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$11.5 billion in profits on $103.06 billion in revenue is a profit margin of less than nine percent. That doesn't seem all that unreasonable to me.
by causi 4y ago
$11.5 billion in profits on $103.06 billion in revenue is a profit margin of less than nine percent. That doesn't seem all that unreasonable to me.
- jeffbee 4y agoOil is the textbook commodity and the expected profit margin on commodities is ~zero. That's the nature of a commodity: a good so interchangeable, with so many competing producers, that the profit margins are inevitably minimized.
- kgwgk 4y agoBy ~zero do you mean "covering just the cost of capital over a full cycle"? This is a textbook example of a capital intensive and cyclical industry.
- _ea1k 4y agoThe problem is that supply naturally reacts slowly and ~1/10th of the supply was removed from the global market. I've heard people act as if that's a small shift, but its really not small at all over the short term.
- missedthecue 4y agoNot all commodities are equally recoverable at similar costs though, and in a world where we need more oil/copper/iron than can come out of the cheapest mine, there will be profit
- _ea1k 4y ago9% is exceptionally high for some industries (eg, commodities or retail). For example, Wal-Mart is closer to 3%. Its not unusual to see targets of close to 4%. I do agree with you that it isn't unexpected during a period of sanctions on a country that produces ~10% of the worldwide oil supply, though. Profits naturally will rise for the remaining players.