News Why Did Obama Drop the Oil Tax Proposal?

[Andre]

http://www.telegraph.co.uk/news/worldnews/northamerica/usa/barackobama/3551022/Barack-Obama-breaks-first-campaign-promise-by-dropping-oil-tax.html

During the campaign, Mr Obama repeatedly promised to submit oil and gas companies to a profits windfall tax, citing the disparity between their huge profits and the struggles of ordinary Americans.
...
But the proposal has been quietly dropped from his agenda listed on transition team website's www.change.gov[/URL], setting off a storm of protest among liberal bloggers and small business groups.[/quote]

Wondering what the relation is with the economic crisis.

 

[TheStatutoryApe]

I forget whether you live in the US or not Andre.

If not you may have read that gas prices have gone down dramatically since the banking crisis came to a head. Prices where I live are down almost by half. Unless I am mistaken in thinking this effects, or is an effect of, how the oil companies are doing I can easily see politicians being less inclined to demonize them. They have the banking and loan people to go after now anyway.

 

[Ivan Seeking]

In fact that price of crude is less than a third of the peak value reached in July.
http://www.oilnergy.com/hpix/1obrent6.gif
http://www.oilnergy.com/1obrent.htm#6mo

 

[TheStatutoryApe]

I actually remembered how much crude had dropped when I left work and they were talking about it on the radio. Apparently they speculate that if economic difficulties hit china as well it may drop to about $25 a barrel.

 

[CRGreathouse]

I expect a rise in the price of oil, not a continued fall. If the softness in the economy spreads, though, the prices could stay low for years to come; if it stays largely in the US and Europe, prices should return somewhat.

While I oppose 'windfall' taxes, I think that the US gasoline tax is far too low -- there are major externalities of burning gasoline that are not taken into account in current prices.

 

[LowlyPion]

The wind fall profits tax has fallen on its own petard.

What would they do now that prices have delivered them a windfall profit loss? Give them a windfall credit?

Realistically the tax would have done little and was never a good idea to begin with. If prices are low, where are the incentives to be developing the more expensive offshore reserves or to find reserves that are even deeper and more expensive to develop? And how would they tax the companies anyway? Retroactively? And how would they treat Exxon differently from companies like Royal Dutch that are not domestically located? If they did, watch how fast Exxon would move its headquarters to Bermuda, or some other foreign haven that would be more than happy to have them relocate.

I'm sure Obama is perfectly happy have it forgotten all together.

 

[Ivan Seeking]

I actually remembered how much crude had dropped when I left work and they were talking about it on the radio. Apparently they speculate that if economic difficulties hit china as well it may drop to about $25 a barrel.

Looking at the graph, by mid Feb they will be paying us to fill our tanks!

What a graph!
http://www.oilnergy.com/hpix/2obrentm.gif

 

[tchitt]

I'm loving it. I almost forgot about a time when I paid less than two dollars a gallon to put gas in my car... and at least the Fed can't get their grubby mits on more money that they don't deserve. Not to mention it'll shut the masses suffering from chronic wealth envy up for a little while.

 

[WarPhalange]

The windfall tax wouldn't have done anything. I mean, what's stopping them from further raising gas prices to compensate for it? Less people will buy gas? Not likely.

I think it's a good thing he isn't going to bother with it, since it's just a waste of time. I don't know how you'd make oil companies not get the profit they want, though. Maybe the system is just broken?

 

[tchitt]

WarPhalange: That's exactly what they would do. All corporate taxes are imbedded in the prices of the products you pay for when you buy them. There's no such thing... and this is one of the biggest flaws in liberal economics.

Why would anyone want to stop the oil companies from making money? It's not as if they're all ripping us off. Congress points the finger at "corporate fat cats" (free market industrialists making the capitalist system work for everybody) so that the wrath of the people isn't turned upon them. They've got a cushy, high paying, do nothing job and they want to hold on to them. What people need to understand is that these companies may be pulling record profits... but their costs also go up with the crude that they need to buy so it can be refined. Their profit margins remain the same, the only difference is the final dollar amount which is inflated due to supply and demand issues.

And the system has been broken since the conception of the Federal Reserve and government regulations imposed upon the free market following the Great Depression. No one can give a single definite reason for why that happened even today... Also, the United States has been out of money since the seventies. That's why we dropped the gold standard... another BRILLIANT move. This is nothing more than history finally catching up with us.

 

[WarPhalange]

Why would anyone want to stop the oil companies from making money?

Because then you have a huge amount of money in the hands of a few people. Sure these people do things with the money, like invest it, but they also just store a lot of that money. At the same time there are people that are starving.

It's not as if they're all ripping us off.

Someone is getting more money than they deserve. There was no oil shortage or bigger difficulty in getting it here when the prices spiked as far as I know. That means someone got something for nothing. Is it their right to try and do that? Maybe (cheating people out of their money is illegal as far as I know). But the consumer didn't get a say in it at all, since this was all across the board. There was no other competition to go to that had lower prices.

Congress points the finger at "corporate fat cats" (free market industrialists making the capitalist system work for everybody) so that the wrath of the people isn't turned upon them.

Oh I love this point, especially since I just tore down your free market fetish. Why should the wrath of the people be turned on Congress? What did Congress do? Spent the money unwisely? Maybe. But people are clearly clamoring for more of what Congress did, not less. So maybe the people don't want a free market?

They've got a cushy, high paying, do nothing job and they want to hold on to them.

The CEO's of oil companies? Because right now Congress people make about $170k/year. That's not what I would consider "high paying", although I agree that they should do more. Hell, maybe if they got paid more they'd care more? Isn't that how the free market works? You'd get more qualified people in because they'd be attracted to the money?

What people need to understand is that these companies may be pulling record profits... but their costs also go up with the crude that they need to buy so it can be refined.

Like I said before, someone made a lot of money on this because there was no real reason for the prices of gas surging like that.

Their profit margins remain the same, the only difference is the final dollar amount which is inflated due to supply and demand issues.

Exactly. That makes a whole lot of difference. Would you rather have 5% of your salary of $500/week taken away or 5% of your $5000/week salary taken away? It's still the same percentage, but $25 for the $500 salary is the difference between having a meal and not having it one day, whereas $250 for the $5000/week guy is chump change because everything still costs the same amount. That's why a flat tax is a ridiculous idea. And likewise here, they made a lot more money while prices for everything else basically stayed the same.

 

[tchitt]

Because then you have a huge amount of money in the hands of a few people. Sure these people do things with the money, like invest it, but they also just store a lot of that money. At the same time there are people that are starving.

Maybe these starving people should get a job? It isn't hard to get a job in this country and I don't care who you are. If you need to move, you need to move... There are a plethora of options which can save ANYONE from starvation. And just because they have the money means they should give it to someone else? The government should steal it out from under them and give it to someone who may or may not be less deserving?

Someone is getting more money than they deserve. There was no oil shortage or bigger difficulty in getting it here when the prices spiked as far as I know. That means someone got something for nothing. Is it their right to try and do that? Maybe (cheating people out of their money is illegal as far as I know). But the consumer didn't get a say in it at all, since this was all across the board. There was no other competition to go to that had lower prices.

Talk to OPEC about that one. We get the majority of our oil from the middle east... it wasn't Exxon mobil gouging prices to rip off the american consumer.

Oh I love this point, especially since I just tore down your free market fetish. Why should the wrath of the people be turned on Congress? What did Congress do? Spent the money unwisely? Maybe. But people are clearly clamoring for more of what Congress did, not less. So maybe the people don't want a free market?

The people will appreciate a free market when they're trying to realize the American Dream. Which is generating a large amount of wealth by starting and managing a business trading merchandise on the free market. Yet once they succeed their wealth is stolen from them and given to those who didn't have a shred of the determination or conviction that they did. Is it John's fault that Bill knocked up sally twenty years ago and never had enough money to start a business of his own? Why should John have to pay for it when he succeeds (creating more jobs and more wealth in the process). You didn't tear down a thing... you'll have to do better than that.

The CEO's of oil companies? Because right now Congress people make about $170k/year. That's not what I would consider "high paying", although I agree that they should do more. Hell, maybe if they got paid more they'd care more? Isn't that how the free market works? You'd get more qualified people in because they'd be attracted to the money?

Congressman are supposed to be humble civil servants working for the good of their constituents. Not pandering to the lowest common denominator to get more votes. The free market doesn't apply to government so that entire point is moot.

Like I said before, someone made a lot of money on this because there was no real reason for the prices of gas surging like that.

No reason at all? Is that a fact? Oil consumption has been rising for a very long time, therefore so has demand. Prices don't just fly up and down on the whim of some CEO.

Edit: http://www.wtrg.com/prices.htm

Exactly. That makes a whole lot of difference. Would you rather have 5% of your salary of $500/week taken away or 5% of your $5000/week salary taken away? It's still the same percentage, but $25 for the $500 salary is the difference between having a meal and not having it one day, whereas $250 for the $5000/week guy is chump change because everything still costs the same amount. That's why a flat tax is a ridiculous idea. And likewise here, they made a lot more money while prices for everything else basically stayed the same.

More wealth envy crap. I'm sorry you're upset that you weren't "fortunate" enough to by some crazy twist of fate end up in the driver's seat for a multinational corporation like these people obviously were. They probably just settled for McDonalds, and had the company given to them by some random customer who wandered in.

 

[OmCheeto]

What would the tax be called if we taxed gasoline, every time it drops by 10 cents a gallon, we tax it by 5 cents more per gallon? I got very used to the price being $4/gallon. I almost feel I have to apologize to the station attendant now that it is only $1.80/gal.

 

[Proton Soup]

WarPhalange: That's exactly what they would do. All corporate taxes are imbedded in the prices of the products you pay for when you buy them. There's no such thing... and this is one of the biggest flaws in liberal economics.

that is a really good point, and is also why we should only tax corporations.

 

[Proton Soup]

What would the tax be called if we taxed gasoline, every time it drops by 10 cents a gallon, we tax it by 5 cents more per gallon? I got very used to the price being $4/gallon. I almost feel I have to apologize to the station attendant now that it is only $1.80/gal.

why would you do that? the attendant's wage never changed.

 

[tchitt]

Proton Soup: Taxing corporations causes them to turn around and incorporate the tax right into the price tag of whatever it is they're selling. So I don't see how you agree with my point when I was saying taxing corporations only makes prices go up... pushing the tax burden back onto the people. Therefore it would be beneficial for all of us if the United States didn't have the highest corporate tax rate in the world.

Any money we can save businesses (large and small) is money invested in the economy. Why do we think the answer to our financial problems is relieving prospective employers of money they would use to pay employees and upgrade their facilities? The left wants to suck the life out of our livelihood... our jobs.

 

[Proton Soup]

Proton Soup: Taxing corporations causes them to turn around and incorporate the tax right into the price tag of whatever it is they're selling. So I don't see how you agree with my point when I was saying taxing corporations only makes prices go up... pushing the tax burden back onto the people. Therefore it would be beneficial for all of us if the United States didn't have the highest corporate tax rate in the world.

Any money we can save businesses (large and small) is money invested in the economy. Why do we think the answer to our financial problems is relieving prospective employers of money they would use to pay employees and upgrade their facilities? The left wants to suck the life out of our livelihood... our jobs.

try and be consistent now. if the consumer ultimately pays all the taxes as you propose, then it makes no sense to tax everyone when you can just tax a smaller number of businesses. the people pay all the tax, just indirectly. yet now, the tax system is significantly streamlined.

you can't have it both ways, that would be hypocrisy. if on the other hand, you wish to shift the tax burden from the corporations down to the consumers, then the consumer has less money left over to buy goods and it has the same sort of stagnation on the economy you wish to claim taxing from the top does.

 

[tchitt]

Ah. I misunderstood you. I interpreted your post as though you didn't really read anything I typed and just interjected something to the effect of "Yeah, the corporations should just have to pay for everything." Actually I'm a supporter of a movement involving a complete overhaul of our current tax system that you've perhaps heard of. It would be a totally indirect tax in the form of a national sales tax. Sort of radical but it does have widespread support and adheres more closely to what I see as American principles. It would also reduce the tax code from thousands of pages to tens, and abolish the IRS (No more April 15th anxiety)... significantly streamlined. www.fairtax.org

I know we're getting pretty off topic here, but I think there's still some relevance to all this seeing as how the topic relates to taxation, corporate or otherwise.

 

[Proton Soup]

Ah. I misunderstood you. I interpreted your post as though you didn't really read anything I typed and just interjected something to the effect of "Yeah, the corporations should just have to pay for everything." Actually I'm a supporter of a movement involving a complete overhaul of our current tax system that you've perhaps heard of. It would be a totally indirect tax in the form of a national sales tax. Sort of radical but it does have widespread support and adheres more closely to what I see as American principles. It would also reduce the tax code from thousands of pages to tens, and abolish the IRS (No more April 15th anxiety)... significantly streamlined. www.fairtax.org

I know we're getting pretty off topic here, but I think there's still some relevance to all this seeing as how the topic relates to taxation, corporate or otherwise.

i think the bolded part is wishful thinking, Congress still likes to pick winners and losers. you'd have to pass a well-thought amendment to keep it fair.

honestly, i could go either way. abolish personal income tax (maybe only anything above $250,000) and only tax corps, or a sales tax. the one argument that I've heard that might shift me in favor of a sales tax is that it becomes a tariff as well.

as far as the current situation and taxing oil, that depends. i don't know what sort of tax breaks the oil companies were enjoying before oil went through the roof. but in general, I'm in favor of keeping energy prices low because energy usage is what drives the economy. GDP (or maybe it was GNP) is roughly proportional to how much we burn. if you don't burn, you don't earn.

 

[TheStatutoryApe]

try and be consistent now. if the consumer ultimately pays all the taxes as you propose, then it makes no sense to tax everyone when you can just tax a smaller number of businesses. the people pay all the tax, just indirectly. yet now, the tax system is significantly streamlined.

you can't have it both ways, that would be hypocrisy. if on the other hand, you wish to shift the tax burden from the corporations down to the consumers, then the consumer has less money left over to buy goods and it has the same sort of stagnation on the economy you wish to claim taxing from the top does.

There needs to be a happy medium. Of course no one is ever really happy about the middle ground though.
If you tax businesses too much then they will not want to operate here. They will leave and people will be less inclined to start and/or maintain their businesses because it will require more capital.

 

[Proton Soup]

There needs to be a happy medium. Of course no one is ever really happy about the middle ground though.
If you tax businesses too much then they will not want to operate here. They will leave and people will be less inclined to start and/or maintain their businesses because it will require more capital.

i don't know what you're talking about. when a company pays someone's salary, this includes the taxes that person has to turn around and then give to the government. it's nothing more than a shell game. if the company has to pay all the tax directly, then salaries will be numerically lower, company taxes will be numerically higher, and expenses will be the same. maybe it doesn't "feel" fair, but in general, companies have accountants to deal with just this sort of thing in a calculating way.

 

[Ivan Seeking]

DALLAS - Exxon Mobil Corp. posted record profits for any U.S. company on Monday — $10.71 billion for the fourth quarter and $36.13 billion for the year — as the world’s biggest publicly traded oil company benefited from high oil and natural-gas prices and solid demand for refined products.

http://www.msnbc.msn.com/id/11098458/

Profits: That means salaries are paid and material costs of production are already satisfied. Taxing profits is not the same thing as taxing the gross income. There is no cost shifting to the public or tax burden shifting from employees. A windfall profits tax would bite into the money used presumably for exploration.

I would certainly prefer that money be used to end the addiction to oil, but this is hardly in the interest of the oil companies. In any event, the billions and billion and billions have already been pocketed and the price of oil is down, so the point is rendered academic until the price of oil goes back up.

Maybe we should ask the oil companies to bailout the auto companies.

 

[OmCheeto]

http://www.msnbc.msn.com/id/11098458/

Profits: That means salaries are paid and material costs of production are already satisfied. Taxing profits is not the same thing as taxing the gross income. There is no cost shifting to the public or tax burden shifting from employees. A windfall profits tax would bite into the money used presumably for exploration.

I would certainly prefer that money be used to end the addiction to oil, but this is hardly in the interest of the oil companies.

Unless of course they are investing the extra $ in alternative energies.
What are the http://en.wikipedia.org/wiki/Supermajor" doing?
* ExxonMobil (XOM) Profit US$ 40.6 Billion
* Royal Dutch Shell (RDS) Profit US$ 27.3 Billion
* BP (BP) Profit US$ 22.3 Billion
* Chevron Corporation (CVX) Profit US$ 17.1 Billion
* ConocoPhillips (COP) Profit US$ 15.6 Billion
* Total S.A. (TOT) Profit US$ 12.6 Billion

Total profit for the above six companies: US$ 135.5 Billion

http://www.bloggingstocks.com/2008/04/01/alternative-energy-makes-little-impact/"
Posted Apr 1st 2008 5:57PM by Aaron Katsman

"Why is Exxon Mobil resisting the renewable revolution," asked http://markey.house.gov/" .

Simon said his company, which earned $40 billion last year, had provided $100 million on research into climate change at Stanford University, but that current alternative energy technologies "just do not have an appreciable impact" in addressing "the challenge we're trying to meet."

Katsman, as managing director of an investment firm, agrees with Simon, stating that;"I would rather get my dividend", rather than see Exxon Mobil invest 10% of it's profits in alternative energy.
Hmmmm...
I hope you lost your shirt in the crash, Katsman! Greedy little short sighted bas**rd.

Exxon also claims that they only deal with 2% of the petroleum products used on the planet. If one extrapolates their profit to the other 98%, one comes up with a figure of 2 trillion USD.

In the future, http://www.shell.com/home/content/innovation/alternative_energy/biofuels/biofuels.html" may also provide a sustainable source of vegetable oil for the production of biofuel for diesel engines. In 2007, Shell announced plans to build a pilot facility in Hawaii with partner HP Biopetroleum to investigate the potential. It is early days but algae holds promise because they grow rapidly, and can be cultivated in ponds of seawater, minimising the use of fertile land and fresh water.

Thieves!

And the size of the investment was probably small given the size of the project:

The joint venture, with Hawaii-based HR Biopetroleum, will initially build a small research plant covering 2.5 hectares...
The two companies did not reveal the size of the investment but Shell will have a majority stake in the company, called Cellana.

About the size of two city blocks.

In the last few hours, I've seen little evidence that oil companies are putting any serious amounts of money into alternative energy research.

I therefore conclude that the market will not fix the problem.
We need to tax oil.

In any event, the billions and billion and billions have already been pocketed and the price of oil is down, so the point is rendered academic until the price of oil goes back up.

Maybe we should ask the oil companies to bailout the auto companies.

I've always considered them to be two sides of the same industry.
Kind of like Intel and Microsoft.
Different, but very much in bed with each other.

For 3 weeks worth of their profit, Exxon could now buy GM.

But getting back to andre's original question about Obama's flip flop on the matter:

During the campaign, Mr Obama repeatedly promised to submit oil and gas companies to a profits windfall tax, citing the disparity between their huge profits and the struggles of ordinary Americans.
...
But the proposal has been quietly dropped from his agenda

As far as I can tell, the oil companies are, for the most part, multi-national corporations. Applying a windfall profit tax on a multinational company may be problematic, if not impossible.

As much as people hate the idea, I'm going to repeat this for the 4th time, we need to tax gasoline, at the pump, at a higher rate.

 

[russ_watters]

Profits: That means salaries are paid and material costs of production are already satisfied. Taxing profits is not the same thing as taxing the gross income. There is no cost shifting to the public or tax burden shifting from employees.

What's preventing it? Let's say ExxonMobil sets their profit margin at 4%. You tack on a profit tax of, say, 50%. What's preventing ExxonMobil from raising their profit margin to 8% to compensate?

 

[Ivan Seeking]

What's preventing it? Let's say ExxonMobil sets their profit margin at 4%. You tack on a profit tax of, say, 50%. What's preventing ExxonMobil from raising their profit margin to 8% to compensate?

Set their margin? Are you suggesting that the profits last year were based on some predetermined margin?

Supply and demand. Or are you suggesting that the oil companies will conspire to maximize profits?

 

[TheStatutoryApe]

Set their margin? Are you suggesting that the profits last year were based on some predetermined margin?

Supply and demand. Or are you suggesting that the oil companies will conspire to maximize profits?

Supply and demand only effects the price of oil. Do oil companies not charge for, or make money off of, any thing except the oil itself?

 

[Ivan Seeking]

Supply and demand affects the price of everything in a free market.

What is your point?

 

[TheStatutoryApe]

Supply and demand affects the price of everything in a free market.

What is your point?

If a company's after tax profit is lessened due to increase in taxes they should easily be able to increase prices to increase profits and offset the tax burden shouldn't they? They may not legally be able to play with the price of oil directly but can increase the fee's attached for things such as processing, transportation, ect, right?

 

[Ivan Seeking]

That is still governed by supply and demand - ie. the price at the pump. Go ahead Exxon, raise the price artificially. BP will gladly take the business.

 

[russ_watters]

Set their margin? Are you suggesting that the profits last year were based on some predetermined margin?

Yes! You didn't know that? Why do you think the profits are higher when the price is higher? The margin is the same.

Supply and demand. Or are you suggesting that the oil companies will conspire to maximize profits?

[edit] I said margin, but I really meant markup. Markup is the multiplier for the commodity price. Margin is after all overhead is subtracted out, what is left. Similar, but not exactly the same. But of course that means that the margin actually grows when the price increases and the markup stays fixed... [/edit] Supply and demand determines the commodity price, but the markup is essentially fixed: Competition determines the markup, but unless something radical changes, the market stabilizes and the markups become essentially fixed. Every business works that way. How can you not know this? Haven't you ever noticed that certain gas station types are always a few cents cheaper than others in an area, yet the price varies from one area to another. Here, the cheapest is almost always Wawa (but you've probably never heard of them_. Supply and demand determines where the price can be at a certain location and the home office decides how far above or below that to set their price based on a profit margin they are willing to live with. Wawa is always cheaper because their business model includes a mini-market, which is where most of their profit comes from. Cheaper gas brings higher volumes of people into the market (where the markups are huge).

A similar example:
Best Buy sells a $500 TV and a $1000 TV. They have a set markup of 50% (a guess, but it is probably close), so the $500 TV gives them an income of $250 while the $1000 TV gives them a net of $500.

Another example:
I work at an engineering consulting firm that sets the target billing rates for the employees at 2x their pay rate. So if their pay rate goes up, their billing rate goes up. If a pay rate goes from $25 to $30, the billing rate goes from $50 to $60 and the profit per hour worked goes up $10.

[edit2] So regarding the example in post 24, those markup numbers would be too small. Let's say the markup is 20% and the final profit margin 4%. If the government puts a 50% profit tax, ExxonMobil increases their markup to 24% to compensate, keeping the "real" profit margin 4%.

 

[russ_watters]

That is still governed by supply and demand - ie. the price at the pump. Go ahead Exxon, raise the price artificially. BP will gladly take the business.

Haven't you ever asked yourself why, if that was true, did all the oil companies earn record profits last year? BP and Exxon determined through competition what markups they were willing to live with and when the price doubled, the profit doubled (actually, more than doubled since the fixed costs did not change). There is no reason for either of them to change their markup in that kind of situation. If you add a new tax, it does not affect supply and demand at all, it only effects profit. So both can simply pass the cost on to the consumer, and the competitive situation remains unchanged.

And no, BP cannot take the business. Supply and demand for oil are both very tightly constrained. BP could not siply undercut Exxon's price and take all of their business - they'd have to first spend billions of dollars for years to build the infrastructure. So if BP undercuts Exxon's price and runs out of gas because they can't meet the new demand, what does that mean? It means they could have charged more for the same amount of gas.

 

[russ_watters]

Another thing about oil company profits: their margins are pretty thin relative to other businesses. But they get a lot of press because the companies are truly enormous. So the profit numbers look big even though they are not relative to other businesses.

 

[russ_watters]

More: The oil market is more complicated than the simplistic examples I gave. Here's a good faq: http://www.theoildrum.com/node/2571

 

[Ivan Seeking]

Haven't you ever asked yourself why, if that was true, did all the oil companies earn record profits last year?

Price was driven by speculation in oil futures - betting on future supply and demand. The hyperinflation of crude prices was completely artificial. And it had nothing to do with the operating costs of the company. But it was caused by speculators, not oil executives, so it was still a function of supply and demand.

Consumers could care less about constraints. If gas station A has cheaper fuel than station B, I will likely go to station A.

We often used to see price wars between stations, and we still do at times, so there is genuine price competition. Also, if one company's price is artificially high, there is more than one company to take up the slack. Exxon doesn't want to lose 5% of their business, so they remain price competitive.

 

[TheStatutoryApe]

Consumers could care less about constraints. If gas station A has cheaper fuel than station B, I will likely go to station A.

We often used to see price wars between stations, and we still do at times, so there is genuine price competition. Also, if one company's price is artificially high, there is more than one company to take up the slack. Exxon doesn't want to lose 5% of their business, so they remain price competitive.

According to what I have read on Snopes, in their article on the fallacy of gas station boycots, oil companies that are unable to sell their own oil (as gasoline) will then turn around and sell their excess to other companies who are in need of more oil to keep up with demand. Taking advantage of the problem of production vs demand they protect themselves in this way from market shifts at the pump. The gas stations themselves don't make much money from gasoline anyway.

 

[Supercritical]

ExxonMobil Q4 2008 (source)
Net Profit: $7.82 billion
Revenue: $84.696 billion
Profit Margin: 9.23%

Profit Margins from previous quarters (from Yahoo Finance and Exxon's investor reports):
Q3 08: 10.77%
Q2 08: 8.46%
Q1 08: 9.32%
Q4 07: 10.00%
Q3 07: 9.20%
Q2 07: 10.43%
Q1 07: 10.64%
Q4 06: 11.39%
Q3 06: 10.53%
Q2 06: 10.46%
Q1 06: 9.44%

It's interesting to note that many media outlets including the NYTimes reported the profit drop of 33% in terms of the current economic crisis, as though "the once high-flying oil sector is scrambling to adjust to a sharp downturn."

On the contrary, while oil prices varied from $60 to $140 and back to $40/barrel during the past 3 years, Exxon's profit margin remained in the range of 9-11%.

I think there's a lot of misplaced anger toward ExxonMobil, but it's died off substantially now that a gallon of gas is cheaper.

 

[Ivan Seeking]

Where are you getting your data. I don't see it.

I did see this:
Net income (U.S. GAAP)
4th qtr 08 7,820
3rd qtr 08 14,830
2nd qtr 08 11,680
1st qtr 08 10,890
4th qtr 07 11,660
http://www.exxonmobil.com/Corporate/Files/news_release_supp4q08.pdf

Beyond that, it was public information that Exxon made greater profits recently than any company in history.

 

[Supercritical]

It's located about halfway down the page on each report (Q4 08 report).

It's true that ExxonMobil has set records for profits in terms of dollar amounts (although I haven't read if the all-time record is adjusted for inflation). However, China eats the most food in the world in terms of tonnage (speculative), but nobody says they eat too much. The point being: ratios and proportions tell more of the story. For instance, for the year 2007 Coca Cola made $5.98 billion profit on $28.9 billion revenue, amounting to a 20.73% profit margin. This means that if Coca Cola had generated the same amount of revenue as ExxonMobil did, Coca Cola would have raked in roughly twice the profit (assuming everything scaled).

In Exxon's case, it just so happens that businesses that are more profitable (pharmaceuticals, for instance) don't have the revenue/sales volume that Exxon has; and those giants that are less profitable (Wal Mart, as an example) don't have the sales to top Exxon's profits either.