record oil industry profits

No time for much of a post right now, since I'm right in the thick of moving, but you might find this interesting. It came from a discussion about this e-mail, that I've seen a couple times now, which calls for a boycott of Exxon until it lowers gas prices to $1.30/gal. That led to a discussion of the fact that Exxon has posted record profits again this year. I was curious about whether Exxon's profits were due to increased volume, selling more gallons of gasoline, or increased margin, selling each gallon at a higher mark-up. So I did a bit of digging.

Just to be clear up front, this is not a defense of Exxon, about whom I've been critical before. (See here and here.) I did this analysis because this is a serious, complex problem that we're not going to be able to solve without either accurate information or a whole lot of luck, and I'd rather bank on accurate information.

So, let's start with Exxon's income statement to see where their record profits are coming from. I've also added the government's numbers on average gas price per gallon (which I had to calculate by downloading their spreadsheet file) and some historical information on crude oil prices.

	12/31/2005	12/31/2004	12/31/2003
Total Revenue	371B	298B	247B
Gross Profit	158B	134B	117B
EBIT	59.9B	41.8B	32.1B
Gross Profit / Revenue	43%	45%	47%
EBIT / Revenue	16%	14%	13%
national average gas price, all grades / all locations	2.28	1.85	1.55
average crude oil price, per 42 gallon barrel	50.04	37.66	27.69
crude oil price per gallon	1.19	0.897	0.659
gas price / crude oil price	192%	206%	235%

Notice that Exxon's Gross Profit as a percentage of their Total Revenue hasn't been increasing. In fact, it's actually decreasing a bit. Their EBIT as a percentage of revenue has increased, but that would be consistent with fixed costs not increasing at the same rate as sales (which is why they're called "fixed" costs.) Notice also that the price of gas, expressed as a percentage of the price of a gallon of crude, has actually been decreasing.

My interpretation of these numbers is that there doesn't seem to be price gouging going on in Exxon. Instead, gas prices are roughly tracking oil prices, and oil prices have been going up.

Why are oil prices going up? I don't have any hard data right now, but I'd suggest a couple factors. The first is instability in the Middle East. For instance, if the markets think the U.S. is going to invade Iran, which would tend to blow up oil wells and reduce the amount of oil coming out of Iran, they may bid up oil prices. The second is that the U.S., China, and India are all interested in buying a roughly fixed amount of black stuff in the ground. Lots of buyers and a fixed supply should mean higher prices.

Conclusion: if we want gas prices to drop, we need to stop wanting gas so much. That means either parking the cars (which is unlikely to happen) or fueling them with something that's not made from crude oil.

an open letter to cell phone makers

Dear cell phone manufacturer,

I know you like to put new features on cell phones. After all, your marketing studies show that features drive sales. They let you create that all-important feature comparison chart, with the features in one column, another column per cell phone model, and a neat line of check marks going all the way down.

I’d like to propose another check mark. I know Qualcomm’s been advertising TV, GPS, and MP3 player on the phone. Those things might be nice, especially if I’m ever lost and want to catch the latest CNN with my own custom soundtrack. But here’s something that’d really be useful: boarding passes.

You see, when I get on a Southwest flight, I need a paper boarding pass. But when I’m traveling, I don’t usually have a printer with me, even if the hotel has Internet service. So by the time I check in, everyone else has done it the night before, and I get a C.

But my cell phone can talk to the Internet. And the newer cell phones can talk IR or Bluetooth. And the cell phone has a unique ID in it, so you even know it’s me – that’s how you can bill my calls to me. So why can’t I check in using my cell phone, and instead of printing out a piece of paper, why can’t I store the boarding pass on the cell phone itself? Then all I’d have to do is walk past the check in station and let the cell phone deliver my e-boarding-pass.

Now, I know what you’re saying: how much sense does it make to require someone to check in 24 hours in advance anyway? It’s kind of silly, after all, since a lot could happen in 24 hours and someone might not wind up showing up for the flight, so it can’t provide all that much assurance of a full seat. But the airlines like the system, so you might as well take advantage of it and sell a few more phones. Business travelers will love you.

Anyway, think it over. The idea’s free for the taking.

You’re welcome,
False Data

taking a break for the rain

One whirlwind trip's just ended and we're getting ready for another. On Monday I got an oral commitment on a place to rent. I sign the papers Thursday. Also on Monday Coppertop arranged for the movers to come. They show up Saturday, so we're both flying up Friday evening to prep the place, we'll be there Saturday for the move and clean up afterwards, then we fly back Sunday. Coppertop will take the painfully early flight -- the only affordable one -- while I'll leave a bit later to handle any last-minute mop-up. In the meantime, studies (for me) and training (for her) continue at the usual crazy pace.

We're having a fairly rare rain shower here. I took a few minutes to eat and sit on the covered patio near the grille. The smell of the rain brought back memories of sitting on the front porch during a full-blown, proper, Texas or Florida-style thunderstorm, drinking a beer and watching the show. I like California, but I sometimes get nostalgic for the kinds of thunderstorms you only get in more tropical parts of the world, where the rain's coming down in sheets, lightning's jumping everywhere, and getting wet isn't an annoyance, it's just a fact of life.

movin' movin' movin'

Traveling again. Coppertop’s spending a month in Santa Barbara for training, so I flew up last night. We were up late packing the car, then got up at 5:30 to get gas, get breakfast, drop off some paperwork, and drive down to SB. We go there to find the apartment manager hadn’t left the key, but the door to Coppertop’s apartment was unlocked. It looked like they’d just finished shampooing the carpet but hadn’t done any dusting yet. Since the apartment manager had left for the day, Coppertop left her a message and we started unloading, making beds, putting away pots and pans, and so on. An hour and a half later the place was looking more like a home away from home and she dropped me off at the Santa Barbara airport. Now I’m waiting for my flight, too tired and brain-fried to update outlines. Maybe I’ll try to nap on the plane and hit the outlines once I get home.

United Express is running late. The plane from SB to LAX was late because that aircraft was delayed flying down from San Francisco. They just announced the LAX to Palm Springs flight was late because the aircraft was there, but the crew was delayed coming in from Utah. My connecting flight’s also late for unspecified reasons. It sounds like they have such an interconnected mesh of aircraft and crews plying complex routes that a delay in one part of the system, or bad weather in one part of the country, winds up rippling all over the system. It seems odd that these little turboprop EMB 120’s would need such a complex schedule to operate efficiently. They seem ideal for the sort of milk run Southwest does: fly LAX to Palm Springs, turn around and come back, and repeat. It makes me wonder if United Express’s schedule is something they designed or if it just evolved that way.

OK, if I ramble much longer, I’m going to start drawing parallels to fault tolerance in computer programming and then there’ll be no stopping. So I’m signing off while the signing’s good. Talk to you later.

virtual tribes

The NPR blog has a story on the recent immigration protests, with links to the LA Times. What I think is cool about this news story is the way it shows some of the unexpected effects of newer communication technology. A lot of the changes we talk about with computers and networks is just more / better / faster, but there are some fundamental shifts starting to emerge. One of those shifts is a much greater ability for people to organize themselves over distances. You can see it most clearly in Europe and Japan with their widespread use of text messaging on cell phones, but it exists in the U.S. as well with social networking sites like myspace.com and e-mail discussion lists. (Once you combine an e-mail discussion list with a Blackberry or Treo, you have effectively pretty much the same thing as text messaging on cell phones.) This is a trend to watch -- it may produce some big ripples in the future.

more on global warming and rising sea levels

The BBC is reporting on an article in Science which predicts a rise in ocean levels of 3-4 meters (but a mere 2-3.5 meters by 2100) with the collapse of half the antarctic ice sheet in 500 years. The prediction is based on past correlation between ocean levels and warming trends, with agreement from computer models. Another study shows that Greenland's glaciers have sped up.

So, how much is a 3 meter rise? There seems to be heavy demand on the interactive maps scattered around the Internet, but a 2004 National Geographic article gives a good feel.

The maps show that a 1-meter (3-foot) rise would swamp cities all along the U.S. eastern seaboard. A 6-meter (20-foot) sea level rise would submerge a large part of Florida.

. . .

A one-meter sea level rise would wreak particular havoc on the Gulf Coast and eastern seaboard of the United States.

"No one will be free from this," said Overpeck, whose maps show that every U.S. East Coast city from Boston to Miami would be swamped. A one-meter sea rise in New Orleans, Overpeck said, would mean "no more Mardi Gras."

If you can get through to it, there's an interactive system here. There is also a collection of static maps here.
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60 minutes on global warming and ostriches

The most recent 60 minutes episode had a segment on James Hansen, the scientist who is charging the Bush administration with censoring research on global warming. I previously wrote about that situation here.