Oil & Gas Exploration In Ohio, PA & WV Periodically I bring you interesting commentary about oil & gas exploration of the Marcellus and Utica Shale formations in Ohio and parts of PA, NY and WV. I roam the hillsides of Eastern Ohio talking with landowners and listening to their concerns and I also work with the big exploration companies. I offer you my perspective of what is really going on in the oil and gas business based on what I am experiencing out here in the trenches. Thanks for visiting, Petro Pete |
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No matter who I talk to out here in the oil patch - landowners, the media and every day folks - most
people harbor animosity towards oil and gas companies. Many even go as far as spewing forth negative
comments based merely on opinions formed from embellished news stories and convoluted
interpretations of hearsay. Many people are blaming Big Oil companies for high gas prices at the pump,
for making too much money, for destroying the environment and a host of other accusations. I don't get
it. From my viewpoint, I see something much different and there are too many misconceptions among
the citizenry about how oil and gas prices are affected. Maybe it's time to set the record straight.
If we take a look at the facts, at what is really going on behind the scenes with oil and gas company
operations, we see a different picture developing. Big Oil companies do not have as much control over oil
and gas prices as many folks may believe. Energy is a world commodity and the supply and demand is
controlled by forces that change the landscape for companies operating within it and not one entity can
control this market. Just look at the situation with Iran. Just the mere threat of shutting down the
shipping lanes or a possible war have sent oil and gas prices sky rocketing again. Chesapeake,
Exxon/Mobil and the other Big Oil companies have no control over that. There is more at work here than
energy company shenanigans.
Whenever the price of gas at the pumps goes up, people generally assume that the oil companies are
raking in more profits and using whatever world crisis is currently handy as an excuse to raise prices.
Every summer, for instance, gasoline prices begin to increase at the gas pump and everyone assumes
that the oil companies are taking advantage of vacation travelers so that they can reap greater profits.
Well, that is not true and you won't hear the truth from the media because it is boring news. Gasoline
prices rise every summer because of chemistry and nature. Gasoline has additives that are different in
winter and summer. In winter, butane is added to gasoline, which is relatively cheap. In summer,
however, butane evaporates too quickly and cannot be added, so more expensive additives are needed
to replace the butane. And it is the higher cost of these additives that drive up the price at the pump, not
Big Oil.
How many times have you heard about how Big Oil companies are making incredible profits at the
expense of the general public who must use their vehicles no matter the price at the gas pump? This is a
big one for the Democrats and Obama who are tying the high price of gasoline to Big Oil and blaming
Chesapeake, Chevron, Exxon and the rest for making record profits.
Yes, it is true that Big Oil companies are making huge profits when seen in absolute terms. But when
we look at their profits in relative terms, their margins are well below many other giants of industry. It is
not how much you make; it is how much you get to keep and oil and gas companies, on average, get to
keep only a marginal amount of what they make.
Take, for example, companies like Disney, Apple and McDonald's. The profits that these companies
make are greater than what the Big Oil companies make, but yet I don't see any media or human rights
groups lashing out at Apple or McDonald's for their practices. No one ever complains about the success of
these companies, but they deny Big Oil the same prerogative. What is the reason for this?
Let's take a look at real numbers. When averaged over the last ten years from S & P data, Exxon/Mobil,
which is representative of Big Oil, posted a net margin of 8.9%. On an absolute basis, that is a huge
amount of money, but in relative terms it is not really that much. Compare that with net margins for
McDonald's of 18.8% and Disney with 15.9% and Apple with 13.5%. This means that Big Oil spends more
and that in turn creates jobs and that is real added value. And Big Oil pays its employees and contractors
well above most other industries.
And keep in mind that the profits that Big Oil makes and the jobs that it creates are right here in the
U.S.A. for the benefit of Americans and their families. Just take a look at Texas, North Dakota,
Pennsylvania, Ohio and a host of other states and you will see oil and gas companies creating jobs and
spending money on local economies that have taken some communities out of poverty and helped areas
prosper.
It is not that I defend the oil and gas companies. There are many aspects of Big Oil that are of concern
to all of us and I want to see improvements in the way they do business just like you and anyone else.
But it is also necessary to understand that Big Oil is not all bad and that we all benefit from their
existence. The purpose of any business is to make a profit and we should not complain and criticize
American oil and gas companies for making money. After all, they spread it around. Just ask the
hundreds of thousands of people working in the oil and gas industry.
But, no matter what positive things that oil and gas companies do, there will always be those who will
continue to bash Big Oil for one reason or another. How do you think I know that?
Till Next Time,
Petro Pete
people harbor animosity towards oil and gas companies. Many even go as far as spewing forth negative
comments based merely on opinions formed from embellished news stories and convoluted
interpretations of hearsay. Many people are blaming Big Oil companies for high gas prices at the pump,
for making too much money, for destroying the environment and a host of other accusations. I don't get
it. From my viewpoint, I see something much different and there are too many misconceptions among
the citizenry about how oil and gas prices are affected. Maybe it's time to set the record straight.
If we take a look at the facts, at what is really going on behind the scenes with oil and gas company
operations, we see a different picture developing. Big Oil companies do not have as much control over oil
and gas prices as many folks may believe. Energy is a world commodity and the supply and demand is
controlled by forces that change the landscape for companies operating within it and not one entity can
control this market. Just look at the situation with Iran. Just the mere threat of shutting down the
shipping lanes or a possible war have sent oil and gas prices sky rocketing again. Chesapeake,
Exxon/Mobil and the other Big Oil companies have no control over that. There is more at work here than
energy company shenanigans.
Whenever the price of gas at the pumps goes up, people generally assume that the oil companies are
raking in more profits and using whatever world crisis is currently handy as an excuse to raise prices.
Every summer, for instance, gasoline prices begin to increase at the gas pump and everyone assumes
that the oil companies are taking advantage of vacation travelers so that they can reap greater profits.
Well, that is not true and you won't hear the truth from the media because it is boring news. Gasoline
prices rise every summer because of chemistry and nature. Gasoline has additives that are different in
winter and summer. In winter, butane is added to gasoline, which is relatively cheap. In summer,
however, butane evaporates too quickly and cannot be added, so more expensive additives are needed
to replace the butane. And it is the higher cost of these additives that drive up the price at the pump, not
Big Oil.
How many times have you heard about how Big Oil companies are making incredible profits at the
expense of the general public who must use their vehicles no matter the price at the gas pump? This is a
big one for the Democrats and Obama who are tying the high price of gasoline to Big Oil and blaming
Chesapeake, Chevron, Exxon and the rest for making record profits.
Yes, it is true that Big Oil companies are making huge profits when seen in absolute terms. But when
we look at their profits in relative terms, their margins are well below many other giants of industry. It is
not how much you make; it is how much you get to keep and oil and gas companies, on average, get to
keep only a marginal amount of what they make.
Take, for example, companies like Disney, Apple and McDonald's. The profits that these companies
make are greater than what the Big Oil companies make, but yet I don't see any media or human rights
groups lashing out at Apple or McDonald's for their practices. No one ever complains about the success of
these companies, but they deny Big Oil the same prerogative. What is the reason for this?
Let's take a look at real numbers. When averaged over the last ten years from S & P data, Exxon/Mobil,
which is representative of Big Oil, posted a net margin of 8.9%. On an absolute basis, that is a huge
amount of money, but in relative terms it is not really that much. Compare that with net margins for
McDonald's of 18.8% and Disney with 15.9% and Apple with 13.5%. This means that Big Oil spends more
and that in turn creates jobs and that is real added value. And Big Oil pays its employees and contractors
well above most other industries.
And keep in mind that the profits that Big Oil makes and the jobs that it creates are right here in the
U.S.A. for the benefit of Americans and their families. Just take a look at Texas, North Dakota,
Pennsylvania, Ohio and a host of other states and you will see oil and gas companies creating jobs and
spending money on local economies that have taken some communities out of poverty and helped areas
prosper.
It is not that I defend the oil and gas companies. There are many aspects of Big Oil that are of concern
to all of us and I want to see improvements in the way they do business just like you and anyone else.
But it is also necessary to understand that Big Oil is not all bad and that we all benefit from their
existence. The purpose of any business is to make a profit and we should not complain and criticize
American oil and gas companies for making money. After all, they spread it around. Just ask the
hundreds of thousands of people working in the oil and gas industry.
But, no matter what positive things that oil and gas companies do, there will always be those who will
continue to bash Big Oil for one reason or another. How do you think I know that?
Till Next Time,
Petro Pete