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Profit Margins and Congress

Posted by cann0nba11 on May 23, 2008

Our elected officials are apparently having lots of fun fluffing up their chest feathers to publicly demean the leaders of our oil companies. They are trying to scold and reprimand leaders that are doing what they can to provide oil for America. The last time I checked, America was the land of opportunity, the the opportunity to make profit is one of the reasons people from all over the world want to come here.

Much of the pubic, and apparently most of Congress, thinks that the oil companies are raping America. I’ll bet you a Memorial Day hot dog that these same people haven’t considered what profit margins other companies make. Let’s take a look at the numbers:

Sample Profit Margins from2007

  • Paychex Inc. (a leader in payroll processing) 27.61%
  • Nvidia (PC video card manufacturer) 19.46%
  • International Water Guard (pollution control) 18.02%
  • Western Union Co. 17.50%
  • Procter & Gamble 13.76%
  • Colgate Palmolive 12.91%
  • Canon 11.25%
  • Life Time Fitness 10.37%
  • Exxon Mobil 10.37
  • Chevron 8.49
  • BP 7.85
  • ConocoPhillips 5.86

Plenty of companies enjoyed far greater profit margins last year. No complaints from Congress? Why not? Now let’s look at the past five years:

Sample Five Year Average Net Profit Margins

  • Microsoft = 26.7%
  • Intel = 19.1%
  • Washington Mutual = 18.9%
  • Charles Schwab = 17.2%
  • 3M = 15.6%
  • Proctor & Gamble = 12.6%
  • American Express = 12.6%
  • McDonalds = 11.7%
  • HR Block = 11.6%
  • Apple = 10.0%
  • Exxon Mobil = 9.6%

This is just a quick list that I picked out of the Fortune 500. With more time I’m sure I could find even higher margins and more familiar names. But here’s an interesting tidbit. In 2007 the average five-year profit margin for the entire S&P 500 was 11.8. These five hundred companies on average had higher profit margins than our major oil companies. Yet “big oil” is somehow the the bad guy?

The issue at hand is that people are only seeing only the dollar amounts and not the percentages. One thing that people are not really talking about is the cut that the government gets from gas at the pump. On average, about 4% of the cost of a gallon of gas goes to ‘big oil’ while Uncle Sam, who has done nothing whatsoever to help petroleum companies in 30 years gets about 15% of the money. The government is getting almost four times as much money from gas sales as the companies that produce the fuel, and they have the audacity to berate the leaders of these firms? The government had nothing to do with the acquisition, refining, production, shipping and delivering of this product, yet they receive 400% more per gallon than the oil companies? This is almost as stupid as taxing someone’s net worth because they just died.

So the peeps in Congress are in a little bit of a bind. They feel compelled to publicly abuse oil executives, but at the same time they can’t be too mean because this industry is generating a major amount of tax revenue. Yet, they still dish out clueless tirades that had nothing to do with economic reality.

This makes me wonder: When do our politicians get to sit in front of a public hearing committee so that they can be asked questions by us bout their wanton ineptitude and blatant disregard for the people?

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One Response to “Profit Margins and Congress”

  1. Cory Hall said

    Thanks for this one, PC. Being from the middle of oil country, it has always amazed me how uneducated folks are about how much more money the government makes from taxes on gasoline than “big oil” does.

    As always, you rock.

    ch

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