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Raking in Profits at the World's Expense

By Matthew Wheeland, AlterNet. Posted February 6, 2006.


The record-breaking profits recently announced by ExxonMobil and Chevron come hand-in-glove with exceptionally -- and artifically -- high energy prices.

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Last week, within days of each other, Chevron and ExxonMobil announced record quarterly and annual profits for the second year running. These are not your average earnings statements. These are profits on an inconceivable scale, profits that dwarf the income levels of most countries.

ExxonMobil announced $36 billion in profits -- in profits -- last year. That's $3 billion every month, which if ExxonMobil were a country would make it the 90th richest country in the world. This astronomical number is a 42 percent increase from last year's record-breaking profits. Chevron also bested its record profits for the second year in a row, raking in $27.4 billion in 2005. This is, once again, the company's highest profit in its 126-year history.

It is no surprise that these announcements come as Americans are paying record prices at the pump, as well as for heating oil and natural gas. Many oil industry critics, as well as most drivers, can connect the dots.

Tyson Slocum, acting director of Public Citizen's energy program, said oil companies are taking advantage of consumers. "Oil prices are definitely arificially high," Slocum said, "in large part because of anti-competetive practices by major oil companies. We've documented it, government investigations have documented it." Slocum testified before the Senate on Wednesday about the price squeeze induced by mergers in the oil industry. In the past 15 years, there have been more than 2,600 mergers in the oil industry, which Slocum says make this kind of price manipulation almost inevitable.

"In 2001, the Federal Trade Commission did a major investigation of gasoline markets and found that oil companies could intentionally withold capacities from the marketplace in order to create some scarcity to drive prices up," Slocum said. "Now when they create scarcity, they're not actually creating scarcity like long gas lines, but they're creating shortages that, in the wholesale market, translate to higher retail prices. If that sounds familiar to you, because that's exactly the economic strategy pursued by Enron and other electricity companies in California, where they literally were taking power plants offline, creating shortages that caused the prices of electricity to skyrocket, and they made tons of money."

It's not just the big-business-friendly policies that rule Washington these days that have caused both high gas prices and even higher oil company profits. Between last year's intense hurricane season (which is expected to be as bad or worse this year) and ongoing concerns about Middle East oil, the public has been primed to expect high prices.

But many experts dispute the reality of those facts on the ground. Antonia Juhasz, author of "The Bush Agenda" and an AlterNet contributor, says that blaming high prices on the war in Iraq is a misleading argument. "One of the reasons that high oil prices have been sold to the American public is that there is a tighter supply because of a disruption in supply coming out of Iraq," Juhasz said in a recent phone interview. "The reality is that there is more oil coming out of Iraq today to the U.S. than at almost any other time in history. It's not steady or as much as the Bush administration had hoped for, but it's certainly more than was the case in the last 30 years, and certainly there's no reason to justify increased oil prices."

The sad truth of the matter is that gas companies have always been quick to raise prices and glacially slow to bring them back down. Steve Kretzmann, executive director of Oil Change International, explained the trend: "The oil industry takes the opportunity of the price of crude going up to pass on the price increase to the pump. They basically take whatever excuse they can get to raise it. And then you'll notice, when the price goes back down, there's nowhere close to a corresponding decrease in the price of gas. It's pretty clear that they're getting this coming and going."


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Matthew Wheeland is AlterNet's managing editor.

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View:
exxon as bad boy!
Posted by: yellow on Feb 6, 2006 3:01 AM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
It is no coincidence that Exxon-Mobil is the worst of the worst. They are also the richest. Not only are their after tax profits the highest but their book value as a firm, over $400 billion, makes them the most valuable transnational corporation in the world. Don't expect to much in terms of social responsibility.

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10%
Posted by: crusty on Feb 6, 2006 5:55 AM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
10% of total sales is the profit. Certainly there have been high prices and I dont like to pay them, but its 10%.

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» RE: 10% Posted by: drone
» RE: 10% Posted by: crusty
» RE: 10% Posted by: artiefacts
» RE: 10% Posted by: Michael Robin
» RE: 10% Posted by: artiefacts
Need for Price Controls and Excess Profits Tax
Posted by: rangerjim on Feb 6, 2006 7:11 AM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
This industry needs to be subject to both price controls and an excess profits tax. In addition, it also needs to be, along with the entire Bush Administration, subject to racketeering prosecution under the RICO act. If it were up to me the top executives of these pirate outfits and the conspiracy in Washington would all be facing firing squads. End the Price Gouging or else face the wrath of angry mobs about to burn Washington to the ground.

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Rename "windfall tax" to "unearned profits tax"
Posted by: kiatoa on Feb 6, 2006 7:21 AM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
Everyone deserves a windfall, but no-one deserves unearned profits. Did the oil companies do some sort of work to earn the extra cash they raked in? Of course not. By the by, I believe that taxing a natural resource like oil will push down the effective cost of the resource. Shift some tax burden from income to oil, oil consumption goes down, oil producers revenues go down, oil producers drop price in market share competition. Effective oil price paid drops! Note, emphasis on shift in tax, not increase.

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Problems and solutions
Posted by: chaoslegs on Feb 6, 2006 7:43 AM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
First thing, lets dust off and utilize those anti trust laws that broke up Rockefeller Standard Oil.

Second, for gas price spikes we have a refining capacity issue that is part of the problem. In the 90s refining was not very profitable AND the companies purposely reduced this country's refining capacity to be the bottleneck that cause prices to spike.

Since we have the strategic petroleum reserve for many reasons, why not create a strategic refining capacity reserve. Take the temptation away from the energy suppliers to game the system. You know they will cry (just like municipal wi-fi) that government should stay out, but then we offer to stay out if they will accept heavy regulation (I know it is pipe dreams).

Last, if we do the windfall tax on these big boys, I would love to see it go to fund credits for capital investment for renewables, maybe to small operations and rural cooperatives.

If you are going to dream, dream big!

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Was it just me
Posted by: jwg on Feb 6, 2006 10:38 AM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
Or did you notice a large drop in price right after the oil executives were asked before congress?

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Get on your Bicycles
Posted by: Artkansas on Feb 6, 2006 12:19 PM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
Exxon laughs all the way to the bank as long as people only grumble. It's when people take real action to reduce their fuel consumption that Exxon has to take notice.

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Raise the gas tax
Posted by: ScottP on Feb 6, 2006 2:18 PM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
Quit your complaining about gas prices, our gasoline prices are a fraction of those in Europe and Japan, where it has moved from the $5/gallon price it was at for a decade to $6/gallon. Higher fuel costs encourage conservation and alternative energy, which is why the administration and most of Congress oppose raising the gas tax (since they're stooges to Exxon). Of course, there would be a public outcry by people driving gas hogs who would claim it's regressive and unfair. My reply: what about global warming, is that progressive? Take your pick, you can have your cheap gas or you can have your environment. You can't have both.

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» Planet Earth, Yes! Posted by: Artkansas
Funny New Cartoon about Exxon's Greed
Posted by: GinnyS22 on Feb 7, 2006 10:22 AM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
Check out this funny new flash cartoon: http://www.ExxposeExxon.com/movie

On Monday Exxon announced that it made a net profit of $36.1 BILLION DOLLARS in 2005!!


While Americans were suffering through hurricanes Katrina and Rita and sky-high spikes in oil prices last year, ExxonMobil was busy pulling down the largest profit in the history of corporate America!!

The flash cartoon was put out by the Exxpose Exxon coalition to try to pressure Exxon to stop sabotaging efforts to fight global warming, quit lobbying to open the Arctic Wildlife Refuge to oil drilling, and get the company to use some of their huge profits to invest in renewable energy like wind and solar.

ExxonMobil is such a huge company. I think we should all post this (http://www.ExxposeExxon.com/movie) on our own blogs and websites to show our support for the fight!

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