to build and maintain the Road system, thus the money collected by the Federal And State Government is used to help the country as a whole NOT pure profit for stockholders.

[93ncsu]

4. I don't watch H&C, but ...

I'm guessing he meant $.08 per gallon of gas, not per gallon of oil. All oil is not used just for gasoline.

Also, investment in new equipment for exploration and drilling is considered a capital expense that is amortized over many years. The money to buy this new equipment comes from the profits of the company. Many companies also use their profits to pay dividends and buy back stock. If you have any kind of a retirement account (401K, Pension Plan, etc), chances are that you are getting the benefits of these actions.

[happyslug]

7. Out of a 42 gallon barrel of oil, you get 44 gallons of product

Thus while, on average, we only get 19 gallon of gasoline out of each barrel. The problem with averages is there are averages. You can vary how much Gasoline you get out of a Barrel, increasing or decreasing how much gasoline you get. Most of the rest of the oil you get Diesel/Kerosene/Heating oil. Thus out of one barrel you get 19 gallons of gasoline, but the profit is 8 cents per gallon, even if the product is Heating oil/Kerosenes/Diesel. Thus the number is 8 cents per gallon even if the gallon is heating oil, Kerosenes or Diesel.

As to investments in new equipment of exploration and Drilling are capital expenses. Those costs are expensed or capitalized NOT classified as Profit. Present law for both the Security and Exchange Commission and the IRS do NOT call money spent on Capitalized items (i.e. Exploration, Drilling) OR expenses (Cost of Salaries including 401K and other Pensions) as profit. Instead both are deduction from total sales to get to "Gross Profit". Thus Profits are money collected by the oil Company OVER AND ABOVE Capital costs and expenses (i.e. Gross profit is counted AFTER the money invested into things like Exploration and Drilling AND employees expenses of salary AND Pensions are deducted from total sales).

Please note even payments on loans occur before you get to profit, thus when profit is mentioned it is NOT money available for Exploration and payment of Salaries, but money that exist AFTER costs of Exploration and Salaries had already been deducted from total sales. The profits mentioned by the 8 cents a gallon is over an above what is spent on things like Capital expenses and salaries.

[Finishline42]

13. Oil Company = Vertically integrated = many profit centers

To take your info further, the oil companies are vertically integrated and at each step, there is aa independent profit center with it's own management/cost sturcture to pay for.

There are divisions that explore, that drill and extract, that buy and sell oil contracts, transportation of crude to refineries, refineries, transportation to gas stations, and the stations themselves. Each with it's own cost structure and management overhead that is used to hide profits from taxation.

[papau]

14. 8.3% of $4 is more like 26 cents a gallon., albeit the wholesale price is less than $4

[GliderGuider]

5. That's what Exxon has reported

http://news.yahoo.com/s/ap/20080501/ap_on_bi_ge/earns_oil_4

Exxon Mobil does not release the amount it pays for crude but said it's been in line with market prices.

At the same time, the company said it made about 4 cents per gallon on petroleum-product sales in the most-recent quarter, down from 8 cents a gallon in the year-ago quarter. Those products include gasoline and diesel.

[carson4560]

8. Hannity and the 8 cent/gallon oil profit

Hannity's 8 cents/gallon figure was heard by a lot of listeners. It's also inaccurate: the correct figure is 8.3 percent, according to Big Oil's lobbying group, the API:

http://www.heartlandviews.net/

[TreasonousBastard]

9. 8.3% of what? Trouble is that...

you can talk about 8.3% on a barrel of crude but there's a lot of fingers in that barrel. Producers. leaseholders, refiners, transporters and retailers are not all the same people. Nor are the chemical companies that use crude as feedstock for their processes.

[Shine On]

11. Hannity and the 8 cent/gallon oil profit

Your url was wrong. It's www.heartlandviews.org . Thanks for the link, and the American Petroleum Institutes report, which confirms that it's 8%, and not 8 cents a gallon.

[bhikkhu]

10. I think he meant gas stations; they make about 2%

thats's about 8 cents per gallon.

What oil companies make varies quite a bit, as the cost of extraction varies from one field and one project to the next.

Incidentally, credit card processing costs about 2%. So if you pay for your gas by credit card the station is making more or less nothing.

[kristopher]

12. Exxon announced today they are selling off their retail opertions. No profit. nt

[bhikkhu]

15. I'm guessing they will take a big one-time charge to their bottom line.

Probably a pretty easy call for them, with taxes in mind.

[XemaSab]

16. And why were you watching Hannity, again?

:shrug: :P

[JohnWxy]

17. EXXON-Mobil made 8.46% profit as a percentage of all revenues. appplying that % to $4.00 you get

$.34 per gallon. However, this profit margin (8.46%) is relative to all revenues. In their retailing of gasoline they may have made less profit margin (profit as a percentage of sales (i.e. revenue)). But over-all from all their operations, they returned profit of $11.68 Billion against revenues of $138 Billion (for the second quarter) for an over-all Profit margin of 8.46% http://www.washingtonpost.com/wp-dyn/content/article/2008/08/01/AR2008080102930.html.

Now this is down a little form their historical profit maargin of 10.85% http://finance.yahoo.com/q/ks?s=XOM . THat's why the market was a little disappointed and ren the price per share down a bit.

Their return on equity however, which is roughly the return on what you invest (depending on the stock price you pay) is historically 35.6%, which is quite nice in anybody's book when you weigh the return agains risk (the demand for gasoline is pretty solid).

[XemaSab]

18. .

:thumbsup: