Something about ExxonMobil's Profits You Probably Won't Read in Media Reports

Thursday, July 31. 2008

Something about ExxonMobil's Profits You Probably Won't Read in Media Reports

ExxonMobil just announced their 2008 2Q earnings -- $11.7 billion -- which are being touted by the press as the "highest-ever" profit for a US company -- of course there is either a de-emphasis or no mention at all of the company's profit margin in most of these stories (ed. -- Exxon's 2008 2Q profit margin was just less than 8.5%) -- a number which might add some additional context to the report.

However, what might be most interesting about Exxon's 2008 2Q earnings report was its effective tax rate of 49% (pdf file), up from a rate of 44% in the 2Q of 2007.

That's right: ExxonMobil paid taxes of almost 50% on its $11.7 billion earnings. (ed -- Obviously, this was sloppily written. $11.7 billion was Exxon's net income, so the company's taxes weren't half of that amount, but were slightly less than the $11.7 billion, since net income comes after all expenses, including taxes. Therefore Exxon will pay about $11 billion or so in taxes on 2Q earnings.)

Read the stories in the New York Times, Washington Post, AP, and Los Angeles Times (AP reprint).

None of them mention profit margin or effective tax rates.

Update: Here is Barack Obama, predictably joining in on the 'record profits' parade.

Update II: Here's a question for all those who are bashing Exxon's 'record profits': if Exxon is making 'record profits,' why is the company's P/E ratio below 11? (The average historical P/E ratio for the stock market is roughly 20, less the inflation rate.)

Posted by Tom Elia in Business at 11:45 | Comments (7) | Trackbacks (0)

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when i earn 8.5% on my savings account then i will be happy.

#1 crshedd on 2008-08-01 02:36 (Reply)

I suddenly feel so bad about the mindset I had towards the oil companies. If I had know they were just eking by like this, I'd have mail a donation check long ago.

#2 andy42302 (Homepage) on 2008-08-01 02:41 (Reply)

My goodness.. now I will smile when I pay $4.50 a gallon!

#3 Eric on 2008-08-01 07:49 (Reply)

Good to see that commenters #1-3 have missed the point.

The press spins the story to make it seem like "Big Oil" is engaging in price gouging or that they're the reason gas prices are so high.

But folks, the price of petroleum is determined on the world market, where ExxonMobile competes with companies much larger than it is. (Exxon control about 3% of the world's supply; the big petrol companies are in Saudi Arabia and Indonesia.)

The U.S. is sitting on more oil reserves than Saudi Arabia has. We flood the market with crude, the price goes down.

Not just for us, but for Guatemala and Niger and Chad and Bangladesh and the Philippines, all of whom could use a break on fuel prices to help lift themselves out the squalor.

Furthermore, the profits that Exxon makes don't go into some smarmy executive's pocket: it goes to people's retirement funds, yo.

Don't fall for the lies: drill here, drill now, pay less.

#4 dicentra (Homepage) on 2008-08-01 10:41 (Reply)

This guy is so full of it his eyes are brown...

Half-truth #1: I'll grant you that price gouging is unlikely, but "Big Oil" has stifled American innovations in fuel economy for at least 20 years with the simple goal of maintaining high consumer demand and high profits.
Outright Lie #1: ExxonMobil is the largest oil company in the world. Look it up. If you're talking about the Saudi government and their vast oil wealth, then they might have more US dollars than Exxon - but its comparing corporate apples to theocratic oranges.
Outright lie #2: The US is NOT sitting on more oil reserves than Saudi Arabia. I can only imagine you're talking about Chuck Norris' claims of oil sands, ANWR, etc. This will NOT change our prices/demand for 20 years, even Exxon has confirmed that. Even if it could, the claim that we have "more" than the Saudis is utter BS.
Half-truth #2: Sure, Exxon's stock is publicly traded, so retirement accounts DO benefit when the company does well - but that doesnt mean that their executives dont make (literally) hundreds of millions of dollars a year.

Drill elsewhere, drive less, pay less. (hey, no more ridiculous than YOUR slogan.)

#4.1 getrealyouGOPhack on 2008-08-01 14:13 (Reply)

1. BIG OIL has STIFLED American innovation in fuel economy? I think your head is further in the sand than any of our oil drills.

2. You're defending an article that was SO WRONG that the EDITOR had to come in and apologize.

3. Executives in other companies - gee whiz - make hundreds of millions of dollars a year. Yeah, it's oil, so it's COOL and TRENDY to crap on them because the average joe buying the product doesn't have a hundred million dollars. Thanks for bringing class warfare into this.

4. True, this will not change our price and demand for 10 YEARS, not 20. But let's say that you're right for arguments sake. Twenty years from now, you STILL want to be dependent on the middle east?

Maybe the mere fact that we DRILL and produce some significant oil would drive the PRICE down so that we can buy foreign oil for 1/4 of what we pay now.

Only a fool would say, "Yeah, let's depend on the middle east for our economy and be completely prepared to meet their demands". We already know that they gave a hell of a deal to China. Doesn't that tell you something?

#4.1.1 Asshat Mcpoop on 2008-08-01 16:15 (Reply)

Ranking oil companies depends on how one defines the rankings, doesn't it?

Are the rankings by total reserves, production, assets, or revenue?

Exxon is probably the world's largest only by assets -- because it's a publicly-traded company -- whereas the nationally-controlled oil companies in Saudi Arabia, Kuwait, Iran, Nigeria, Venezuela, Mexico, Russia, etc., all have larger reserves.

Exxon might not crack the top five in terms of production either...

#4.1.2 Tom Elia on 2008-08-01 18:14 (Reply)

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Something about ExxonMobil's Profits You Probably Won't Read in Media Reports

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Something about ExxonMobil's Profits You Probably Won't Read in Media Reports

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