Peak Oil and the Myth of Oil-Company Profits
If the trend of the last 10 years continues, i.e. a 10-percent annual increase in price, a hundred years from now a barrel of oil will cost a million dollars — unless, of course, people decide that walking is more practical than driving a car. Yet, contrary to popular wisdom, oil company profits are in the same range as most other businesses of that size. It’s not so much that the price increase is a mirror reflection of the extraction decrease (although that’s roughly the case). More precisely, the problem is that, no matter how much more money and technology are added, the point has now been reached at which supply and demand are permanently in conflict.
Yet whenever I’m in a car with somebody and we pass a gas station, there’s some kind of sarcastic remark about gasoline prices, usually some variation on the urban legend that high prices are due to “price fixing,” “gouging” the customers, and so on. I never mention the possibility that high prices might be due to the gradual lack of availability of oil, because nobody would believe me. I’ve always brushed off those “price gouging” comments as beneath my dignity to respond to, just as I never respond when people tell me that because of recent discoveries the world is “awash with oil,” or when these same good people tell me they plant vegetables by the phases of the moon.
The correct figures are readily available in such publications as Forbes or Consumer Energy Report. The reality is that oil-company profits (i.e. the ratio of profit to revenue) hover somewhere in the vicinity of 10 percent, a fairly typical percentage for big companies of any sort these days. In fact, there are plenty of businesses that make bigger profits than the oil companies; this is especially the case with businesses that sell personal computers or provide Internet information. But most people would prefer to look anywhere but at the truth. Freud would call this displacement: if you can’t kick your boss, kick the dog.
Airwicky on Wed, 23rd Oct 2013 10:32 am
Misleading since we all know about the incredible tax breaks and subsidies oil companies receive. If I didn’t know, I would think they were already nationalized besides the CEOs laughing to the bank in a more and more environmentally unsound world.
DC on Wed, 23rd Oct 2013 11:30 am
What! Another poor Exxon n BP article.
Kick the dog ROFL! There is no bigger ‘dog’ in this world, than fossil-fuel energy corporations. As for that ‘10%’, it is much higher, but the thing that really makes that 10% matter, is when your grouped with the largest corps in the world. 10% is no longer trivial. But this goofball thinks people are upset just because of profit margins?
Well, I suppose most people do think that way, but it is irreverent. The things that upset informed people, are things like what they DO with those profits-not they make them. For example, I am full aware oilco profits are used to drill for more dirty oil, for more cars, and more wars. Oil money corrupts just about everything and everyone it touches, there is no ‘upside’ to the matter.
Things like that bother me, not they make 10 or 12 or 5 % on a barrel of oil….
mo on Wed, 23rd Oct 2013 1:45 pm
Its the law of the commons. There’s no conspirisy here. Every major corporation or government is doing what’s best for them ( even if its no good for us). How do you fight that?
shortonoil on Wed, 23rd Oct 2013 3:08 pm
Even though conventional crude production is now in decline, prices per unit for the next fifteen years will increase faster than per unit production costs. Expect the oil producers (not the refineries) to hold their margins during this period. Their gross revenue will remain fairly constant even though their volume of production will be declining. The non-energy producing sector of the economy will not be doing so well, as they will be footing the differential!