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Originally Posted by RJ
Please excuuuusse me if this question already came up, but.....
I've been reading, both in this thread and elsewhere, that the oil industry runs on about a 10% profit margin. What I'm wondering is, has that 10% margin been consistent over years or is that a recent number? The reason why I ask is that, obviously, if your margin is 10% then you'd rather be making 10% on an $80 barrell than 10% on a $40 barrel, assuming consumption stays the same. And if that's the case then I don't see where it would be in the oil industry's interest to be proactive in keeping the PPB down from their suppliers.
Am I missing something, perhaps being too simplistic? I can't claim to know the first thing about that business beyond how to put their product in my car.
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Making 10% on $80 is really no better than 10% on $40. It can be argued that 10% on $80 is significantly higher risk. It's double the income, but it's at least double the risk.
The oil companies don't always run in the black. They frequently run at a loss because their margins are so thin.