This is one thing that nobody talks about. The oil companies which drill in the U.S. and are subsidized to do so (??), charge the public the going futures market rate.
I read this in the U-T today, proving to me that $600 million of Conoco’s profits are due to the extra money they could charge on DOMESTIC oil. Note that this is not imported oil from the supposed in-crisis Middle East, but American oil. We are paying through the nose for our own oil. I guess they have the mineral rights.
U-T QUOTE link
“The company’s refining and marketing segment reported net income of $1.7 billion, up from $1.1 billion in the year-ago period, because of a 53 percent surge in domestic refining margins – the profit margin per-barrel of crude oil that is refined.”
More proof that the profit come from our own domestic oil.
The U-T story said”
Profits climbed 65 percent increase from the $3.14 billion profit during the same period a year earlier, while revenue rose 12.6 percent to $47.1 billion.
END U-T
Now we are all informed, about WHY the oil companies make so much money. It is NOT because the futures market is trading so much higher, but because they can sell their cheap domestic oil at futures market prices, so their profits rise 3X as much as revenue.
I wish I could claim credit for figuring this out. It was my brother who told me.
Why should any oil company sell American oil at a reduced price in the US if it can be sold to China, Europe, etc for futures market price?
Just like in the housing market, if you bought a house for $200K in 1995 and today a similar house sells for $600K, would you sell it for $200K because you bought it cheap?
There is nothing like “cheap domestic oil”. Oil is much more expensive to extract in the US than in the Middle East where you only need to insert a tap on the ground.
The US imports almost twice more oil from Canada and Mexico than from the Middle East. Even Mexico, where wages are small compared to the US, gasoline and oil prices are set to futures market value.
I am not against the oil companies at all. They should charge market value for their oil. I just wanted to explain why they are making record profits, and why their profits are up 3x more than their revenue. They are earning more on the domestic oil, because they benefit from the higher futures market pricing. I don’t know if it’s more expensive to extract – they get government subsidies for drilling/exploration.
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