The Bank of Spain notes that oil companies skyrocketed their profits by passing on the increase in production costs “largely” to the final selling price
Production costs have risen for all companies due to the rise in energy products and, in general, in all raw materials after the outbreak of the war in Ukraine due to bottlenecks in global production chains. However, a report from the Bank of Spain confirms that about half of them have seen their profit margins grow during this period (Q1 2022 compared to 2021).
For example, the ‘Recent evolution of corporate margins’ document published this Friday by the Bank of Spain details that in some sectors this increase in margins was more pronounced, such as that of the oil companies. In this sector, consumer selling prices grow faster than production costs, increasing the margins of these companies, the text says.
«The industry branch shows a remarkable increase in its gross economic result (REB), of 45%, conditioned by the extraordinary growth of the oil refining subsector in a context of sharp rise in the price of crude oil, which these companies would be largely passed on to their selling prices,” says the Bank of Spain in its report.
Of course, corporate profits are far from pre-pandemic. Specifically, gross value added (turnover minus goods used to produce) is 5% below 2019 and profitability is -15%.
But not all companies saw their margins grow, despite the price increases we are experiencing. This is the case with electric power sellers, where margins have fallen as selling prices have risen “well below cost of production,” the agency notes. In other words, no matter how much final prices have gone up, the cost increase has been so intense that they haven’t noticed it in their corporate profits.
For example, the energy sector experienced a 21% drop in profitability. On the one hand, because of the limit of marketers to increase the prices for their free customers. And on the other hand, because the electricity generating companies recorded a sharp increase in their costs due to the rise in gas prices.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
