[Ansteorra] Gas prices

[Lilie Rose Sinclaire]

I know I shouldn't but I can't resist...

First, ExxonMobil financials from yahoo
http://finance.yahoo.com/q/ks?s=xom

ExxonMobil's profit margins (corporate level) are 10.17%.

Second, the price of anything is based on supply and demand in perfect
markets, Perfecnt markets don't exist in real life, they are used for
economic models. In imperfect markets, which do exist, there is wiggle room
and market inefficiencies can occur, which means that producer or consumer
surplus can also occur. I think that in the case of gas prices going up the
producers (defined loosely as the companies that participate in the oil
industry) get the surplus, instead of the consumers.

The difference between perfect and imperfect markets from Investopedia:
"The perfect market, as defined in economic textbooks, is not a truly
achievable goal, but is still a beneficial model that provides a starting
point for observation of our present market status.  Practically, the
imperfect market is the only kind that really exists. Even in the United
States, the most advanced
financial<http://www.investopedia.com/terms/i/imperfectmarket.asp#>market
in the world, there are still numerous cases of price corruption,
improperly disseminated information and other market inefficiencies."

CEO pay is determined by the contract the CEO negotiates with the board of
directors. Theoretically, CEOs are supposed to be paid for performance. In
realily, most of CEO pay is determined by company size. However performance
(return on equity to the shareholders) is pretty much what public
corporations care about. This may seem unfair to many of us, but that's how
it is. If you buy a part of a company, you give your money to them in the
hopes that the company is going to add value and make one dollar into more
than one dollar. In the case of oil companies the shareholders got returns,
so according to the rules of the corporate world and free market economies,
the CEOs should make out like bandits.

(I am not saying I agree with this personally, but that's beside the point.
These are the rules, just like the natural world has rules / laws. I may not
like the fact that bodyparts start to sag after a few decades, but they do,
and whether I think it's fair or not is beside the point.)

Until shareholders decide that companies need to do things in a way that is
more acceptable to teh larger public, until they are willing to forgo some
of the money they get back in returns, things are not about to change.

An interesting sideline here, is why CEOs who destroy shareholder value (eg.
Freddie, Fannie, Home Depot last year and a bunch of others) also make out
like bandits, why shareholders let them do that.

By the way, if you are interested in what drives corporations watch the
documentary "Corporation". It highlights the history of corporations, the
legal background etc., and has a bunch of interviews with people like Milton
Friedman and others about the topic.

My two (?) cents...(no pun intended)... do not mean to offend anyone...just
couldn't resist jumping in.

Lilie

On Fri, Sep 12, 2008 at 6:28 PM, Harry Bilings <humble_archer at hotmail.com>wrote:

>
> They are public corp and the information is public record. The news media
> gets it because it is spectacular.plachoya > > OHHH let me cry big fat
> crocodile tears for them. If their profit margin is SO small they don't need
> to announce it. Nor do we need to be hearing that CEOs and CFOs are getting
> million dollar bonuses besides their salaries, when we have to worry about
> if we can afford to buy a tank of gas to go to work next week And go to a
> movie on the weekend. If their margins are so small; their officers don't
> need to get bonuses. Mortgages are only supposed to be about 20% of your
> income. Your gas bill shouldn't be 25%. > Ly Gabriele
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