Wednesday, May 10, 2006 | 7:27 a.m.
This is in response to Jeff Willets' May 9 letter. He erroneously suggests that if Exxon cut its price of gasoline in half, it could live on $4 billion in profit.
Exxon's quarterly revenues were $88 billion, with costs of $73 billion and with tax liability of $7 billion, leaving the $8 billion profit. Cutting the revenues in half to $44 billion would leave a loss of $29 billion with a tax refund of over $10 billion. This isn't an accounting trick, it is basic math.
Also, Exxon cutting prices in half would not affect the profits of the oil traders, refiners, distributors, gas station owners or the 45-50 cents per gallon in taxes to the state and federal governments. The price of gasoline at the pump would go down, but not by much, definitely not by half.
Big Oil does not set the world spot market price; market forces and OPEC have more impact. The president of Iran threatening to destroy Israel has more impact on oil prices than Exxon. The increasing demand in China has a significant impact as well.
The obscene profits are because of size. Ten years ago Exxon's annual revenues were only $134 billion and $7.5 billion profit. After the oil company mergers in the 1990s, we only have four major players in the United States. If 12 smaller companies shared the industry profits instead of four, would there be such uproar?
Kyle L. Tingle, Henderson
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