"Windfall" Profit Taxing

Full article (here).

Some have suggested taxing the “windfall” profits of oil producers. So let’s look at those profits.

It’s true that as crude prices have surged, so have profits for the companies that produce the stuff. Exxon Mobil last week posted a $10.9 billion profit for the latest quarter — the second-biggest U.S. quarterly corporate profit ever. It may help to put that number in perspective. (Many readers don’t really want to do that, but here goes anyway.)

The reason big oil companies post such huge profits is that there are only a handful of them left after the price crash of the late 1990s sent crude prices to $10 a barrel, below the cost of production.

Major U.S. oil companies also found themselves bidding against bigger and better-funded state-owned competitors. (Today, U.S. oil companies produce about 10 percent of the world’s crude oil.) To fund those projects they needed lots of capital; getting bigger by merging was one way to do that.

But, hey, $11 billion for three months' work? Isn’t that a little much? On the next page, let’s look at how that compares with profits reported by other industries.

Let’s start with drugs. There are eight major drug makers in the Standard & Poor's 500; collectively they made $36.2 billion over the past 12 months on revenues of $237.2 billion. That means they pocketed about 15 cents of every dollar’s worth of product sold. Not bad.

How about software? The seven big companies in the sector (including Microsoft, which jointly owns msnbc.com with NBC Universal) took in $92.3 billion in revenues and earned $23.6 billion in profits, or about 25 cents on every dollar.

Banking? Despite their problems with subprime loans, the eight big “money center” banks in the S&P 500 took in profits of $41.3 billion on revenues of $267.3 billion, about 15 cents on the dollar.

Now let’s look at the three oil majors in the S&P 500. In the last 12 months, ExxonMobil, Chevron and ConocoPhillips took in $833.7 billion in revenues but reported profits of $71.8 billion. That works out to about 8.6 cents of profit for every dollar's worth of crude.

Refiners fared even worse. They sold $293.6 billion worth of gasoline and other fuels and made $11.9 billion in profits, or about 4 cents on the dollar.

We got our data from MSN Money's Stock Screener.