I'm not one to claim that we are in Iraq because of oil, I just think our president is an idot. but its hard not think that we aren't there because of oil when you look at the numbers. the middle east troubles have created about a $20 premium on the price of a barrel of oil and the oil patch is cleaning up. link Executives ride high on boom in energy By TOM FOWLER Copyright 2006 Houston Chronicle The energy boom rang loud and clear through corporate suites in Houston last year where total pay grew 28 percent for the 100 top-paid executives at publicly traded companies. The average pay package for the top executives in this energy-centric city was $6.9 million in 2005 versus $5.4 million in 2004, including salary, bonus and long-term incentives like stock options, according to data compiled for the Chronicle by Longnecker & Associates. The increase was fueled in large part by a 68 percent jump in the value of stock option grants and a 23 percent increase in bonuses. Leading the pack was Eugene Isenberg, chairman and CEO of exploration and production company Nabors Industries and a frequent top five finisher on the list, with a $45.6 million package. This is almost triple his $15.7 million 2004 pay package, primarily because of a tripling in the value of his annual stock option grant. Nabors' chief operating officer, Anthony Petrello, ranked third with a $23.3 million package. James Mulva, CEO of Houston's largest company by revenue, ConocoPhillips, ranked second with $36 million, including a $22.5 million long-term incentive payout made mostly in restricted stock. Charif Souki, CEO of Cheniere Energy, which develops terminals to import liquefied natural gas, made his debut on the list in fourth place with $20.2 million. Most of that was from a stock option grant valued at an estimated $18.1 million. And Dave Lesar, chairman and CEO of oil-field-services giant Halliburton, held fifth place with a $17 million package, up $3.3 million from the prior year partly because of a larger stock option grant. Only two executives in the top 25 were not tied to the energy or chemical businesses: HCC Insurance Holdings Chairman and CEO Stephen Way (No. 8, $15.6 million) and Thomas Lankford, former president of food distributor Sysco Corp. (No. 16, $9.5 million). Only 20 of the top 100 were not in energy industries
That's what I don't get. If something cost more for me to get wouldn't it cost me more to sell as well? How do they get these record profits, salaries, etc.? Example: let's say I am a candy bar dealer and the price of chocolate skyrockets from 5 cents an ounce to 50 cents an ounce. I was selling candy bars at 10 cents to make a 5 cent profit when chocolate was 5 cents an ounce but now since it's 50 cents why wouldn't I just sell it for 55 cents an ounce? You might say I would have to up the price to get my neede chocolate inventory but if I upped the price to do that it would be going into my product not my pocket. I just don't understand.
I'm not one to blindly follow W. For my own unique reasons, I am also not satisfied with the war effort: however, I think your arguement is the exact opposite to the arguement liberals have advanced to this point. The idea that I remember was that we would exploit the oil reserves in Iraq to lower the price of oil and improve our economy.
A war for oil wouldn't be based on keeping prices low, it would be based on keeping profits high, in line with the desires of those who pursued the war in the first place. There are separate economies in the United States. Benefit to one does not necessarily (or usually) translate into benefit for the other. But the beneficiaries always manage to sell it to the populace by using flowery language, slogans, fears, terms of 'doing our duty'. They're doing it for power and profit. We're doing it, according to them, for 'the safety of our children' and 'democracy' and 'our way of life' - but none of these ghostly ideas make it easier to pay the bills. And guess who gets the money when you pay the bills...
THe oil exploration companies are making money b/c while the cost of exploration has risen mildly (b/c they are looking at harder sources given the high prices). So say it now costs $15 to produce a barrel...now you can sell it for $75 instead of $30..voila...more profits.. On the refining side, they are paying more for oil to turn into gas, so to a certain extent, yes they shouldn't make a lot more money. Except for one thing: refineries are running at a higher capacity, so they have been able to raise the margins on their products (gas, etc). These margins are more likely to decrease with new refining capacity slowly coming online (think 2010) but this is a small component of the price you pay.
OK, it is making a little more sense now. But the oil companies that sell gasoline (ex. Exxon, Shell, BP, etc.) are reporting record profits. What part do they play in this? Are they doing the exploration and extraction of oils? Are they the refiners? Are they just the salesmen? If they do the exploring and extracting I see where they make the profits at but if they do the other two I do not.
Exxon, Shell, etc are primarily explorers...a lot of explorers don't do refining/sold off refining b/c of the historically low margins. Oil accounting (memory very hazy on this) is a little odd b/c say Exxon finds a well with 1 billion barrels of oil and so now it has proven reserves of 1 billion barrels of oil. At an oil price of $20, these reserves are worth $20B. If Oil goes up to $80, these reserves are worth $80B. Did the company just make $60B? I have to think there is some sort of "normalized" oil price otherwise these swings in oil price would drastically affect balance sheets.
My father works in the oil industry: Firstly, yes all these companies are located in the oil producing countries (except for nations such as Venezuela/Libya...they nationalized their industry)... What happens is that income from production and exploration is split with the country and the oil company. (the oil companies operate EVERYTHING from drilling to selling) Why would countries want these oil companies in their countries? Well, because they provided the infrastructure (capital and labor), which most these countries at the beginning could not afford (nor the knowledge to operate). Libya got into a really sh-tty deal with these companies and that’s why they nationalized…then got bombed. Anyway Iraq has oil worth in the trillions…much of it is untapped…Halliburton must be lov’in it
Well, you have investors that want to see good profit margin and return on investment. If it cost 5 cents to make chocolate and you sell for 10, you are turning a 100% profit. If it costs 50 cents and you sell for 55 cents, you are making a 10% proft. You investors will not be happy that profit margins fell from 100% to 10% despite having the same net income. So when oil doubles in price from $40 to $80 a barrell, you have to continue to make the same margins as you did before. So you make more net income, but the same profit margin. That is why you see record profits, but margins about on line with almost every other industry. The same will happen in reverse if oil pries tumble. No more record profits, but the same margin.
Exactly as Thadeus said. Claiming war for oil never meant the avg. joe would see lower oil prices. Just that the oil companies and Bush's croinies would see high profits. I don't know if it is a war for oil or not, but Bush's oil buddies have seen record breaking profits.
I really recommend the book "Confessions of an Economic Hitman", it will give you a general idea of how things work...
and prices are going up. I really don't think its a consparicy, it just looks bad, that these guys are cleaning up on war, despair,or as pointed out in this post, its own screw ups.
Just a question, but what do you mean "These Guys"?? After all most of these companies are publicly traded companies that are owned by you and most of us here that have a 401k or mutual funds. Those record profits are going to the shareholders. Profits are used to increase future shareholder value and to give dividends to shareholders. Do you have a 401K?? Even if its in 100% bonds, many of the bonds may be from energy companies. I'm not getting into the whole Bush/Oil etc thing, but we as investors are the ones profiting from the gains in these companies profits.
Or we're getting screwed because we hold investments that are negatively affected by high energy prices.