In response to an editorial I wrote this week (slightly condensed from a blog posting I made Aug. 4), Kevin Chrisman sent me the following e-mail:
“The article states that Jill Morgenthaler’s comments against Peter Roskam’s protection of oil profits was ‘misleading rhetoric’ and that she ’shouldn’t jump on the Bash Big Oil bandwagon without all the facts.’ Perhaps you should heed your own advice.
“This is the second time ExxonMobil has set record US profits. This time, they reported a net income of $11.7bn. This, according to the Financial Times, is ‘in spite of falling production, lower refining and chemical margins and rising operating costs.’ It is true that oil is driven largely by the demand for it, but has the demand for oil skyrocketed in the last four years? It’s true that China and India’s economies have grown in the last several decades, but 25% of the world’s oil imports are here in the US despite the fact we make up a mere 4% of the world’s population. We should take a look at ourselves.
‘The fact is lapdogs like Peter Roskam serve the demands of those who really run the country; powerful multinational corporations including several from within the oil industry. The goal of any corporation is to maximize profits, even if it means hurting its own citizens. We have the right and good reason to jump on the ‘Bash Big Oil’ bandwagon, and the facts are right in front of us.”
While Chrisman obviously differs with my opinion, I truly appreciate his input. It’s good to know people take my comments seriously enough to respond, even if they don’t share my opinion.
That being said, here is where I believe Chrisman is mistaken. He wrote that ExxonMobile reported a record profit. But as I said in my blog posting, this was a record profit from a fiscal quarter.
The only way to gauge how well a company is doing is not to focus on one quarter but an entire year. The enormous profits a corporation earns in one quarter may well be offset by revenue losses in other quarters.
Oil companies have reported annual profit margins of between 6 and 10 percent in recent years. There are other industries that have had higher annual profit margins than this. While they may not have earned as much total money as have oil companies, their percentage of annual profit (what they grossed minus what they spent) was higher.
Some industries purchase their oil supplies early in the year so they will avoid paying higher prices later on when oil is in higher demand. This would account for oil companies recording higher profits in the first and second quarter of a fiscal year, with profits leveling off somewhat in the third and fourth quarters.
And again as I wrote in my previous blog posting, record oil profits help those who invest in the oil industry. If your financial advisers are worth anything, they have oil as part of your portfolio. So your retirement plan or pension fund benefits when oil companies make large profits because you’ll get more back from your investment.
Yes, the United States accounts for about 25 percent of the worldwide demand for oil. And yes, we hurt ourself by being so “fuelish” (to borrow a phrase used in the 1970s). The recent drop in oil prices resulted from decreased use. So there is a connection between how much oil we demand and how much we pay at the pump.
But the additional strain on oil demand that has spiked prices recently has come largely from China and India. For example, Beijing has spent the last several years getting ready for the Olympics going on right now. We still use much more oil in total than these two countries, but there’s no denying the recent increase in demand has come mainly from them.
So we won’t know how much total profit the oil companies have made for 2008 until next year, and much of this profit will go toward rewarding investors (most of them average Americans saving for their future). We can affect the price we pay at the pump by using less gas, and we will benefit from the higher oil profits when our retirement plans come due. This is not as bleak a picture as some politicians want to paint.
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2 Comments
August 15, 2008 at 10:31 pm
Oh, Thanks! Really funny. keep working!
October 26, 2008 at 1:56 pm
I appreciate your lengthy response, but unfortunately it seems you missed the point of my letter and its intentions. Clearly, the article I was responding to was an attempt to marginalize Jill Morgenthaler by making her seem completely out of line for criticizing a politician who supports the exploitation of oil resources in the quest for avarice.
You response indicates that the rising fuel prices is a good thing, because the average American has “financial advisor’s” who surely have oil as part of our “portfolios.” Clearly, you are mistaken to believe that a majority of the US has this wonderful option of calling their advisor’s with the tremendous amount of wealth they have invested in the stock market.
If, perhaps, you stepped out of the comfortable bubble of DuPage county, you might awaken from the misleading notion that the majority of US citizens have a luxurious stock option, and that they don’t mind paying outrageous prices for fuel because in the long run their retirement funds will be prosperous.
We are talking about the largest quarter earnings EVER in the history of corporations. This, however, is disregarded by the notion that since we are only counting three months, we cannot tell if Exxon is actually profitable. But the question never was asked, “why should they be allowed to control natural resources?” is never asked.
Before you mention that my response was mistaken, please indicate how anything I mentioned in my letter was not a truism? This isn’t about the difference between democrats and republicans; this is about the private control of resources, and the ability of people like Peter Roskam to encourage the exploitation of US citizens. My comments were not mistaken, it was the arrogance of the previous article which should never have been published in the first place.