Quote Originally Posted by ramAnag View Post
I?m surprised because, apparently naively, I imagined that the cost of oil related products had risen exponentially which is why we are paying more for petrol, diesel and heating oil etc. I hadn?t, again apparently naively, factored in that the oil and petrol companies are profiting to such an extent from the crisis. Silly of me!
lets say if you make a 10% mark up on selling a product, then it the product cost goes up by eg 50% you will increase your price to maintain the 10% markup - meaning your gross profits in monetary terms will go up 50%. You havent changed your margin but the turnover and cost of sales have risen proportionately. Equally you have a bigger base turnover to spread your overhheads across hence not profit will increase by more than 50%.

Of course the converse is true in that if prices fall then your gross margin will fall proportionately and your ability to absorb overheads will become impaired.

This where windfall taxes are a tad unfair in that they will get you when markets go up, but there is no equivalent relief when markets fall. In an incredibly volatile market where prices were moving significantly from day to day a lot also depends on the timing of the market shifts.

This is an exceptionally simplistic version as oil trading in particular (but also as with most commodities) yjr uses of futures trading hedging an options smooth things out longer term, but in any one quarterly cycle there can be very anomalous results.. The other quarter to quarter impact is simply the massive increase in stock values of oil held at the previous quarter end - pump prices will have gone up whilst the older cheaper stock holdings are being sold of at current higher yields. Then again same things happen in reverse.

The figures for comparison are (per BP) "Reported profit for the quarter was $3.8 billion, compared with a loss of $3.4 billion for the fourth quarter 2025." Thats a lot more than doubled. I suspect what youve seen is results on an underlying replacement cost basis which have approx double butare somewhat "pie in the sky" and not representative of what the actual cost really are.