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10/26/2006: "New Math, or Why We Hate Oil Companies"

I'm all for capitalism. If you can make money, you should make money - hell, it's the American Way. But when you start to reap undeserved profits by taking advantage of your fellow man - that's just bullshit.

Today, it was announced that ExxonMobil second-largest quarterly corporate profit in history. OK, so maybe they just had a really good quarter. But wait - wasn't it just a few months ago that my butt was stinging from unholy gas prices? You don't suppose the oil companies are making profit at my expense, do you?

Like most commodities, if you take the cost of producing the product and add an appropriate profit, that represents the price to the consumer. We know that the price of crude oil has soared in the last year, which certainly explains the high cost of gasoline. But how does that impact profits?

Let's take a look at the math. First you have the cost of pulling crude oil out of the ground, or as in this case, you pay someone else to do it for you. That cost has gone through the roof. After that, there is the cost to turn that crude oil into gasoline. Unlike crude, you can assume that this is basically unchanged. Add those two together, and you essentially have the cost to ExxonMobil to generate their product. They should add a certain profit margin to the cost of the fuel, and thus have the cost to the consumer.

Now, they could determine their profit by the amount of gasoline they sell - say, taking a percentage of the cost of each gallon they sold. Their profit would increase as they sold more gasoline. But we're busy trying to limit the amount of gasoline used by consumers, both to minimize pollution and dependance on foreign oil. So that doesn't work for ExxonMobil. Instead, they take a percentage of the overall sales of gasoline - the revenue generated by the gas stations. When the cost of fuel increases, their profit increases - even though they've done nothing to earn the additional profit. Even more galling is the realization that they're getting you twice - you pay for the increased cost of crude, and for the increases profit margin created by it.

I guess I shouldn't be surprised - it was ExxonMobil that set the profit record earlier this year. But greed disgusts me, and blatant greed angers me. When you see a guy pissing on the pump the next time he fills up, that'll be me ...