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Originally Posted by acropolis
So intuitively I would expect that a jump in oil prices would result in a drop in oil profits, not the opposite.
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If oil companies were simply middlemen, then yeah, one wouldn't expect their profits to go up or down much based on the price of oil (demand being fairly inelastic, at least in the short term). However, oil companies are also producers--that is, they own oil wells. So if the oil they were pumping out of the ground yesterday for $60/bbl now gets $70/bbl then their profits go up. \o/
Looking at Exxon's 1Q financial
results, for example, I see that their upstream (production) operations accounted for 76% of their profits.
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