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Robert Rapier

Robert Rapier

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What Biden Is Getting Wrong About Big Oil’s Profits

  • President Joe Biden has targeted Big Oil companies, accusing them of price gouging.
  • The high profits and soaring inflation are both a result of high oil prices, and oil companies have little influence over that.
  • The oil companies are always a convenient scapegoat, particularly for Democrats.

Last Friday President Biden singled out ExxonMobil for reaping big profits as a result of high oil and gas prices. The President complained “Why don’t you tell them what Exxon’s profits were this year? This quarter? Exxon made more money than God this year. Exxon, start investing. Start paying your taxes.”

Other prominent Democrats have also smeared oil companies in an attempt to deflect anger over high gas prices. Earlier this year Bernie Sanders blamed inflation on high oil company profits, which reflected a complete failure to understand cause and effect.

Oil companies aren’t reaping huge profits because they are gouging consumers, and their high profits aren’t driving inflation. The high profits and soaring inflation are both a result of high oil prices, and oil companies have little influence over that.

The oil companies are always a convenient scapegoat, particularly for Democrats. But let’s look at ExxonMobil’s profits in context. Further, let’s compare the company’s net profits to those of Apple over the past 10 quarters.

In the most recent quarter, ExxonMobil reported $5.5 billion in net income. If that’s “more than God”, I wonder how President Biden would quantify Apple’s $25.0 billion for the quarter. Five times more than God? Oh, and ExxonMobil also paid $2.8 billion in taxes for the quarter, so it seems that they are paying their taxes.

(The point here by comparing to Apple is simply to show that the outrage isn’t actually over some insane profit level. It’s about the perception that ExxonMobil is taking unfair advantage).

Related: Exxon Hits Back At Biden After Investment Accusations

Over the past 12 months, ExxonMobil has reported $25.8 billion in net income versus Apple’s $101.9 billion. But if we look back further, the discrepancy is much worse.

ExxonMobil reported losses in four of the past ten quarters, including a whopping $20.1 billion loss in December 2020. That’s what can happen when you don’t control the price of the product you sell.

You don’t see that happening with Apple. They never earned less than $11.2 billion in any of the past ten quarters. Add it all up and include the losses, and over the past ten quarters ExxonMobil earned $11.8 billion dollars and Apple earned $211.7 billion.

Perhaps someone can help me understand this concept of price gouging.

ExxonMobil is selling a product whose price is set in the global commodity markets. They earn a fraction of Apple’s profits.

Apple has full control over the price of its products and trounces ExxonMobil’s earnings in every quarter. Apple could slash the price of its products and still make a huge profit. But ExxonMobil can’t slash the price of its products because it doesn’t set the price.

Yet it’s ExxonMobil that is accused of gouging.

If you want to know how we end up with bad energy policies, it’s because too many politicians believe things that aren’t true.

By Robert Rapier

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Leave a comment
  • Pat on June 18 2022 said:
    I’m not sure what Biden thinks is going to happen by having the wars act. The energy companies can’t make more products they are already maximizing and soon the equipment will fail. The public better hope that doesn’t happen until winter because if it happens now get ready for 10$ a gal gas. It’s not just the cost of oil that causes increase in gas it’s supply and demanded and the democrats know it this will fuel there environmental agenda.
  • Mark Brown on June 18 2022 said:
    You are correct that Apple gouges the public, but they have almost no downstream effect on the economy and alternatives abound. That is a very poor analogy for your argument. Oil has a direct effect on just about every level of the economy and limited alternatives. Your usage of 2020 oil company losses is cherry picking dara that was the result of Covid, shame on you. Oil that cost $40 per barrel to extract last year still costs $40 plus inflationary labor and ancillary costs to produce today. If the U.S. imports 30% of it's oil and you use a domestic per barrel sales price of $60 (50% profit before tax) then with $110 import barrel cost we should be at a blended $75 per barrel. End result of this is yes the oil companies are in the immediate term gouging without consideration for the overall good of a properly running society or the negarive impact they have, basically PURE GREED.
  • DoRight Deikins on June 18 2022 said:
    But, but ...

    We need our iPhones. They help us do our work and we can play with them when we're not working and Big Oil just pollutes the planet and I'm happy in my cell with all my virtual friends. There is no need to leave and see what the real world is like when I can go anywhere on my phone and talk to all my friends and then when they say something I don't like, I can unfriend them and get new friends who agree with me.

    Don't you read about how bad oil is?
  • Ken Hyde on July 05 2022 said:
    Instead of making comparisons to Apple, perhaps the author should have explained why oil production in the US, today, is still LOWER than it was in 2019. Production in the US has been steadily rising this year, in June it reached 12.1 million b/d (barrels per day). In 2019 12.29 million barrels of crude oil per day, for the entire year. This year refinery capacity is around 17.94 million barrels per day. In 2019, capacity was 2019 18.80 million barrels per day. It was oil companies who brought down capacities in 2020, in anticipation of plummeting demand. As of today, in the US, they are still behind their 2019 capacity. It may come as a shock to some, but the Executive branch of government had nothing to do with production shutdowns in 2020, and it has no control over lagging oil and refinery production in 2022. It doesn't take new drilling to bring capacity back to pre-2020 levels. When US production returns to 2019 level, it will then surpass it. Today, oil companies are getting paid more for producing less. Oil CEOs say they have no control over price, but they do have control over production. Suggesting that today's oil and gas prices have to do with government policy is nonsense. There is nothing going on in government policy, in the last 18 months, that has caused high fuel prices. It's demand outpacing production, and that production was already in place in 2019.

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