$40,610,000,000. That’s the profit Exxon Mobil made last year. It’s a record, not just for oil, but everyone. $10,900,000,000. That’s the profit Exxon Mobil made in the first quarter of 2008. Annualize that and you’ve got another record year in 2008. Congress has once again pulled in the oil executives to explain themselves. As in the past, this does nothing for consumers and just lets Congress look like the good guy. Here’s the entire situation in a nutshell:

Oil got expensive, so consumers have to pay more at the pump. The oil companies started making bigger profits, while consumers suffered. Congress represents the consumers, and so its their job to ask Big Oil to explain themselves.

Every time Big Oil comes before Capitol Hill they say the same thing. Its such a formality at this point I don’t know why they even bother. The question always is “Why are your profits so high?”. The media has given us the impression that the answer is “Because we want to make lots of money”. The actual answer is, “We were smart enough as an industry to prepare for the growth in demand of our product, thus we reap the rewards”. Exxon and the other Big Oil companies owe the American public no explanation for their profits. Its called Capitalism, kind of why America is awesome. In fact, you should be smart and own stock in these companies. I do through mutual funds, likely you do as well.

Alright I still haven’t explained why Big Oil isn’t your enemy. Which do you want to do first, taxes or profit margin? We’ll do taxes since we’re still in that season. Exxon Mobil is the single greatest taxpayer in the United States. That is, no one pays more taxes than they do. Those taxes pave your roads, fund the EPA, and of course pay the salaries of everyone in Congress. Its true they have some tax breaks and maybe they should be revoked, but that’s an argument for another day. The fact remains that the profits of Big Oil are a big contributer to our tax revenue.

This one is my favorite. To be honest I didn’t even notice this until writing a post about the Fortune 500 (coming soon). As you may know, profit margin is the amount of revenue that’s profit. So if I have a 10% profit margin, each $1 in revenue gives me $.10 in profit. If I can grow my revenue while keeping the same margin, I’m going to get great profits. To the cynical consumer, you can look at profit margin as “how much of my dollar the greedy corporations are taking when I buy stuff”. It’s my feeling that Congress should focus on the industries with the highest profit margins. They are taking the most money out of my pockets per dollar I spend. Check out the list and see if you can find any other bad guys. Oh what’s this? Cigarette companies have a higher profit margin! When was the last time they had to answer for their profits? Oh! Despite having (what we were told) a bad 2007, BANKS still have better margins than Big Oil.

Source: Yahoo Finance

Better still, let’s just look at companies in general. Below we have some of the biggest consumer brands in the country. You should know the first 3 well, Revlon does make-up and Wells Fargo is the #5 bank in the country if you didn’t know. Why is it that Congress crawls the up the rear of Exxon but greets Bill Gates with open arms? Microsoft has almost 3X the margin. Wells Fargo participated in many bad loans to consumers yet no one other than Countrywide has been asked to testify. Revlon does makeup and has similar margins, but they aren’t being picked apart by the media. Just blame the highest profit.

I’m not here to tell you that Big Oil is the next United Way. They don’t have to be. Oil is a profitable industry. When the media tells us Americans are suffering, we listen whether its true or not. Naturally, the American way is to blame someone other than ourselves. Just acknowledge to yourself that you played a part in driving up the cost of oil. Don’t blame Big Oil because they planned their infrastructure in a way to expand with increased demand. Take responsibility for your own greed America. Blame yourself and then do something to decrease your reliance on the black gold, truckers will thank you. Now go on, find something else to blame for your inability to control spending. Big Oil may not be your friend, but its certainly not your enemy.

Liked this post? Hated this post? Hate me? Email me and let me know: Philip@weakonomics.com