They Made HOW MUCH?

This is a guest column.

They made HOW MUCH?

By Kirk Wentzel

For those of you who don’t know me, I’ve been an accountant for 25 years now. I don’t claim to be an oil industry expert but I do understand accounting and how Income Statements and Balance Sheets work.

Exxon Mobil reported second quarter 2006 profit of $10.36 billion 36% higher than in the same period in 2005 when Exxon Mobil reported a miniscule $7.64 billion.

Royal Dutch Shell posted $7.3 billion.

British Petroleum announced profit of $7.3 billion.

ConocoPhillips said they added $5.18 billion to their coffers.

The last of the big 5, Chevron announces tomorrow at 11:00 a.m. and you can expect another huge number.

Exxon’s profit number was, simply put, staggering. Remember this $10 billion is profit AFTER all expenses are accounted for. Exxon spent $4.9 billion on capital and oil exploration and another $7.9 billion in dividends and stock buy-back and still made $10 billion.

To put this in a perspective lets look at it this way:

There are 91 days (well 91.25 but most economist and accountants use 91) in a quarter so Exxon earned $113,846,153.84 per day, that’s just under $114 million per day.

There are 2184 hours (91 days x 24 hours) in a quarter so Exxon earned $4,743,589.74 per hour, or a little over $4.7 million an hour.

There are 131,040 minutes (2184 hours x 60 minutes) in a quarter so Exxon earned $79,059.83 PER MINUTE.

How many of you make $79,000 PER YEAR????

What I make in a year, Exxon earned in 37 seconds during the second quarter. Color me impressed!!!

Sure companies are in business to make money…believe me I understand capitalism. I’m OK with capitalism but really, how much is too much?

And lest we forget, I’m not JUST talking about gasoline for cars. The same oil gets used to make diesel fuel, jet fuel and home heating oil. So when prices go up, transport costs for EVERYTHING go up which add HUGE numbers to the inflation equation.

The pre-purchase price for winter heating oil in the northeast is between $2.30 and $2.70 per gallon and in some places, even higher. Tell me how people on fixed incomes and working in minimum wage jobs are going to afford to heat their homes this year.

According to Exxon, the average price of a barrel of oil during the second quarter was in the $65 range. How much MORE are things going to cost when the $75 and $80 barrels of oil reach the marketplace?

We are going to inflate ourselves out of economic stability unless someone puts a stop to these price increases. The world oil markets are unstable because of all the warfare and political tension in the oil-rich Middle East. That drives the price of crude higher, trust me, I understand the economics and the mechanics.

However, the oil companies and their shareholders don’t need to make this much money on the backs of Americans already struggling to make ends meet. Oil prices like this are inflationary and then the Fed increases interest rates to keep inflation in check. Fact is that the core inflation is not that bad. It’s the Food and Energy segments that are driving the numbers.

It’s all inter-related folks. One topic leads to another to another to another. I could go on for days debating economic theory with myself and even longer with a learned economist. That’s not the point.

The point is that there is a limit as to how much is too much. And even though we Americans pay far less for gas than people in other countries around the world, this is too much, too fast. Other countries also have programs to take care of their elderly and poor that we do not. Other countries are actually integrating new fuel resources into their infrastructure, we are not. (Oh yeah, they’re not doing it by ripping up their national parks either so I don’t EVEN want to hear about the Alaskan Wildlife Refuge…leave something for nature.)

I’ve heard the argument, “when gas gets too expensive people will switch from the cars to public transport and that will bring the price down under the law of supply and demand”. OK, but I don’t see a supply issue. Are gas stations running out of gas? Are there supply problems? Is it REALLY short supply and large demand that’s driving the price up? Can you say “NO”?

Sorry guys, but to me this really does seem like price gouging and there should be SOME limits on how much these can charge. What is a fair profit? It’s a hard question and I don’t claim to have an answer bit $10.36 billion.

Oh, and one final thought. ExxonMobil’s dividend is 32 cents per share paid on 9/11 to shareholders of record on 8/14.

32 cents, how much gasoline will that buy?