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05/13/2011: "Oil Company Profit Hypocrisy"

The unnamed Star Phoenix writers have opined, quite correctly, that there is nothing politicians can do about gas prices. There are indeed many factors driving gas prices up, all of which politicians can either do nothing about or only make worse. Unfortunately, the writers also chose to repeat the myth that profits made by oil companies are "skyrocketing".

It may be true that the absolute value of those profits appear high. I've read numbers in excess of $10 billion for an individual company in several places. However, if you compare those profits to expenditures, things return to earth rather rapidly.

According to Yahoo Finance, as of the most recent quarter, the "Major Integrated Oil & Gas" industry had a net profit margin of 6.2%. This is the total amount of profit after all costs are accounted for, as a percentage of revenue. In other words, profits minus expenses over income.

The Yahoo list doesn't list numbers of how many other industries made better profits, and I didn't count, but there are at least 100 above this sector, putting them about half way down the list.

The top industry is financial -- "Closed-End Fund - Equity", but the second is "Publishing - Periodicals". Newspapers are far further down the list, but even they top oil companies at 6.9%.

Isn't it ironic then that a newspaper could claim that oil companies are making skyrocketing profits?