I've read enough of your drivel to ask you this question point blank
Drivel?? Rather harsh word, don't you think... especially since I've said nothing comparable towards you.
Today, refinery profits are higher than they have ever been in the history of the industry. About Six Bucks per Barrel.
It all depends on the price they originally paid for that oil. Refiners normally lock in long-term contracts for their crude oil supplies. And oil was rather cheap several years ago and many refiners who import crude locked in long-term contracts at cheap prices. But the spot market price for crude generally dictates the pump price for refined product. Thus, margins can vary widely depending on the replacement price of crude oil. And much can depend on if the parent oil company possesses oil fields of its own because there is a fixed cost of production from established fields.
Here's a pretty fair article I found while doing a quick query on refining profit margins. It explains it far better than I could:
Oil company profit margins climb with gasoline prices
nctimes.com
STEPHEN GAUT
Staff Writer
Gasoline prices in North County and California have risen to record highs in recent weeks, both reaching an average price of $1.85 per gallon. The rising price of crude oil, which has risen from $25 per barrel in early January to $34 per barrel, is to blame for some of the increase.
But an analysis by the North County Times of gasoline profit margins shows that at current prices, California oil refiners are realizing near-record profit margins.
Due to high crude-oil prices and high gasoline prices in California and the Midwest, the quarter that ended June 30 was the most profitable quarter in the history of most oil companies in absolute dollar terms.
Exxon reported profits of $4.5 billion on revenues of $50 billion, while Chevron reported profits of $1.1 billion on revenues of $12 billion. Those quarterly profits are greater than 70 percent of what both companies earned during the entire year in 1998.
The breakdown
A gallon of gasoline has four main price components: the cost of crude oil, taxes, the refinery margin and the dealer margin. Crude oil is a highly volatile commodity; its price is determined by international production and demand factors. The refinery margin is the cost to turn crude oil into gasoline, and it includes refinery operating costs, distribution costs, storage costs and profits. The dealer margin is the markup that gasoline station owners add on to a gallon of gasoline to cover their operating costs and profits.
At $1.85 per gallon, the breakdown is as follows: crude oil, 77 cents; taxes, 49 cents; dealer margin, 5 cents; and refinery margin, 54 cents. It is the refinery margin that garners the most attention from politicians and critics of the oil industry because it is the one component of the equation that the oil companies can control.
The refinery part of the oil business has historically garnered only low to mediocre profits. Refining oil into gasoline is a complicated and extremely capital-intensive process. Oil companies must charge enough for their gasoline to cover operating costs, and to recoup their investment in their refinery facilities, which cost approximately $1 billion to $2 billion to build, depending on the capacity. Tosco ---- a company that refines and sells gasoline and does not own any oil fields ---- has a PROFIT MARGIN on revenues OF ONLY 2 PERCENT TO 3 PERCENT. (emphasis added, Hawk)
29 cents a gallon -- profit
Oil companies will not disclose their operating costs per gallon, but most estimates peg the cost at around 25 cents per gallon. Thus, a 54-cent-per-gallon margin translates into a 29-cent-per-gallon profit before corporate overhead is taken into account.
So how does this margin compare with past months? Using California Energy Commission data on the end-of-month price of crude and the statewide average price of gasoline and an assumed average dealer margin of 5 cents per gallon, refinery margins going back to January 1999 were calculated (see graph).
This analysis shows that at several time periods, such as March-April 2000 and March-April 1999, gasoline margins have exceeded their current level of 59 cents per gallon, reaching a record high of 66 cents per gallon in April 1999. This analysis shows that at other times, such as November 1999-January 2000, the margin was as low as 25 cents per gallon, which means that the oil companies were selling gasoline at near break-even prices. The average for the last 20 months has been 43 cents per gallon, giving the oil companies a healthy profit of about 18 cents per gallon.
Some of the lowest margins have come at times when the price of crude oil is on the rise. Most industry analysts say that gasoline price fluctuations lag crude-oil price fluctuations by about a month. Refinery margins tend to be lower at the beginning of a crude-oil price spike, when gasoline prices have not yet absorbed the increase. Refinery margins tend to be their highest when crude-oil prices begin to fall following a several month run-up.
This scenario holds true for March 2000, when margins were 63 cents ---- the second highest level in the last 20 months. Crude-oil prices dipped to $27 per barrel in late March after going from $23 per barrel in October 1999 to $33 per barrel by early March.
Other factors apply
But factors other than crude-oil price fluctuations can also affect gasoline margins. The record high refinery margins in April 1999 were not related to crude-oil price movements. Gasoline prices went from $1.19 in mid-March to $1.62 per gallon by mid-April. Oil industry officials blamed the spikes on a major refinery outage and a few other smaller refinery glitches, claiming that these outages decreased the supply of gasoline available in the marketplace. During that time period, crude-oil prices were fairly stable at around $17 per barrel, around one-half of current prices.
With the current margin of 59 cents and crude-oil prices at $34 per barrel, the state's big oil companies are experiencing the best of both sides of the oil business in California. "Vertically integrated" oil companies such as Chevron, Exxon-Mobil, British Petroleum Amoco (which recently acquired Atlantic Richfield), Royal Dutch Shell and Texaco are refining and selling the crude oil that they pump out of the ground. The cost to pump a barrel of crude oil is essentially the same whether that barrel is selling for $34 per barrel or $17 per barrel. Thus, every increase in the price of a barrel of crude adds revenues without adding any operating expenses, resulting in higher profits and profit margins.
Most analysts expect gasoline prices in California to remain high. North County and California residents have seen gasoline prices above $1.60 per gallon for 26 consecutive weeks, and few expect prices below $1.60 per gallon unless crude-oil prices go below $29 per barrel for an extended period of time.
Stephen Gaut can be reached at (760) 740-5412 or sgaut@nctimes.com.
9/17/00
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Thus, clearly the key is having your own oil fields, with fixed costs of production, or having long-term hedging contracts so that you have a stable cost of raw crude.
And although we gripe now about "gouging" by "big oil" companies, no one seemed to care when they were essentially selling gasoline "at cost" back in November, 1999 - January, 2000 time frame.
Hawk |
