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Oil Industry

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  • August 2, 2006
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Brittany Butler and Nick Schuchardt
MBA 633
Position Paper

The Oil Industry: "Why Companies Are Not Getting a Fair Shake"

Within the last two years, the oil industry has increased the price of oil causing gas prices to rise to $3.00 a gallon today. It was only a few years ago that the price of gas was $1.00 a gallon. There have been many complaints against the oil industry on price gauging and monopolizing the industry. Oil companies are reaching sales up to $100 billion and they are seeing profits in the $10 million range. These are the facts that we receive from the media and the government to portray a negative image on the oil industry. The oil industry does not seem to be getting their fair shake and peoples perception from the media and government reaction have clouded the statements issued by the oil industry. Oil industry profits and taxes

The oil industry is still making .1% below the national average profit margin. One other item to consider is the cyclical nature in the oil industry. The increase in profit today is what helps the companies keep their heads above water in preparation for a future drastic decreasing period. Rayola Dougher, who oversees market issues for the American Petroleum Institute, says today's margins are helping refiners bounce back from the 1990s. "They're still as a sector struggling, but certainly the last few years have been looking good," she acknowledges. There have been many years where the oil industry has been performing at a low profitability level. The market value of petroleum products has been low. From the early 80's until just a few years ago, profits for oil companies fell behind in profits compared to other industries. Based on historical data, the increase in profits by oil companies is only temporary. Two things could happen because of this: 1) many of the owners involved in producing fuels will re-negotiate their own agreements when it becomes feasible to do so, 2) it is doubtful that...