The View From Down Here

Have you heard that ExxonMobil made 9.9 billion in profits this quarter?

Does that make you mad? If it does, then wake up sleepyhead - you live in a capitalist society! Exxon is a business that exists to make money by selling gas, not to provide fuel as a public service.

OK, I confess, I'm mad too; mad as hell, but not at Exxon.

Let’s parse some numbers: Exxon’s 9.9 billion is large, true, but it is an 11% profit margin based on their revenues.
This means every time you buy a dollar’s worth of gas from Exxon, they earn 11 cents.

Compare: 33% profit margin for CitiGroup. Source: credit card interest
Compare: 32% profit margin for Microsoft. Source: software
Compare: 31% profit margin for Coca-Cola. Source: soft drinks
(Source: Bloomberg News Service)

So every time you pay your CitiCard bill, or buy a new MS computer game, or buy a Coke, those companies pocket 31-33 cents for every dollar you spend. That’s 3 times Exxon’s profit margin. 3 times!

The only thing that the high Exxon profits mean is that the price of gas has gone way, way up and their 11% profit is, therefore, quite a bit more. It does not – I repeat, not – mean they are charging you too much! 11% of $2.79 gallon of gas is quite a bit more than 11% of a $1.25 gallon of gas.

Now, CitGroup, Microsoft, and Coca-Cola, they very well may be ripping you off.

Do you remember about 5-6 years ago when the price of oil dropped down to below $10 a barrel? Everyone drove to their hearts content on 97 cent per gallon gas and bought huge SUVs. But, what you never heard was nearly 300,000 oil workers along the gulf coast got laid off by the oil companies because the price of oil dropped so low and the oil companies were struggling domestically. That’s enough workers to fill a good sized American city (like San Antonio).

Guess what? While all that was going on, the government did nothing to help the oil industry. They rode the wave of “good economy” and patted themselves on the back for a job well done. 300,000 people out of work, oil companies shutting down stateside facilities, and the government did nothing but tell us how wonderful they all were. Now we wonder where our refining capacity has gone. We wonder why all our refineries can be shut down by one hurricane – why our demand for gas has outpaced our ability to refine it.

By God, though, let the farmers have a bad year, a drought, and the government can’t wait to bail them out. Let's not mention that farmers are no longer the humble tillers of the soil of yesteryear and are now organized in sophisticated, billion dollar agribusinesses with huge lobby power. No such love for oil workers.

That was a brutal lesson for the oil industry and the lesson’s name was “Self Reliance”: put your money in the bank when you can because the government won’t lift a finger to help when you get in trouble.

Exxon learned this lesson, and they learned it well. I say bully for them, they EARNED those profits.

As for the media reports about record profits, they are just trying to get your attention. Just trying to sell you a newspaper. Just trying to peddle advertisements on TV that tell you to go buy another Coke and rack up the charges on your CitiCard.

The news media are in business just like Exxon, the only difference is the news media are trying to make a buck off your attention span. I wonder what the profit margins are for that?

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