No its all due to the world oil price isnt it

Submitted: Wednesday, Apr 30, 2008 at 06:17
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BP's first-quarter profit jumps 63 percent
BP has reported a 63 percent jump in profits in the first quarter compared to the same period a year ago. (CNN — 10 hours ago)
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Shell's profit soars to record $9 billion
Royal Dutch Shell's has reported a 25 percent rise in first-quarter earnings, crediting strong increases in energy prices. (CNN — 11 hours ago)
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Sinopec: Q1 profit drops 69 percent
China's second-biggest oil company, Sinopec, says its first quarter profit fell 69 percent due to government controls that bar it from passing on record crude costs to consumers. (CNN — 28 April, 2008)
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Reply By: Cape York Connections - Wednesday, Apr 30, 2008 at 06:29

Wednesday, Apr 30, 2008 at 06:29
Funny thing isn't it

Why don't we base our price on china and the government use China's methods.

AW that's rite its all to do with the price of a barrel.

No that's rite the ACCC is keeping an eye on anything that's no on the level.

All the best
Eric
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Follow Up By: The Landy - Wednesday, Apr 30, 2008 at 08:53

Wednesday, Apr 30, 2008 at 08:53
I'll bite.....

1/

I guess our government could try and do that, we'd either end up in massive debt, or the refineries will shut up shop...no fuel, no more whinging about price.

2/

Posting headline profits and suggesting they are unreasonable is the stuff of talkback radio shows. What was the return on their investment? That comparison would provide a much better picture, you have no way of telling whether this was a good or bad result based on the actual profit number alone.

Eric, your in the business of making money (I suspect) what sort of percentage return do you expect to make on your trips and capital outlay. At the end of the day, no profits = no service in the future!

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Follow Up By: Bware (Tweed Valley) - Wednesday, Apr 30, 2008 at 09:07

Wednesday, Apr 30, 2008 at 09:07
Landy,

I would think there is a difference between a small business that makes a profit to make the business viable, and a company that needs to keep the price of its shares going up. The latter creates a situation in which its service or product becomes secondary to constantly increasing its profits to keep shareholders happy.
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Follow Up By: Member - Mfewster(SA) - Wednesday, Apr 30, 2008 at 09:26

Wednesday, Apr 30, 2008 at 09:26
Eric, do you really want our government to use Chinese price control methods? Would you accept government price control on your prices, your wages as well? Personally I think socialism has a lot going for it, but that has never been a popular point of view in Australia. I'm happy to have total government control of water, power, fuel and public transport as a minimum.
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Follow Up By: Member - Serg (VIC) - Wednesday, Apr 30, 2008 at 09:52

Wednesday, Apr 30, 2008 at 09:52
Mfewster,

Do you know that electricity, gas and water prices controlled by government? And because of this nothing collapsed in Australia? In my strong opinion in such commodities like fuel government *MUST* control prices. We are paying more then half to someone when we fill out tanks – can you call it anything else but robbery? And no-one said that government-controlled prices means *FIXED* prices – not at all! It is possible to make a formula that gives you price for petrol and diesel based on last price of crude oil. Of course profit must be incorporated into this formula. And then we will have *TRUE* competition between Big Oil Guys – they start to think how to make their cost down to maximize profit instead of simply inflate prices.

Serg
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Follow Up By: The Landy - Wednesday, Apr 30, 2008 at 10:15

Wednesday, Apr 30, 2008 at 10:15
Bware, can't diasgree more, the same business rationale applies.

Besides without an adequate return you wouldn't get the services you now get...
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Follow Up By: The Landy - Wednesday, Apr 30, 2008 at 10:20

Wednesday, Apr 30, 2008 at 10:20
Serg...we don't need government control, that will surely increase prices. Refineries price their fuel in the way similar to what you describe and contrary to popular belief the return is little more than 1 cent per litre. Just how much more competition do you think government control will provide?

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Follow Up By: Member - Serg (VIC) - Wednesday, Apr 30, 2008 at 10:31

Wednesday, Apr 30, 2008 at 10:31
Landy,

I am aware about what you saying, but do not believe it is even close to the truth. If it is true, how hell price on petrol jumps up and down every week in predictable manner in all petrol stations include those that belongs to main suppliers like Shell an BP? You trying to convince me that Wednesday’s petrol production cost more then Monday’s? And by end of the week became cheaper to produce again? They continuously saying that petrol station does not making any money from petrol and that refinery running so lean that I almost ready donate them. But tell me then who collect those 5 or even more cents difference between Monday and Wednesday prices?

Serg
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Follow Up By: Member - Mfewster(SA) - Wednesday, Apr 30, 2008 at 10:39

Wednesday, Apr 30, 2008 at 10:39
The problem with that Landy is that the finance model of all private business, especially listed companies, is built on the expectation of growth. They have to have increasing sales and inflation. Any company that looks static is immediately marked down. Look at the crazy lending policies US banks were prepared to use to boost their sales figures with no regard for long term consequences, just as long as those sales figures went everupwards. When the market has to deal with essential commodities that have a short supply and/or are finite resource, public companies are a very poor way to manage the resource.
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Follow Up By: The Landy - Wednesday, Apr 30, 2008 at 10:47

Wednesday, Apr 30, 2008 at 10:47
Serg....you get the 5 cents!

That is the discounting cycle working for you. Do you want to pay the full price everyday or are you happy to get a discount?

Have a look at my blog I've covered some thoughts on this. But the same information is widely available elsewhere.



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Follow Up By: Member - Serg (VIC) - Wednesday, Apr 30, 2008 at 10:58

Wednesday, Apr 30, 2008 at 10:58
Landy,

“Serg....you get the 5 cents!”

Sorry, but this is biggest bull sh1t what I ever heard. Thus according to this logic they give patrol away on Mondays? Surely time to organize campaign to collect donations for poor refineries!

Also you completely wrong if you recon that “the same rationales” apply on small and big businesses. My wife an accountant, been working for small to medium businesses for long time and recently start working for big electricity company. She says (and sorry, I have much more reasons believe her then you) that accounting and profit calculation *TOTALLY AND ABSOLUTTELY* different – basically nothing in common.

Now if you put into equations that no-one actually produce crude oil, but rather extract it from oil field it became as much in common between oil industry and pizza shops as between F1 racing car and bulldozer. Fine – both can move by using internally combustion engine.

Serg
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Follow Up By: The Landy - Wednesday, Apr 30, 2008 at 11:33

Wednesday, Apr 30, 2008 at 11:33
They are the facts Serg with respect to the petrol discounting cycle. Argue for the removal of the abrupt price changes and that’ll mean you’ll pay a higher price everyday. How can you be better off under that system.

For your guide at the height of the discounting cycle fuel is often sold below production costs…..

As far as businesses go..they might calculate profits in any number of ways, but the rationale must be the same, either make an adequate return (profit) on your investment or it would be pointless being in business. Why would that rationale be any different from a small, medium, large, listed, unlisted company? Do you work for nothing?
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Follow Up By: Member - Serg (VIC) - Wednesday, Apr 30, 2008 at 11:51

Wednesday, Apr 30, 2008 at 11:51
Landy,

If I recall correctly you and I been discussing similar topic about china made cr@p. Sorry – we do not have common ground to make consensus in this discussion either. While you believe that Monday’s fuel cheaper because of it discount below cost, I honestly do believe that cheapest prices during week cycle actually true prices including fat profit and on Wednesdays they lift them up even more because traditionally Wednesdays is paydays and they try to rip off as much as they can unfortunate people who cannot afford to pay for fuel whenever they like. Regular discounts below cost? Tell me what stuff you been smoking recently.

And you completely misunderstand and misinterpret economics and accounting if you believe that the same rules should apply to pizza shops and mining companies.

Serg
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Follow Up By: The Landy - Wednesday, Apr 30, 2008 at 11:59

Wednesday, Apr 30, 2008 at 11:59
Mate,

Petrol - the facts are there if you want them.

Companies - Everyone in it to make a profit (that was my argument) applies to anyone from the local pizza to the mining company.

Take it easy and we'll agree to disagree.
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Follow Up By: Member - Serg (VIC) - Wednesday, Apr 30, 2008 at 12:10

Wednesday, Apr 30, 2008 at 12:10
Yep – there is plenty of facts what THEY want you to know or believe.

Some businesses can be unprofitable and not making any money. Fire brigades do not make any money what so ever. Furthermore everyone hope that they will not work at all (and still receive money for doing nothing). Thus according to your logic we do not need them.

Agree to disagree.

Cheers
Serg
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Follow Up By: Cape York Connections - Wednesday, Apr 30, 2008 at 17:54

Wednesday, Apr 30, 2008 at 17:54
Yes landy I am in business to make money.
My 4wd business the prices are set a year in advance.
Not daily and don't go up and down by 15% in an hour but apparently that's how it should be.
So you book a trip with me say for $1500 then when you pay your last payment I say well its Wednesday and its going to cost you another $200.
I think I know what you would say.

I am also a builder the price of materials don't vary b y 15% daily.

See its all based of competition the oil companies don't have any.
They set the price amongst them selves. Opps did I say that.

All the best
Eric
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Follow Up By: Member - Barnesy - Wednesday, Apr 30, 2008 at 18:49

Wednesday, Apr 30, 2008 at 18:49
Are you making 100s of millions of $ profit each financial year through your two businesses Eric but still want more?

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Follow Up By: Cape York Connections - Wednesday, Apr 30, 2008 at 20:00

Wednesday, Apr 30, 2008 at 20:00
Barnesy just a wisker under that.
When I retire I can buy the family an ice cream each as long as is not a fancy one.

All the best
Eric
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Follow Up By: Member - John (Vic) - Wednesday, Apr 30, 2008 at 20:29

Wednesday, Apr 30, 2008 at 20:29
The money is made on the crude production, thats to say the end of the process that pumps it out of the ground and sells it to refiners.
They pump out a barrel of crude oil that they sold for say $80- USD a year ago and today the market will now pay them $120- USD.
In the instance of Shell and BP they own huge production fields and thats where the profits are coming from.
BHP Billiton Petroleum is another production company that has no refining or retail operations, the reason is no money in it.

Production Investment and Production Costs have not leaped at the same rate in recent times, hence the dollars fall straight through to the bottom line, hence the larger profits.

The refining and retail margins are crap the money is in the crude.
Ever wondered why Exxon (used to be Esso in Australia) sold off their Australian retail operations and for that same reason Shell did the retail deal with the then Coles Myer? the reason such poor returns in the retail end of the market.

Just have a good look at the annual reports of say Caltex and you can see that as a refiner they are not benefiting from the high price of crude and tight refining and retail margins continue to exert pressure being a refiner only.
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Follow Up By: Cape York Connections - Wednesday, Apr 30, 2008 at 20:49

Wednesday, Apr 30, 2008 at 20:49
No 6 billion is nt that much a quarter. That is a tight margin.

All the best
Eric
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Follow Up By: Member - John (Vic) - Wednesday, Apr 30, 2008 at 23:24

Wednesday, Apr 30, 2008 at 23:24
As I said Eric the vast majority of the $6 Billion came from crude sales not refinery or retail margin.
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Follow Up By: Cape York Connections - Thursday, May 01, 2008 at 06:36

Thursday, May 01, 2008 at 06:36
Its still 6 billion a quarter thats a lot.

All the best
Eric
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Follow Up By: Bware (Tweed Valley) - Thursday, May 01, 2008 at 08:07

Thursday, May 01, 2008 at 08:07
I don't understand why the oil companies don't do what other businesses (small and large) do; absorb increased overhead costs and review your pricing over a longer period. Say 6 months to a year.

Their fluctuating prices is what gives them such a bad public image. Most people believe that, if not a conspiracy, the oil companies at the least are ripping us off. Their public relations dept should be lined up and shot. Probably their marketing dept as well.

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Reply By: Member - Barnesy - Wednesday, Apr 30, 2008 at 06:32

Wednesday, Apr 30, 2008 at 06:32
You know CYC these major oil companies are really struggling. They are justified in charging us so much for fuel because they very well may go broke.

The Aussie governement only has an $18 billion budget surplus so they need all of the money they can get, 38c per litre of fuel. But they can't reduce that tax because that would increase inflation making fuel even more expensive.

The coal industry does need the tens of millions of $ in diesel subsidies given to them by our government because they are struggling fincancially too.

Barnesy
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Follow Up By: Cape York Connections - Wednesday, Apr 30, 2008 at 06:40

Wednesday, Apr 30, 2008 at 06:40
Silly me forgot all that.

All the best
Eric
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Reply By: Kiwi & "Mahindra" - Wednesday, Apr 30, 2008 at 07:27

Wednesday, Apr 30, 2008 at 07:27
Its ok for the to make a profit but why dont they have a competition , for each state everyone keep their receipts and at the end of the yr send them in to try and win your mortgage to be paid off! They make enough and this wouldnt dint their profit that much! Hve like 4 winners for each state........seriously!!!!

Im all up for profit, just hand some out and not be greedy!
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Reply By: Member - Paul Mac (VIC) - Wednesday, Apr 30, 2008 at 07:54

Wednesday, Apr 30, 2008 at 07:54
Oil Companies greedy???????????? Never. I mean, we are being told all the time they aren't manipulating their prices to benefit themselves.

I want a job with the ACCC. They must pay their employees a fortune for doing as little as possible.

I wonder if the ACCC is sponsored by the Oil Companies?

Besides, be nice to the Oil companies, they own all the technology already that will replace the petrol combustion engine when the oil runs out in about another 100 years or so, or is that sooner and that's why the price is increasing? Gosh, I wonder who you need to believe? Oil prices wouldn't have anything to do with Iraq either would it? The war on Iraq was instigated because of all those nasty weapons of mass destruction Saddam had stockpiled away and nothing to do with oil.

What will we all be saying when the price hits say $5 a litre or even $10 ? It will, one day.

Be happy though. Providing your super funds have invested heavily in Oil companies.
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Follow Up By: Member - Serg (VIC) - Wednesday, Apr 30, 2008 at 08:42

Wednesday, Apr 30, 2008 at 08:42
“I wonder if the ACCC is sponsored by the Oil Companies?”

It is strongly seems to me that all governments (former, current and even future) sponsored by Oil Companies.

Serg
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Reply By: MrBitchi (QLD) - Wednesday, Apr 30, 2008 at 08:02

Wednesday, Apr 30, 2008 at 08:02
Don't let it get you down... KRudd's going to fix the economy by increasing the tax on beer............ 8--(((
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Reply By: Member - Footloose - Wednesday, Apr 30, 2008 at 08:44

Wednesday, Apr 30, 2008 at 08:44
Eric, dear me. Tut Tut. Are you suggesting that oil companies are making obscene profits ?
You can't do that on this forum, you'll get slammed by those with interests in the industry !
I know, Chukkie, I know !
AnswerID: 301262

Follow Up By: The Landy - Wednesday, Apr 30, 2008 at 08:59

Wednesday, Apr 30, 2008 at 08:59
I'll bite...again (and then move on!)

The problem with posting headline profit numbers is that it provides no real useful information, but makes for fodder to beat up on the industry. What was the return on capital investment and how doesv that compare to other listed companies?

Only with this information can we determine whether the profits are 'obscene'.

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Follow Up By: Member - Footloose - Wednesday, Apr 30, 2008 at 09:10

Wednesday, Apr 30, 2008 at 09:10
Perhaps in order to disprove the notion of Gross profits, you could provide such figures ?
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Follow Up By: Bware (Tweed Valley) - Wednesday, Apr 30, 2008 at 09:17

Wednesday, Apr 30, 2008 at 09:17
Without singling out oil companies, doesn't the word profit mean what I have left after overheads? If I choose to use that profit to play the stockmarket etc that is my choice. If I lose it all that is what I chose to do with my profit. Do companies get to say that it isn't really profit if they reinvest it and call it business?
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Follow Up By: Member - Footloose - Wednesday, Apr 30, 2008 at 10:33

Wednesday, Apr 30, 2008 at 10:33
AFAIK there is Gross profit and Net profit. Net profit is what's left over after everything has been taken out for tax etc.
Capital investment isn't included in either AFAIK.
But creative accounting has much to answer for...
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Reply By: howesy - Wednesday, Apr 30, 2008 at 12:12

Wednesday, Apr 30, 2008 at 12:12
For all you guys who continually stick up for the oil companies and obviously believe we are not getting ripped off please send me your address as I would like to send you all an offer to purchase land i am selling in Antarctica and the Simpson Desert for 250K an acre.
Yeh right! Wake up and get with the program.
No one likes to admit they are being conned but get over it we are and big time.
AnswerID: 301297

Follow Up By: Kumunara (NT) - Wednesday, Apr 30, 2008 at 16:20

Wednesday, Apr 30, 2008 at 16:20
Howesy


The biggest con is not the oil companies.

It is the fuel parity pricing plus the GST on top of it.

We have keating and howard to thank for it. Screwed by both parties.

Kevin Dudd will not do anything about it because the government get a huge amount of money from the fuel parity pricing.



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Follow Up By: howesy - Wednesday, Apr 30, 2008 at 16:41

Wednesday, Apr 30, 2008 at 16:41
Being older I remember when the fuel industry was regulated. It was deregulated with that famous claim that it would stimulate competition and ultimately lead to lower prices. Now I realise there are other factors in play driving prices up but there is not one deregulated industry that hasn't over time resulted in astronomical profits for the provider and huge cost increases for the consumer.
If you could stamp out greed and collusion and govt taxes on taxes on taxes then competition would indeed result in low prices but while they can all get away with it and it cant be proved they will continue to do it and the govt. will fight tooth and nail to keep its taxes or it will have to find that money elsewhere. Taxes are here to stay and I believe greed and collusion are are part of business life these days
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Reply By: brushmarx - Wednesday, Apr 30, 2008 at 16:35

Wednesday, Apr 30, 2008 at 16:35
I personally think it this level if increase to profits is obscene, but it's not just fuel, it's the Reserve Bank, power suppliers etc.
USA's interest rate is around 2%, and their fuel is cheaper.
Obviously the big drawback for living in the USA is having to live in the USA.
The biggest benefit they have is a history of political assassinations, where we don't.
Our politicians seem to have no regard for the poor or soon to be poor, because they have virtual immunity to wrong decisions.
The Qld Government is directly responsible for inept doctors killing people, goat tracks instead of roads killing people, too much judicial control ensuring criminals don't go to jail because we don't have enough room, thus putting them back on the streets selling drugs and (just for a change) killing people.
And what can we do?. All we can do is vote them out to an endless gravy train.
Maybe the USA has something to teach us after all.

I'll get there someday, or die wanting to.

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Reply By: Member - Barnesy - Wednesday, Apr 30, 2008 at 18:59

Wednesday, Apr 30, 2008 at 18:59
Prices for any consumer good are not set on cost to produce etc etc but more so on what customers are prepared to pay. If oil companies can charge high prices for their product thereby increasing their profits then that's what they will do.

When their profits begin to be threatened then the oil companies will review their business again, including pricing.

Barnesy
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Reply By: Member - Mfewster(SA) - Thursday, May 01, 2008 at 08:48

Thursday, May 01, 2008 at 08:48
The Finance report on last night's ABC news showed a useful graph for this discussion. It compared demand for oil with successful oil exploration. What it showed was that over the last 10 years, very little new oil has been found whereas demand for oil continues to rise rapidly. Crude oil is sold on an auction system, so the price goes up and down daily depending on stocks and supplies and weather etc. The only way to change this is to produce more oil or consume less. Opec could pump more out, but current oilfields have peaked and this would simply bring on a major catastrophe faster when the wall is hit. Better to buy as much time as possible and hope technology will find some answers. The same thinking is behind Australia's fuel tax. While we were pretty well self sufficient in oil, we could have sold it much cheaper, but as we only had limited reserves, the decision was made to keep the price more or less on a par with international prices so that our economy would adjust to that reality. Probably a good thing as our reserves are pretty well gone.
The sad thing is that the politicians used the fuel windfall to wind back Australian taxes rather than invest in new technology. They were possibly correct in this because that is what the Greens wanted to do and we all know how most Australians responded to this sort of thinking 10 years ago. Who would you have voted for 10 years ago? A party that said we will give you tax breaks or a party that said we will put the $ into developing alternative fuel?
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