A lot of folks are whining and wailing about the unfathomably large profit made by Exxon for 2006.

Oil giant Exxon Mobil Corp. on Thursday posted the largest annual profit by a U.S. company _ $39.5 billion _ even as earnings for the last quarter of 2006 declined 4 percent.

The 2006 profit topped Exxon Mobil's own previous record of $36.13 billion set in 2005.

Revenue at the world's largest publicly traded oil company rose to $377.64 billion for the year, surpassing the record $370.68 billion Exxon posted in 2005.
"Exxon Mobil continued to leverage its globally diverse resource base to bring additional crude oil and natural gas to market," Rex W. Tillerson, chairman of the Irvin, Texas-based company, said in a statement.

However, let’s look at some numbers really quick – numbers that make all the difference in the world.

As a percentage of total earnings, ExxonÂ’s profit was 10.45 %. Is that really an unconscionably high profit?

And taken per share, the profit was $6.62. With shares trading at $74 dollars as of this morning, that means that each share had a profit of 8.9%. Again, does the level of profit really shock the conscience?

What IÂ’m suggesting is that no, it does not. Indeed, those earnings are right around where many of us would like our retirement portfolios to be performing.

But most people don’t actually look at numbers like that. They hear “record profit” and assume that something unreasonable, unethical, or unsavory has been going on, not considering how that dollar figure relates to the size and level of capitalization of Exxon.

Watch for politicians and commentators to start demanding that “something be done” about oil company profits. Expect folks to start insisting that these companies be run as if they were not-for-profit enterprises, not business ventures with a primary responsibility to the shareholders AKA owners. After all, those complaining are people who fundamentally misunderstand the nature of business and the role of government.

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Posted by: Greg at 02:23 PM | Comments (1) | Add Comment
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