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Sunday, August 03, 2008

Exxon Made 7 Cents Per Gallon Produced

Exxon released its quarterly earnings last week. There was a great hue and cry because it made $11 Billion in the quarter after taxes. The MSM had TV cameras in gas stations and showed some drivers whining about the price of gas. One said "why can't they give back some of their profits and lower the price of gas?".

So, I did the MSM's job and asked myself "how much did Exxon make per gallon"? Without knowing that, I could not determine if Exxon could lower it price for gas. And if it did give back some of its profits, would that have an impact on our pocketbooks?

Anyway, here is what I did:
  • I did the googles on the internets and found Exxon's 2nd Quarter earnings report (took two minutes).
  • Next I printed the report (took another two minutes).
  • Read the report to find some statistic that would tell me how many gallons of gas they produce (took 15 mnutes).
  • Found their "Oil Equivalent Production" was 3,801 KOEBD which I think means 3.8 Billion barrels of oil products (took my 30 minutes to get my brain around this concept).
  • Next I made a presentation & analysis decision (remember I am a financial analyst. I am not bound by GAAP rules of financial reporting) and decided to use this metric to calculate Exxon's profit per gallon:
  • {Exxon profit after tax divided by gallons of petrleum produced = profit per gallon}.
  • Next I had to convert barrels to gallons. Had to do the googles again and found there are 42 gallons to a barrel (took me 15 minutes). Hope that is accurate.
  • So here is the calculation:
  • 3.8 billion barrels time 42 gallons per barrel = 159.6 billion gallons produced
  • Exxon made $11.7 Billion
  • $11.7 Billion divided by 159.6 billion gallons produced means they made a windfall profit of 7.3 cents per gallon (snark alert).

So if Exxon gave up half of their profit, next time you gas up you will save 3.6 cents per gallon. For a car with a 20 gallon tank that is a savings of almost 75 cents!! Or six bits as they used to say.

And that is my two cents - too bad the MSM can't do stuff like this. Maybe I should offer to school those journalists.


Duffy said...

Your analysis is flawed. You assume that all oil becomes gasoline. It doesn't. There are byproducts like kerosene, other crap used for asphalt, diesel etc. The magins for each vary so I don't think it's accurage to do a 1:1 comparison for barrels and pump price.

Duffy said...

While I'm at it....IIRC their profit margin hasn't changed in years despite their profits going up significantly. This page is particularly instructive:

AJ Lynch said...

Duffy :

When I used the term "gallons", it refers to their total oil production. Not just gasoline.

Duffy said...

Gotcha, I though you were talking about gallons of gas not oil.