If only Exxon could earn money like Disney

Some things are just too easy -- like attacking Exxon Mobil Corp. for yet another quarter of record earnings.

Of course Exxon made a lot of money in the second quarter. It sold $138 billion worth of oil, natural gas, chemicals, gasoline and other energy products.

The net profit on those sales: $11.68 billion, which just happens to be the largest quarterly profit ever earned by a U.S. company.

But Exxon’s net profit margin of about 8.5% -- net income as a percentage of revenue -- pales when compared with what many other blue-chip companies earned in the latest quarter.

Yes, this is the argument the oil industry always trots out when its earnings are under fire. But that doesn’t make it less true.

If companies such as Walt Disney Co. and Eli Lilly & Co. could rack up Exxon-like sales while maintaining their current profit margins, nobody would pay much attention to Exxon’s results. Instead, there would be demonstrations in Anaheim demanding that money-grubbing Disneyland cut the price of churros and cotton candy on Main Street.

Disney earned $1.28 billion last quarter on sales of $9.2 billion, for a profit margin of 13.9%. Apply that margin to revenue of $138 billion and Disney would rake in $19.2 billion.

Drug maker Lilly would do even better -- much better. Its second-quarter profit was $959 million on sales of $5.15 billion, for a margin of 18.6%. On Exxon’s sales base, Lilly would earn a stunning $25.7 billion.

There are plenty of companies with profit margins well below Exxon’s, of course. Wal-Mart Stores Inc.’s net margin in its fiscal first quarter was a mere 3.2%.

And by some financial yardsticks Exxon is indeed earning spectacular returns, even if its net margins don’t stand out. The company’s return on equity last year -- a measure of how well it deployed shareholders’ investment -- was 34%, compared with 15% for Disney, according to Bloomberg data.

Consumer activists say their real beef with Exxon is that it isn’t spending enough of its loot to find new oil and gas reserves. Wall Street may even agree, to a point: The company’s shares slumped $3.95, or 4.7%, to $80.43 today, in part on concern that Exxon’s overall oil production is declining.

Then again, name a oil-rich country on the planet that is welcoming American energy giants and promising to make it worth their while to come in and drill.

Venezuela? Russia? Iran? California?

Photo: Sign at a recent L.A. mini-protest against high gas prices. Mel Melcon / Los Angeles Times

Comments

[DisneyOil]

yea right.. what a way to compare.. Disney makes movies..doenst affect everyday folks basic needs. Folks are not forced to be dependent on their shit.
How about they come up with a Reporters License and make the license cost like the NY taxi. Then lets see whose talkin...
Which moron company hires these idiots reporters.

[Elmer Ashcraft]

What a wonderful feeling it is to read an article like this from a newspaper like the Times. It gives me a little hope for the future. Not much, but a little.

[Art]

Hey Disney Oil... seems nobody forced Americans to buy SUVs, Escalades, 4,00 square foot homes, and move out to suburbia.. so stop whining when the bill comes due. Are you asking Exxon to sell you oil at below the global market price... what, communism?

[I Hate Business Journalism]

I agree it's a pointless comparison. Sucking up goop (without properly compensating the communities that live above or around the goop), refining the goop, and moving it is in a different world from the business of making art and entertainment or researching and making medical treatments.

[perspicillata]

Utter non-sense. Oil is a commodity, shouldn't have any margin. That they can draw 8.5% tells you about their pricing power. Disney is not in a commodity business. They can earn 99% margin if they want, because there is no substitute for their product.

[bc]

I agree with you. I heard all day about Exxon making these large profits but at the end of the day Exxon led a decline in the market because they missed market projections. I just had to laugh. At least with the 5% share of the worlds oil they provide a valuable service to us. The congress and senate do not, throw the bums out on their ears

[ryan]

Terrific commentary. Any educated person out there can easily understand that the oil companies arent at fault for todays gas prices. Theyre doing exactly what every single one of use does every day at work - trying to maximize their income.

In a capitalist society, you vote with your wallet. If you dont like gas prices, allocate your resources elsewhere, like mass transit, carpooling, or biking.

[G W Bush]

Thanks for this article. It's good to see you're on my team.

Signed,

GW Bush.

[Don]

DisneyOil is simply upset that he/she (who knows when they hide behind a facade of anonymity) hasn't worked hard enough to get far enough to not worry about these things. If DisneyOil wants the oil to be subsidized, then DisneyOil should live in a Socialist or Communist state and leave my beautiful country alone. Attacking someone/something for your own failures is pothetic.

Good read Tom Petruno, who is employed by the L.A. Times...Try reading DisneyOil.

-Don

[Rich Hudson]

Record *profits* (as opposed to revenues) mean that Big Oil isn't merely passing on the higher cost of crude to us; they're also using the opportunity to rake us over the coals. But then again, their first responsibility is to the shareholders, not to the public or the nation, heaven forbid.

[Ryan B]

You're telling me Disney can sell a coke for 4 dollars a cup in their parks (bs price), and gas stations sell gas for 4 dollars a gallon (market price), and OIL is the bad guy???

Simply laughable.

[FatherTime]

@DisneyOil: Hmm... a company that provides something that people really need so they'll buy it. What a crazy idea. Maybe Disney can make a movie about the nutjob who came up with that. Try to read the business section before you jump into the comics.

[Jim Bowman]

Banks and Insurance companies own everything now, and with the declining economy they are going to own even more soon. We are doomed slaves.

[Sandzman]

Boo-Hoo. Another proof to the adage "Figures don't lie, but liars sure can figure."

Exxon's whining about their small profit margin in comparison to other billion dollar giants is pathetic. It's like a well paid CEO complaining about having to pay $3.99 for a loaf of bread. What about his minimum wage line worker?

[Bob]

How dare you use logic, common sense and a little bit of financial analysis when talking about big oil. You wouldn't last a day in congress!

As punishment, I banish you to driving a Prius, until you develop a high-minded argument against big oil that will save the common man from himself.

[Anonymous Coward]

If only Exxon could earn money like Disney? If only Disney could spill oil like Exxon! If only Disney could dodge paying damages like Exxon! Sporting title.

[Gary]

And how much of that is paid to the gov in taxes so they can spend it on
Investigate, investigate, and investigate, maybe steroids, bridges to nowhere
Or maybe a meaningless Al Gore scam or and incoherent movie.
It is either inflate your tires and tune up your car or drill, drill, drill.
Maybe just grab your ankles and kiss your donkey good bye.

[EthanQ]

Someone should go out and tar and feather the pathetic twerp who wrote this trash. Is there no common morality any more? Are people just allowed to say anything to make a buck? Is there no more common decency?

From Enron to Exxon the energy companies are destroying America. We're fighting a war to the oil companies, and while we're bleeding for them in Iraq, they bleed us dry at the pump.

Vote Republican. Vote Exxon.

[Andy]

I find the socialist tendencies of some of you disturbing. Your comrades in Russia seem to get it though, offering tax breaks to oil companies as an incentive for exploration.

Capitalism has given us the best standard of living in the world. The russians and chinese are embracing it, yet here in america its becoming a crime to make money. Yikes.

[Alan Goff]

The high price of oil has caused enormous damage to this country, escalating costs of everything and increasing unemployment unemployment, all this to satisfy a very greedy few, can Disney claim to be able to do this much harm.

[W Threlfall]

Other facts. 70% of Exxon's earnings come from abroad, ( US balance of payments benefit?). They produce less than 2% of the worlds oil, ( how can you fix prices at this level). Selling gas in the US provides less than 7% of earnings, (and the return on that part of the business is less than 5%). When Exxon invested in projects that are providing the revenue stream no one anticipated oil to be so high. Also, oil price can come down as it has in the past and is now doing. A little conservation can go a long way.
Just for completeness. There have been over 200 oil spills since Exxon Valdez, over 20 of which were larger. The number of spills has decreased markedly over the last few years with attention by all Industries.

[D.G.]

Mr. Hudson doesn't appear to have read (or at least understood) the article. The author's whole point is that these profits are not out of line and 8.5% is not some tremendous "price-gouging" margin. Exxon's profits are so high because their revenues are so high and the revenues are so high because people continue to buy their products no matter how expensive they get.

This is not Exxon's sin. Americans are, on average, wasteful people with an absurd sense of entitlement who are quick to complain when their wasteful behavior causes prices to rise. I, for one, am just thrilled to see a few people in the media finally getting some backbone and telling the truth rather than stooping to fearmongering and scapegoating just to make their readers/viewers feel better about themselves. I just wish Obama and McCain would take their opportunity in the spotlight to do the same.

[Keith]

After reading previous comments, Obviously people are emotional about this and not logical.

Good article, you could have also pointed out that they paid 9Billion in taxes. If they made zero profits, they'd pay zero taxes, that translates into more taxes from you and me.

Or you could do as congress is proposing, take some additional money from the oil company to add to the 9B they paid the government, scrub it through the efficient governemtn system and hire a few bureaucrates along the way, and then give it back to certain complainers in our society.

[joey]

Kill the prebble mouse and every bleeding heart dem that stuffs one in!

[Brian]

Comparing Disney and Exxon is quite simply comparing apples to oranges. They aren't the same thing. I run a small service business and make about 95% profit on turnover i.e. 5% of my revenue pays for equipment and expenses; the rest is my income/profit. That doesn't mean I'm greedier or more successful than Exxon, I just don't sell a commodity. Disney don't dig Mickey Mouses out of the ground, and Exxon don't dress up like cartoon characters and entertain your kids. They dress up like George Bush and pretend their oil costs them more to produce than it used to; it doesn't. When their commodity is an essential item most people can't do without (unlike Mickey Mouse or my services) it's called 'price gouging.'

[JOHN]

AMERICAN, WE LOVE TO PAY FOR HIGH gASS PRICE. BUT SOON WE WILL REBELL AND START TO BURN DOW LAZY CONGRESS MEN'S OFFICE AND SHOW THEM HOW UNHAPPY WE ARE.

PATHETIC GOVERNMENT, JUST OVER THROW THEM AND REPLACE A BETTER ONE.

GEOGE W. BULLSHIT!

[JOHN]

First of all Disney is luxury, you don't have to buy a coke every week in the 50 state.

second, Exxon is a necessity, poor American have to pay for gass every week.

Now, how did this newspaper writer get his job anyway, this guy is out of touch with the American people. I suggest, just beat him(her) up for not helping us poor American.

[Russell Frazier]

I'd like to know what fancy accounting practices the oil companies use to come up with a reasonable margin like that for public consumption. After all, according to Hollywood studios, none of their most successful films make a profit after studio overhead - so writers and directors entitled to a share of the "profits" get zip.

We know that the CEO's of American companies are tremendously overpaid for the work they do. The CEO of Ford gets paid 9x as much as the CEO of Toyota - for making bad decisions. This Exxon figure obviously comes after the pockets of Exxon management have been stuffed to the bursting point.

[Mike]

The problem as I see it is that the country doesn't "depend" on Disney to function. Oil effects nearly every aspect of our lives. Somehow it's just not right for the producers and refiners to make such huge profits on such a vital necessity. Unethical is the only word I can think of that describes their practises. They've got us over a barrel and they're loving it. The next thing you know they'll buy up all the toilet paper in the land.

[BrianGriffinLovesYou]

$11.68 billion in profit is still $11.68 billion in profit. Nice little dance you do around it, though, with the silly Disneyland comparison. There IS no Disneyland, ese--for Disneyland is all around us, coast to coast. (Jean Baudrillard's got a cute piece on that, if you're interested.)

[Scott]

The oil companies aren't doing anything illegal and they aren't the reason for the high prices. SO WHY DO WE CARE ABOUT THEIR PROFITS? Exxon Mobile has made record prices because they have more gas stations and do more business volume.

If this happened ten years ago Exxon was separate from Mobile and this wouldn't be an issue because they would have made about five billion each. If you don't Exxon Mobile here's an idea, stop buying gas from them.

[Hunter]

While the refining process may not have changed, if Exxon has to buy their crude at the market price of 5 times what it was 5-10 years ago then of course the cost to refine will go up. As for passing it on to the consumer, that's pretty much standard procedure for a company that's wants to stay in business. They made a lot of money because the world is using more oil than ever before. 8.5 cents of profit for every dollar of revenue is nothing to write home about.

[Absurd Comparison]

This comparison is ridiculous, like everyone with half a brain has noticed, oil is a COMMODITY, the kind of commodity which is regulated for necessary reasons. If anything, their profit margin is pretty big for a commodity, and that's not even considering the fact that this is the profit margin that we know about, energy companies are a little fast and loose with the books in case you're wondering.

California Energy Crisis, anyone?

[David K.]

I guess that old bit of folk wisdom is true, after all.

Injure one person, and you're a criminal. Injure one million, and you're Policy.

"...make money like Disney" - no one needs entertainment. If Disney wants to charge three times as much for seven nights at Disney World tomorrow, you can just go to Six Flags. You don't have to change from brand name to generic food and then dial back on your consumption of food altogether. For most of us, it doesn't take a leap of imagination to conclude that oil and a re-release of "Bambi" aren't the same animal. They aren't the same league. "They aren't even the same sport."

[brian]

Seriously, if an American company wasn't making this money, the Arabs would be. Exxon Mobil only has 2% of the worlds production. They make no money on refining (changing oil into gasoline). If you want lower prices for gas, then you can only either decrease demand or increase supply.
Get an electric car or walk.

[arnold sens]

The article make a lot of sense, however many of the comments are unbelievable. It appears many posters would like to see the oil industry ran by the government- with the state and federal governments astonishing financial abilities in play they would certainly change the price of a gallon of gas.

[JoeSchmoe]

Not a single report about how much money those governmental institutions are raking in from the PERCENTAGES in taxes charged for fuel purchases. I would love to know what roads are going to be repaired when there aren't any tractor-trailers hauling goods to grocers and other stores. The highways are starting to feel bare and not only am I paying more at the pump but I'm also paying more for goods and services that REQUIRE fuel to deliver. You aren't paying $4 at the pump. You are paying much more directly and indirectly. I do not see one electrical charging station at the service pumps, I do not see alternative fuels at the service pumps. Come to think of it, I haven't seen the new democratic controlled bunch PUSH for alternative fuels at the pump though my frigging vehicle can use RENEWABLE fuels such as ethanol, etc. Where the hell is the DEMOCRATS and their initiatives? All i see is political posturing and Neanderthal duh's. I know MANY men and women who once worked offshore go home when the rigs stacked. Would be nice to see them get jobs again instead of the middle-east. All the politicians are doing is a lot of handwaving and looking stupid.

[mike]

I'm all for capitalism. Like other people have indicated, if higher gas prices become a problem, we'll see it with a reduction of gas usage. But when prices went up months ago, fuel consumption went up also. Busines 101 states that you increase price until demand drops. If people change their habits (carpool, public transportation, ride a bike, walk), then it'll make an impact. Once demand for oil drops, prices will fall. Complaining but not changing one's habits... that's ridiculous.

Heck, the USA still has some of the cheapest gas of most first world countries.

[Byron]

We live in a country that is founded on capitalism and liberty, which means that our government does not regulate how much money people or businesses are allowed make.

How many companies do you know of that intentionally charge just enough to offset their overhead? If you know of any, then you must go out of your way to criticize them for overpricing just like you have for Exxon. This is an absurd idea, yet why do so many people have it?

People want lower prices, and get mad when they're not, and then look for someone to vent their anger on. We never look for what we can do to cause the prices to drop.

Commodities are very simple, when demand goes up, without a matching increase in supply, then the price goes up. The greater the disparately, the greater the price increase. Even if we get off of oil, the rest of the world's demand is growing so much that the price of oil will never go back to being under a dollar (like it was just 9 years ago). That is how the commodities work; Supply and Demand.

The sad thing is that whatever commodity replaces oil as our source of energy will suffer the same fate as oil (i.e. Hydrogen). The only way to break that cycle will be for us to develop an energy source that is both renewable and cheap (i.e. solar, wind, hydro, geothermal, and the holy grail fusion). Research for all of these have been in progress for decades, but the efficiency is not good enough to make them cost effective, even with gas prices the way they are.

[Cedric]

As someone who drives 55, I have no sympathy for those who drive past me. Which pretty much means I say Americans deserve the price they pay at the pump.

[mark]

What about the fact that the government is spending how much money a year making sure that there is good access to the oil (Iraq anyone). So who benefits the most from that government spending?? Apparently it is the oil companies with the record profits at a time when we are spending over 200 billion per year just on Iraq. Gee exxon paid 9 billion in taxes, sounds like a pretty good deal to them.

There should be an extra tax on the oil revenues to cover the extra costs incurred by govt in ensuring the supply. I realize that govt must do this as the economy depends on free flow of oil, but that doesn't mean that the companies that benefit the most from it shouldn't pay extra for it.

Simple supply and demand, oil companies should be paying for the right to make sure their supply is not cut off. But no, the conservatives seem to believe they should get tax breaks because they pay so much.

[Patrick]

@mark...

Okay, let us go ahead and tax the company that supplies the oil... so those companies can raise the price of gas to make up for the money they pay in taxes...

Please, do America a favor: sit out this election and spend some time getting an education.

[Gary Brown]

How can any one in their right mind defend Exxon? They are destroying our nations economy. Tell American, Delta. United that it's ok for them to make 12 billion in 1 qtr. Exxon has their profits along with the American peoples groceries and house payment. I am sure GW and Dick Cheney are fuming about this all the way to the bank. What kind of predident can watch the people he represents suffer at the hands of this out of control greed machine? A man with no conscience. But hey, it's ok. This is a free market so everyone bend over.

This is too big. Oils does not belong on the free market. These people are destroying the nations economy. It's time for the government to take control
of US oil company assets and run the show

[RGR]

I guess the democrats don't like Oil companies could it be that they are getting money from foreign companies? or they prefer that foreign companies earn more money that American companies. If the oil lobbies are not given money to the democrats that means that some body else is, or they want money from them. I guess they will prefer that any american company that earns more than 14% should be taxed more or better I invite these corporation to leave the country so they can make as much money they want. - Where is John Galt?

[forparity]

CNN noted: Exxon also had a hefty tax bill. Worldwide, the company paid $10.5 billion in income taxes in the second quarter, $9.5 billion in sales taxes, and over $12 billion in what it called "other taxes."

So let's see. $32 billion in taxes would (did):

- $107.87 for every person in the US
- Paid $4,114 in taxes for every second of the 91 days in the second quarter.
- 11 years of funding for UNICEF
- the entire federal income tax bill for the bottom 50% of taxpayers with positive AGI
- Total federal funding for "Natural resources and environment"
- 320 million textbooks for the public shools
- Damn near is funding the entire Iraq war (at this rate)

[Sternberg]

If the company is making too much, buy the stock.
If it is charging too much, don't buy the product, or produce a competing product at a lesser cost.
And for all those people who want to say that "we can't do those thins", because we are just the poor wage slaves, well yes you can, or at least someone just like you can and probably will.

[chris]

you want to open California's coasts to off-shore drilling? fine. then oil spills due to negligence which cause over $1 billion in damages are subject to the potential punishment of the death penalty.....literally

[martscan]

Great articles precipitate great discussion.

Unfortunately, this great article precipitated a lot of stupid discussion.

I believe any margin under 10% is reasonable for an industrial.

Oil companies don't set commodity prices, auction markets set commodity prices.

Corporations do not exist for purposes of patriotism, they exist to produce profits.

Exxon isn't 'gouging' anyone.

Chevron also netted $11B. Too bad we don't have more companies netting like amounts.

One comment, that of D.G, has it right.

[L Lee]

He/alth ins. 400/mo, elec.bill 200/mo, water 60ou, mortg. 1800, gas 350, food 400, trash pick up 70, homeowners/car ins 95,no cell phone, 3400/month expenses. 36000/yrincome - 3500/mo minus tax and soc sec, 9000/yr, take home 25000, haven[t bought a sock,one child in college,loosing my home, what is the answer? EVen with just rent on an apartment, still can't make it. can't go watch my son play cololege football, no cable, can't even watch on tv.working weekends. when a secretary pays more income tax than her boss Warren Buffett - somethihng is rotten in America. I WILLsurvive, I just lwish things weren't so hard. I'm really tired and everything hurts.

[Ayn Rand]

What is so wrong with the government limiting the profit a company makes when the citizens need that product? Oil is a need, we need it to drive our cars to work. And as long as we are talking about needs, I am sure our Big Governement can come up with some more things we all "need" and limit the ability of those comapnies to make a reasonable profit. If 8.5% is too much, lets say 4% profit is all you can make from now on.
I need shoes, everyone does too. From now on, the Government should limit the ability of all shoe makers to only be able to clear 4% profit. This is going to be great, cheap shoes. I'll save a fortune on my wife's shopping.
I need coffee. I am adicted to it. From now on, Starbucks and DDonuts can only make 4%, that is going to help the price of coffee!!!
I need clothes. Lets go after J Crew, Kohls, Lands End. Who do they think they are selling us a product we clearly need (you would not want to see me naked) at an outrageous profit.
I really need food. Kelloggs cereal (Capt Crunch) got to have it, got to get it cheap!!! I am sure we can get some others like Super Target, Super Walmart and any producer of food. Done, 4% no more!!!
I need a bank to pay all my bills to these evil companies. No more bank fees, free checking!!! 4% profit, thats it.
This is going to be sooooo great. All these things we need will now be regulated by our friend the Government. Of course these companies are tricky. We will have to place government agents in their businesses to watch them. And get this, we will charge them to pay for these agents!! And of course if these companies that are now limited to only 4% want to leave and take their comapnies to other more favorable countries, we of course will stop them. From now on, no US company can leave. Here forever.
Now, all my IRAs and 401K and savings are tied up in stock of these companies. hmmmm... I bet their stock value is going to drop because they can no longer make real money. I think the Government should force them to keep their stock value up. If it drops, the companies should have to buy it from me at a higher price. Its not my fault they made money and drove up the value of their stock that we, as Americans, own.
This is going to be a revolution! We can soak those evil rich people, take all their money and force them to live like us! I just hope none of them leave. You know, as long as there are people producing what we need, we can keep milking them for all their worth. What happens if we run out of rich people? Oh thats right, I forgot, we will have all their money, cheap clothes and shoes, so it will be okay.
I used to be able to fish for my food, but now the government will hand me a fish to eat. I will be able to sit back and relax. Soon I will forget how to take care of myself. AGgain, thats okay because we will have "free" government health care!!! Just like Michael Moore showed us in CUba. EVrything will be great. North Korea, CUba, Venezuela, Berlin under Russian rule.
I can not wait.
Ayn Rand