Reading about the record $19 billion in quarterly profits by exxon and shell. The wsj and congress are starting to bring up the question of what a ‘fair’ profit is. Something seems a bit wrong for companies to profit from disasters, wars and the general social misery of higher oil prices.
Putting that aside I still don’t get why a company in the business of oil refining or distribution makes more profits when prices go up. Obviously reserves will increase directly and that could explain some.
I’m an investor in valero which I started liking about 2 yrs ago as a great way to bet on oil price increases as they refine sour crude at a cost of $12 and sell at market, an insulated way to bet on price increase.
It these profits are merely from the increased spread on their own costs of drilling and refining reserves I get that. If, however, companies are taking the opportunity created by short term shortages to increase their margins on distribution, that seems like profiteering. I’m not sure why the two seem different.
And conversely I wonder how it would be fair for congress to force companies to sell their reserves at below market prices simply because they’re based in the US. Do certain industries have a social responsibility beyond others?
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