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The revenue ranking of the world's five largest oil companies in 2021 has been released. The top two are: Sinopec and PetroChina. The former has revenue of US$407 billion and profit of US$6.79 billion, while the latter has revenue of US$379.1 billion and profit of US$4.44 billion.
In other words, we have defeated super profitable oil giants like Saudi Aramco and are already the largest oil company in the world by revenue.
But even so, two barrels of oil are still losing money every year.
Even in the first quarter of 2022, the total loss of two barrels of oil in just three months reached 36 billion yuan, which is equivalent to a daily loss of more than 400 million yuan.
Then the question comes: Now that the oil price is so high, why are two barrels of oil still losing money?
Loss Analysis
First, let’s briefly introduce these two giants.
PetroChina and Sinopec are both state-owned enterprises under the State-owned Assets Supervision and Administration Commission. Although they are both engaged in petroleum, their division of labor is different.
PetroChina mainly engages in oil extraction and refining, while Sinopec mainly engages in refining and chemical production. In other words, PetroChina extracts oil, and Sinopec deeply processes the oil to produce downstream products such as gasoline.
From a national perspective, PetroChina dominates the northeast and northwest regions because there are relatively many oil fields and refineries in the north, such as Daqing Oil Field , Shengli Oil Field , Karamay Oil Field , etc.; while Sinopec dominates East China, South China and in central China, there are relatively few oil fields in the south.
In other words, PetroChina’s oil is mainly extracted from domestic sources, while Sinopec’s oil is mainly imported from abroad.
In the retail market, the two occupy 29% and 47% of the national market share respectively. The domestic market has an absolute advantage. In the gasoline market, the domestic market share of the two is as high as 92%.
After all, the cars running on the street are just a pile of scrap metal without the supply of oil. Therefore, PetroChina and Sinopec have the absolute "initiative" in the industry.
It stands to reason that PetroChina and Sinopec are both the market leader and the second runner-up. Not to mention making a lot of money, but they will not still lose money, right?
And what’s even more strange is that no matter whether the international crude oil price plummets or rises sharply, both barrels of oil are at a loss. This makes many people, like the monk Zhang Er, scratch their heads and express their incomprehension.
In fact, there are many reasons for the loss of two barrels of oil, the main ones are the following.
First of all, there are millions of employees behind both barrels of oil, including not only gas stations, but also oil field mining, oil processing, oil transportation workers, etc. This series of processes requires a lot of manual labor.
The huge number of employees means that monthly salary is a huge expense.
In times of economic difficulty, if it were a private enterprise , it would definitely cut down expenses through layoffs as soon as possible.
But because Two Barrel Oil is a state-owned enterprise, it will not do this. It must assume more social responsibilities and solve many problems such as more employment and economy.
The second is the mining cost.
According to statistics in recent years, of the total proven oil reserves in the world, the Middle East accounts for 2/3 of global reserves.
is like a piece of cloth above my head. I am the richest in the world, Saudi Arabia . Why are I so rich?
It is because it has the second largest oil reserves in the world. It has proven oil reserves of 298 billion barrels and daily oil production of 10.52 million barrels. The reserves can be used for 309 years. Moreover, there are more than 100 billion barrels of oil hidden underground, waiting to be discovered. and mining.
not only has a lot of oil, but also has shallow wells, good oil quality and reservoir physical properties, high single-well production, and low mining costs. It has a great price advantage, and you can make money by selling it at a low price.
According to statistics, the average cost of producing a barrel of crude oil in Saudi Arabia is less than 10 US dollars.
The cost of oil extraction in other countries in the Middle East is also very low, including Iran, Iraq, Kuwait, the United Arab Emirates and other countries.
In comparison, China has deep well oil, and the crude oil produced is of average quality. The disadvantage is that it has a large viscosity and density, and requires complex and expensive refining facilities.
At present, the cost of a barrel of oilfield extraction in China is more than 50 US dollars, while the cost of offshore extraction is even more expensive, about 60 US dollars.
To give a vivid example, the wealthy people in the Middle East can dig out oil by hiring someone to drive an excavator, but a large team of ours can drill a well several hundred meters deep to get a little oil out.
Of course, the cost of oil extraction is not only the physical extraction cost, but also the cost of logistics, storage, manpower, administration, etc. In addition to these costs, there are also benefits divided by various channels.
In many cases, the cost of extracting the oil we mine exceeds that of imported oil. More importantly, domestically produced oil cannot meet the current needs of China's rapid economic development, so it must be imported.
According to National Bureau of Statistics data, my country imported a total of 512.98 million tons of crude oil in 2021, and the cumulative import amount reached 257.3 billion US dollars. The number one importer is Saudi Arabia , with a total of 87.57 million tons of crude oil imported from it. , accounting for 17% of total crude oil imports.
What’s even more exaggerated is that the proportion of China’s crude oil imports is almost over 70%, which means that only 30% is domestically produced.
But important strategic materials like oil are always in the hands of other countries, so what can we do? If foreign countries impose a blockade on us, will we be without oil?
People can happily sell to us during peacetime, but if international turmoil occurs, that may not necessarily be the case.
Therefore, even if we continue to lose money, the two barrels of oil will still be mined, and the mining cannot be stopped.
Because in addition to supporting domestic social demand for refined oil, it is also responsible for the country's energy security and domestic oil price stability.
For example, even if the cost of extracting two barrels of oil is higher than in the international market, we must continue to increase our efforts to extract it.
Domestic oil must have a certain degree of self-sufficiency to avoid over-reliance on foreign crude oil imports, and at the same time maintain the stability of the oil market. This is for strategic security considerations.
Furthermore, international oil prices change too fast, and sometimes they fall right after we buy them.
We have just imported crude oil at a high price and then refined it. It has not yet formed the final product that can be sold. We found that the price of crude oil fell, so we bought it and it fell again.
For example, if two barrels of oil buy a batch of crude oil in January 2022, the international crude oil price will basically remain between US$50 and US$60. If the price of refined oil sells for US$40 in March, the profit per barrel will be reduced. As much as 10 to 20 US dollars.
This is similar to ordinary people who just buy a house and the price of the house drops. This makes no one happy, right?
The crude oil imported at a high price can only be sold at a low price. It is difficult for the "two barrels of oil" to make money, so the losses can only be borne by the two barrels of oil themselves.
Finally, there is another reason. my country’s refined oil products have a pricing mechanism. That is, after the international oil price falls below 40 US dollars per barrel, domestic refined oil products will no longer be lowered.
Does that make a lot of money? Not really.
Since Two Barrels of Oil is a state-owned enterprise, these price differences are used as risk reserves and must be handed over to the state treasury. Two Barrels of Oil cannot use this money to make up for its own losses.
This is also the fundamental reason why our oil prices are not linked to international oil prices. If international oil prices fall, we will not fall. If international oil prices rise, we will also rise.
and finally
, as two barrels of oil owned by the two major domestic oil giants, always suffer losses, which is indeed incomprehensible to us ordinary people.
It’s no wonder that some people ridiculed Two Barrels of Oil as “selling the most expensive oil in the world, losing the most money in the world, and receiving the most subsidies in the world.”
But losses are not terrible. Two barrels of oil still need to study more on how to improve their management and cost control capabilities. After all, if they are always losing money, no matter how big the family business is, they will not be able to sustain it.
In the words of Uncle Ge, the landlord’s family has no surplus food!
