High Gas Prices Cut Oil Industry Profits
WASHINGTON, D.C. -- The Phoenix Center has released a new study that has found that contrary to popular belief, the entire oil industry, along with consumers, suffers from higher gas prices.
"It may be fashionable to beat up on oil industry profits, but it appears that these firms do bear at least some of the burden of high oil prices … Our analysis shows that when gas prices are at their highest, oil industry profitability is at its lowest," said George S. Ford, chief economist for the Phoenix Center.
Eleven American oil companies' financial statements over 11 years were analyzed in the study. Company profitability was compared between low and high gas prices during that span, and it was found that "profitability of the major integrated oil companies is actually lower during periods of extremely high gas and oil prices," the study notes. Specifically, for every 10 percent increase in gasoline prices, profits for the oil industry's companies dropped 1.8 percent. For smaller oil companies and those mainly in the refining and selling of retail gasoline, the effects are the same.
Over the past decade, "the integrated oil companies we studied are most profitable during times of moderate oil and gas prices," Ford said. "The data clearly show that when oil prices rise sharply, as they have in the last year, these firms are less profitable, in terms of profit per dollar of revenue," he continued.
The study also compared profitability for these firms with other industries, and concluded that "selling beer or bleach is more profitable than selling gas and oil, even during times of 'record' profits from oil companies."
Analyzed companies were ExxonMobil, Chevron-Texaco, ConocoPhillips, Shell, Marathon, Hess, Sunoco, Giant, Frontier, Tesoro, Valero and all the named companies predecessors.
"It may be fashionable to beat up on oil industry profits, but it appears that these firms do bear at least some of the burden of high oil prices … Our analysis shows that when gas prices are at their highest, oil industry profitability is at its lowest," said George S. Ford, chief economist for the Phoenix Center.
Eleven American oil companies' financial statements over 11 years were analyzed in the study. Company profitability was compared between low and high gas prices during that span, and it was found that "profitability of the major integrated oil companies is actually lower during periods of extremely high gas and oil prices," the study notes. Specifically, for every 10 percent increase in gasoline prices, profits for the oil industry's companies dropped 1.8 percent. For smaller oil companies and those mainly in the refining and selling of retail gasoline, the effects are the same.
Over the past decade, "the integrated oil companies we studied are most profitable during times of moderate oil and gas prices," Ford said. "The data clearly show that when oil prices rise sharply, as they have in the last year, these firms are less profitable, in terms of profit per dollar of revenue," he continued.
The study also compared profitability for these firms with other industries, and concluded that "selling beer or bleach is more profitable than selling gas and oil, even during times of 'record' profits from oil companies."
Analyzed companies were ExxonMobil, Chevron-Texaco, ConocoPhillips, Shell, Marathon, Hess, Sunoco, Giant, Frontier, Tesoro, Valero and all the named companies predecessors.