The laws of profit and loss are simple. If you sell more goods or services, you make more money. If you sell less, you make less.
So why, in a world where we are supposedly facing an oil shortage, are oil companies making record profits? It’s all hype, and it’s all just crap designed to make powerful people more money. This week it was Shell (see main link on title). Even better – the first paragraph (at least, at the time of writing) says that Shell needs continual price rises, otherwise it will suffer a loss in profits. Aww, boo bloody hoo.
There are other examples from around the world of profits increasing over the last 12 months, occasionally even because oil output has increased:
Indian Oil Corp: 17% profit rise[1]
Shanghai Petro: 50% profit rise[2]
Canadian Oil: 400% profit rise[3]
Equally suspiciously, no-one in the media, nor in government, has uttered a single word about the gaping inconsistencies, either to say "haaaang on" or to rationalise them. The conspiracy theories are too obvious and numerous to be mentioned here, and it's getting bloody difficult to discredit them merely for being conspiracy theories, which seems to be the fashionable thing to do these days.
What's next? I predict that, as a result of the problems of Northern Rock in the UK and the so-called sub-prime "crisis" in the US, both countries will soon introduce a raft of measures to allow financial institutions to make lots more mon... I mean, to recover so that they do not adversely affect people's savings. I don't know about the US, but in the UK it's already happening: the government is thinking of allowing banks to be bailed in secret[4][5]. Who needs transparency when it's far simpler to hide problems behind people's backs? And this is despite Mervyn King's excellent statement that:
The only thing that will stop banks taking risky activities is the knowledge that if things go wrong, they, and they alone bear the consequences.[6]
Needless to say, if I go missing within the next few weeks and this Blog is suddenly shut down, then you'll have a good idea as to why.
[1] Reuters. (31.01.08), “India’s IOC Q3 net profit rises 17 percent yr/yr”, http://uk.reuters.com/article/oilRpt/idUKBMA00028720080131
[2] Reuters. (31.01.08) “Shanghai Petro says 2007 net rose over 50 pct”, http://uk.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUKSHA16615320080131
[3] Reuters. (30.01.08) “Canadian Oil Sands profit jumps on prices, output”, http://uk.reuters.com/article/oilRpt/idUKWNA784920080130
[4] Guardian. (31.01.08) “New Powers for Bank to Stage Secret Rescues”, http://www.guardian.co.uk/business/2008/jan/31/northernrock.bankofenglandgovernor?gusrc=rss&feed=business
[5] publicradio.org. (30.01.08) “Bank of England to save banks in secret”, http://marketplace.publicradio.org/display/web/2008/01/30/bank_of_england_bailouts/
[6] Reuters. (24.09.07) “Regulation stalled Northern Rock Rescue”, http://uk.reuters.com/article/personalFinanceNews/idUKNOA03409820070924?pageNumber=3&virtualBrandChannel=0
5 comments:
The profit increases from IOC and Shanghai Petro can be explained by a rapid increase in local demand for oil in the past year, and the increase in the Canadian Oil Sands' output is directly as a result of higher oil prices due to difficulties elsewhere making their method of oil extraction from sand viable.
Due to fixed oil production volumes from OPEC member states (which reduces supply, hence increasing oil prices) - those oil companies with reserves outside of OPEC countries (such as all those mentioned in your blog post) stand to make bigger profits while they are able to make up the shortfall in supply.
I'm no expert on the oil industry and it's economics, but I'm know enough to realise that it's much more complicated than the simple assertions that you've made.
Hoorah, finally, a sensible comment from a reader!
Regarding Canadian Oil Sands - this simply agrees with my point. In other words, you're saying that Canadian Oil Sands is profiting hugely from higher demand, while consumers have to pay more. It's suspicious that OPEC uses economics to control only supply (as per the Hotelling Rule), but not to control prices (an imposed discount rate, which is also permissable by the Rule).
In other words, economics does indeed explain the increased profits, but economics is being used in a convenient way so that the oil companies stand to gain hugely at the increased detriment of consumers. Given that there are no real alternatives to the fuel they provide to people like us and it is thus a necessity, I do not see why price caps cannot be imposed to limit the exposure to consumers. If the economy can be controlled by artificially limiting oil supplies, I do not see why artificially limiting prices cannot also be done. Oil companies would still make a profit (as is evident - if they've been making recent record profits, then it can't be hurting them that badly), and consumers wouldn't be affected so unfairly.
Oily is no expert on the oil industry...or really is just a sinister global elite monitoring all blogs?
Anyone interested in this area should watch the legendary lecture by Prof Albert Bartlett at Boulder, University of Colorado, which can be seen here:
http://www.youtube.com/watch?v=F-QA2rkpBSY
I have seen the Bartlett programme, and it is indeed excellent. It has been followed more recently by the Horizon programme by David Attenborough.
hi, good site very much appreciatted
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