Side question: in what way is the Saudi oil company state owned? Does the royal family own it and run it like a private family owned business? Or are these terms even meaningful or helpful in such a state (a monarchy)?
I’m not confused about anything. Return on investment is return on investment. There’s no apples-to-oranges problem in this respect.
Although I share your pain regarding the increasing cost of fuel in the US, history shows that the US gummint isn’t good at making a buck, except by raising taxes. Example: Amtrak. US oil companies are good a making a buck, as evidenced by their shareholder returns. Were the gummint to take over oil, prices would be as high, or higher, and they’d manage to piss all the profits away, guaranteed.
I’m sorry. I thought you were referring to net profits. Upon review of your original post, I don’t see anything about ROI. Perhaps I overlooked it. Can you point it out for me?
You need to look at percent profit, not absolute $. If MSFT or INTC reported earnings in that % range, their stocks would plummet. Are those companies ripping us off?
2007 Profit as percent of revenue:
Exxon-Mobile: 11%
Microsoft: 27%
Intel: 18%
Actually, absolute profit is the name of the game, since the oil compaines financial performance has been as a direct of result of the cost of oil.
Again, net profit margins are irrelevant to the comparison. Oil is a capital-intensive industry. Software is not. Apples are being compared to oranges.
Microsoft is a red herring. Software companies inherently have greater margins because they are selling what is essentially a virtual product. Can you hold software code in your hand? No, you can’t. Just the CD, DVD or disk its burned on. Once Microsoft sells a certain number of copies, the remaining are almost pure profit (minus the couple pennies it takes to burn a CD and the handful of pennies it takes to ship to a reseller. No reference to the OEMs that lower Microsoft’s distribution costs to essentially zero).
Intel is a much better comparison, as unlike Microsoft Intel has significant capital costs. Tooling up a line of machinery to manufacture computer chips is not cheap. Yet Intel’s industry is one of boom and bust. The same cannot be said for oil.
Both of these realities are reflected in the companies’ operating margins and their stock performance.
Lastly, show me any Microsoft or Intel product that has increased in price to the tune of triple digit percentages since it was made available to the public. And show me some fluctuation in the price of their products on a week-to-week basis. Althose these requests are rhetorical-- I already know that no such evidence exists. Software and computer hardware inherently decrease in cost, often exponentially. 15 years ago, a megabyte of RAM memory cost about $40. Now you can get about 1000 times that for the same cost.
As for the question of whether or not Intel and Microsoft “rip their customers off,” I’ll let the numerous DOJ investigations and antitrust settlements over the past 10 years speak for themselves.
ROI is the standard of measure for profitability. Net profit is a meaningless number except for purposes of collecting taxes. This basic knowledge is assumed for the purposes of debate unless someone asks for clarification.
That’s complete nonsense and I’m being kind when I say that. ROI is ROI. If you think Exxon is ripping you off than sell your Microsoft stock and buy Exxon. It’s all about how much return is made by the amount invested. Capital intensity has nothing to do with ROI.
I’m sorry, but can you cite for me this “basic knowledge” you speak of? Last time I checked, stock prices went up or down significantly based on net earnings, not on net margins. In fact the entire quarter is centered around the earnings release. Reading financial statements from these companies, the net margins are not given anywhere much weight in management’s discussions.
Perhaps I’ve been running my business incorrectly all these years. My primary concern is my net income. I guess it’s better to make $1 on $1 investment (100% ROI) than it is to make $50 on a $100 investment (50% ROI) ???
I made no claim that Exxon is ripping anyone off. Please show me where I made that claim?
All I stated was that comparing the profit margins of Exxon to Intel to Microsoft was not an equal comparison.
I am still waiting for someone to find me an industry that supports $12 billion in quarterly profit, so we can make an equal comparison.
We’re done here. You have no understanding of basic business concepts which means you’re trolling this thread.
Moderator Warning
Magiver, accusations of trolling are prohibited outside the Pit. Do not do this again.
Let’s rachet the tone of the discussion back a few notches as well. That goes for everyone.
Colibri
General Questions Moderator
Since this seems to have veered out of GQ territory, I’m going to move it to GD.
Heh, market value for that house based on the market value that comes after the plans to redevelop it are insituted, so it’s the fair market value for a house that will be demolished in order to build an overpass or high price luxury condos.
Ha, fair market value. One of the biggest jokes of eminent domain.
My apologies if this broke the rules. You can just delete the last sentence altogether. I’m not trying to be rude but I’m not going to argue the basics of math with IAmNotSpartacus. As I said before, he/she is free to sell Microsoft stock and buy Exxon because Exxon made more money in net profits.
You can’t seem to decide if this is about math or business. Can you decide? First it was “basic business concepts” and then “basic math,” which in this day and age are almost mutually exclusive terms. Reference any number of the FASB rulings to support this.
I’m still looking for a cite on these “basics” that you make reference to. Instead I’ve been met with ad hominem attacks.
And as far as ROI goes, I’d have more money if I invested in XOM three years ago than if I’d invested in MSFT. Any amount of math will prove that.
If ROI was as simple as net margins than nobody would ever invest in telcos, utilities or conglomerates. It’s much easier to make $1 from $1 than it is to make $10000 from $10000.
OK, apology noted. Just try to keep it civil from here on. (We don’t edit posts for such things, however.)
Colibri
General Questions Moderator
Good grief…another evil oil company thread.
Leaving aside that this isn’t why your gas costs more (as others have already pointed out), I don’t think the government could seize US oil companies using eminent domain :
This seems to be limited the seizure of property or use for the ‘military in wartime’. Granted, that’s pretty vague…but I seriously doubt the government could get away with trying to snag Exxon by claiming the war in Iraq makes it necessary.
Even if the government could seize corporations as you suggest, how do you suppose that would help in any meaningful way? The price of oil is dictated by the world market after all. So, even assuming the US could seize all US flagged oil companies, and making the even more preposterous assumption they could run those companies efficiently, this wouldn’t change the price of oil at all…unless you think the US can seize all the oil producing foreign companies (many of them nationalized) as well. :dubious: Not only would the US need to do that, but then it would need to somehow seize the oil commodities market as well since the market would go ape shit if the US seized even the US flag companies…let alone launched several wars of conquest (which is what it would take for us to seize the oil producing companies in such lovely places and Saudi, Iran, and Venezuela…to name a few).
As for your assertions…seriously, read the other thread and educate yourself. The price of gas at the pump is not set by evil oil companies and is a fairly complex process and set of circumstances.
-XT
It might seem like a good idea on the surface, but it’s alot more complicated then that.
Scum sucking US oil companies, while more evil then Satan and Dick Chaney’s love child, do have skill sets and resources the US government would have a terrible time replicating.
Not to mention business contacts, labor forces. Plus the whole president of it all. Part of America’s success is that you can be semiscure in keeping your property.
Think of exxon like a mule, while it produces piles of smelly nasty crap, randomly kicks you and steals food from your plate without remorse just to make it’s self fatter.
It is pretty good at pulling things. Alot better at pulling a plow for your field then a congressmen would be.
Now the proper way to do what you want is to threaten Exxon and it’s fellow robber barons with massive taxes and penalties to help the people these high prices are running into the ground, unless gas prices get lower.
Because they are international corporations and many are not even based in the US
They could move operations quickly…