Should Oil Companies Thank Katrina?

[DrPizza]

I figured this didn't belong in OT so, here goes...

Gasoline now hitting stations was already produced. Prices went up 55 cents per gallon (here). That's 55 cents of extra profit per gallon.

a. What is the normal profit per gallon?
b. Does this amount of excess profit offset future loss of profits because of declining production ability?
c. Hey, with your employees receiving unemployment while your refineries are offline, you've cut expenses there too!


Please, try to answer a. and b.
Is this good news for the oil industry? Or bad news?
(and, didn't their stocks just go up?)

 

[Smaug]

a. Normal profit per gallon for whom? Station barely makes anything, refinerys make a cut, the oil pumped out of the ground is one of the higher costs generally.
b. It would for a Shell or a BP, not necessarily the franchisee that owns the gas station.

Fact is that gasoline futures have gone up 25%, the market is catching up to that high initial price for gas. It's easy to blame oil companies for this but they sell their gasoline for as much as they can get for it, and if speculation drives up the price of gas 25% who are they to turn down free cash?

 

[charrison]

Yes they should thank katrina for the billions in infrastructure damage that they now have to repair.

 

[DrPizza]

Originally posted by: charrison
Yes they should thank katrina for the billions in infrastructure damage that they now have to repair.

1. I doubt the damage to them is in billions.
2. They don't insure their assets?

 

[ntdz]

What extra profit? Eight refineries are shut down, they are producing less gas, meaning less revenue, meaning less profit =/

 

[Engineer]

Originally posted by: ntdz
What extra profit? Eight refineries are shut down, they are producing less gas, meaning less revenue, meaning less profit =/

Uh, in case you haven't looked at the prices of gas lately?

Gas up nearly 30% or more = same revenue = MORE profit on the product sold. I doubt that we have lost 30% of our refining capacity.

They'll make better profits than any other quarter and then some!

 

[charrison]

Originally posted by: DrPizza

Originally posted by: charrison
Yes they should thank katrina for the billions in infrastructure damage that they now have to repair.

1. I doubt the damage to them is in billions.
2. They don't insure their assets?

According to a report 20-30 off shore rigs are lost. That is easily billions...

 

[charrison]

Originally posted by: Engineer

Originally posted by: ntdz
What extra profit? Eight refineries are shut down, they are producing less gas, meaning less revenue, meaning less profit =/

Uh, in case you haven't looked at the prices of gas lately?

Gas up nearly 30% or more = same revenue = MORE profit on the product sold. I doubt that we have lost 30% of our refining capacity.

They'll make better profits than any other quarter and then some!

About 10% of the refining capacity is down. But they were also running at 96% capicity before this happened...

 

[Colt45]

87 went from $3,10 to $3,80 here.

we're an exporter too. The only reason they're charging more here is because they can charge more in the US now. seems like BS to me, but thats global economy or however you call it.

 

[Tsunami982]

oil companies are evil... they will use any reason to boost prices. summer is coming up... boost prices for increased driving. winter is coming... boost prices for heating oil. they sky is blue today... boost prices because they need a new ferrari. i think the only greedier industry is the pharm. industry.

 

[Stunt]

I bought energy companies because people consume excessive energy and are wasteful even with high prices. With continued demand from the booming US economy, global demand going through the roof; the volatility of the COMMIDITY is expected.

I don't think oil companies are thanking this, but it's not hard to see they are doing ok with the events of the past few days. Blaming them for volatility of the market is naive as we are the ones demanding all the fuel.

 

[Genx87]

Originally posted by: Engineer

Originally posted by: ntdz
What extra profit? Eight refineries are shut down, they are producing less gas, meaning less revenue, meaning less profit =/

Uh, in case you haven't looked at the prices of gas lately?

Gas up nearly 30% or more = same revenue = MORE profit on the product sold. I doubt that we have lost 30% of our refining capacity.

They'll make better profits than any other quarter and then some!

Actually that area refines and produces about 27% of our gas and oil production for the nation.

 

[DrPizza]

Let me rephrase part A and part B for those who can't figure it out... but, I'll use an analogy.

Suppose a company makes and sells widgets.
They make and sell 100 widgets a day for $1.50 each; which gives them a profit of 10 cents each.
They have 500 widgets in stock.
Because of some catastrophe, they can now only make 80 widgets a day. However, production costs go up slightly, let's say $1.50 per widget.
Since demand is still high, they raise the selling price to $2.50, making their profit $1.10 on the 500 in stock and $1.00 on widgets they sell from new production. However, they only sell 85 a day because of the increased price. The increased price lowered demand which helped avoid a serious shortage. The surplus widgets in stock will last for quite a while with the lower demand.

So, profit used to be $10 a day
Now, it's $85 to $93.50 a day.

Even including costs to repair equipment, do they end up with even more profit now?

Adjust the numbers to fit the oil/gas industry... how will it work out, or do we have to wait for the next quarter reports?

 

[KK]

Georgia's governer lifted the state taxes on all gas in the state which I heard would be around 15 cents a gallon. My question to this move is, how long before the stations raise the price 15 cents and pocket the money for themselves?

 

[BaliBabyDoc]

Originally posted by: KK
Georgia's governer lifted the state taxes on all gas in the state which I heard would be around 15 cents a gallon. My question to this move is, how long before the stations raise the price 15 cents and pocket the money for themselves?

That seems like an odd decision to make. Yes, the gas tax is regressive but you would assume that the tax revenue is being spent on something worthwhile. If that's the case, you now have to come up with the extra revenue to fill the gap. Further, just as you note, when the price rises another 15 cents, what's the governor going to do . . give a credit?

 

[TravisT]

I'm not sure who, but someone is getting some extra money somewhere. Some states are going into panic mode and there are lines down the street to buy gas. It's not that bad here. But you know, there is still gas out there to buy. And for every gallon they have going itno the cars, they are making a lot more off of it than they would have a few weeks ago. You can't say that they aren't making money.