Oil says: We're only making about 7.7% profit -- We do not consider that a windfall
Scott Bannon
November 09, 2005
Or is it? For a perspective the local grocery super-market operates on about a 1.5% profit margin.
Retail is something I know a little about. I worked in the industry for a decade in various levels of management.
The oil companies are claiming that higher prices for crude are driving the pump-pricing hikes and that those hikes have nothing to do with the record profits that they're seeing. They offer the "low" 7.7% profit margins as proof that they're not taking unfair advantage of consumers.
However, the cost for produce and dairy items goes up and down based on weather and other factors on a constant basis, yet your local grocer doesn't see record profits when this happens? He simply adjusts his pricing accordingly and remains at around the 1.5% profit margin. In that perspective, it appears the oil company's explanation is actually thinner than their profit margins.
I'm not saying that oil companies don't deserve to earn profits and I don't necessarily believe that the government should jump in to impose special taxes on any industry that does well for itself.
Let's look at the real problem here, people. That's right, it's people's need to own over-sized automobiles and refusal to walk anywhere further than their own driveway that's driving the prices and profits up.
America is a free-market society based on the principals of supply and demand. Any business owner, oil companies included, has the right to cap or limit their product supplies. If consumers keep driving up demand for a limited product then pricing (and profits) will rise.
Personally, I don't care if oil prices keep rising and never stop. I also don't care if quarter after quarter the oil companies keep breaking profit records. Good for them. What I do care about is the dishonest, smoke-n-mirrors efforts to save face with the public instead of simply saying the obvious, "If you don't like it, don't buy it!"
See, that's the other side of a free-market system. If consumers begin to seek out alternatives to a product, the company behind the product will have to adjust their business to stay alive. Bottom line -- the market, prices and profits are all consumer driven in the end.
Instead of crying foul over fuel prices, maybe one should reconsider the two block drive you just took in your SUV to the local Starbucks for that $6 cup of coffee ($7.50 with tax and fuel added in).
America may be the leader in many things, but when it comes to energy conservation and future energy technologies, we're trailing the rest of the world -- even the third world.
Retail is something I know a little about. I worked in the industry for a decade in various levels of management.
The oil companies are claiming that higher prices for crude are driving the pump-pricing hikes and that those hikes have nothing to do with the record profits that they're seeing. They offer the "low" 7.7% profit margins as proof that they're not taking unfair advantage of consumers.
However, the cost for produce and dairy items goes up and down based on weather and other factors on a constant basis, yet your local grocer doesn't see record profits when this happens? He simply adjusts his pricing accordingly and remains at around the 1.5% profit margin. In that perspective, it appears the oil company's explanation is actually thinner than their profit margins.
I'm not saying that oil companies don't deserve to earn profits and I don't necessarily believe that the government should jump in to impose special taxes on any industry that does well for itself.
Let's look at the real problem here, people. That's right, it's people's need to own over-sized automobiles and refusal to walk anywhere further than their own driveway that's driving the prices and profits up.
America is a free-market society based on the principals of supply and demand. Any business owner, oil companies included, has the right to cap or limit their product supplies. If consumers keep driving up demand for a limited product then pricing (and profits) will rise.
Personally, I don't care if oil prices keep rising and never stop. I also don't care if quarter after quarter the oil companies keep breaking profit records. Good for them. What I do care about is the dishonest, smoke-n-mirrors efforts to save face with the public instead of simply saying the obvious, "If you don't like it, don't buy it!"
See, that's the other side of a free-market system. If consumers begin to seek out alternatives to a product, the company behind the product will have to adjust their business to stay alive. Bottom line -- the market, prices and profits are all consumer driven in the end.
Instead of crying foul over fuel prices, maybe one should reconsider the two block drive you just took in your SUV to the local Starbucks for that $6 cup of coffee ($7.50 with tax and fuel added in).
America may be the leader in many things, but when it comes to energy conservation and future energy technologies, we're trailing the rest of the world -- even the third world.
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