Time to Rein In the Pump Profiteers
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Feeling a little squeeze at the gas pump? You are not alone -- U.S. consumers are expected to pay an additional $200 billion this year for oil and gas products.
These billions, notes Sen. Byron Dorgan, D-N.D., amount to a "massive transfer of wealth from average Americans who can't afford it to big oil companies who already were experiencing all-time record profits."
While ordinary Americans are forking over upwards of $3 for a gallon of gas, 15 distinctly unordinary Americans -- the CEOs of the largest U.S. oil industry companies -- are celebrating their biggest paychecks on record.
According to a new report, "Executive Excess," by the Institute for Policy Studies and United for a Fair Economy ( PDF)], Big Oil CEOs last year took home an average $32.7 million in compensation -- 518 times more than average oil industry workers in 2005. The ratio for all industries in 2005 between average and highest paid worker was 411 to one, while the average globally in advanced countries is 25 to one.
The Oil Barons' grab even exceeded their excessively paid counterparts at other leading U.S. firms. Their $32.7 million average pay was almost three times higher than the average bloated paycheck of $11.6 million for CEOs at 350 large corporations surveyed by the Wall Street Journal .
The three highest-paid U.S. oil chieftains in 2005: William Greehey of Valero Energy ($95.2 million), Ray R. Irani of Occidental Petroleum ($84 million), and Lee Raymond, outgoing CEO of ExxonMobil ($69.7 million).
At the end of July, ExxonMobil reported a quarterly profit of $10.36 billion, the second biggest gain ever. This follows its record-breaking annual profit of $36 billion in 2005.
When ExxonMobil's CEO Lee Raymond was called before Congress to explain, he stated that rising prices reflect global supply and demand, nothing more. "We are all," Raymond assured Congress, "in this together, everywhere in the world." Except Raymond. Raymond recently retired from ExxonMobil with a Golden Parachute retirement package worth nearly $400 million, including country club fees and use of the company jet. "He is a porker of the first order," observed executive pay expert Graef Crystal.
ConocoPhilips CEO James Mulva explained to ABC News that oil companies only make ten cents on the gallon. High oil prices, not greed, are the cause of skyrocketing prices at the pump, he explained. Big Oil can't control the global marketplace.
But if Big Oil CEOs have no power to influence the cost of gas, then they don't deserve any special reward for industry profits. And even if their performance contributed to the company's profitability, shouldn't broader criteria be used to judge their performance, including their record on the environment?
With these enormous salaries, Big Oil CEOs should be held to account for their failure to dedicate their mountains of excess cash toward seeking new energy sources that move us beyond fossil fuels. They can run green-looking TV ads claiming they are indeed preparing for the future. But when they throw massive windfall profits at chief executives, they seem to be signaling that the coming lean years will be somebody else's problem.
What is good for ExxonMobil and Lee Raymond -- and all the other titans of the contemporary American oil and gas industry -- has not been good for average Americans. According to new wage data reported in the New York Times , "wages and salaries now make up the lowest share of the nation's gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960's." So what can be done about petrol profiteering?
One proposal is to tax oil industry windfall profits and earmark them for public energy conservation projects and efforts to reduce energy costs for the poor. Sen. Byron Dorgan, D-N.D., has proposed that a 50 percent tax be applied to profits earned by major U.S. oil companies on the sale of crude oil above $40 per barrel.
Another proposal is to eliminate government tax breaks and massive subsidies for big oil. The independent Taxpayers for Common Sense identified 16 wasteful subsidies for the fossil fuel industry totaling $5 billion a year.
Finally, Congress should take up the question of anti-trust laws in the face of oil industry consolidation. Not since the 1911 break-up of Standard Oil Co. has the country witnessed such a concentration of petroleum power, with 23 major mergers in the last decade.
Big Oil's grip on U.S. politics is strong. Since 1990, they've given $192 million to federal candidates and parties. They have blocked sane energy policy and investments that move our country beyond dependency on oil.
That's why a campaign organized by Oil Change International to "separate oil and state," and encourage members of Congress to give up their addiction to Big Oil political contributions is a key leverage point. It's a practical first step in stopping further looting by the pump profiteers.
Chuck Collins is a senior scholar at the Institute for Policy Studies and coauthor of "Economic Apartheid in America: A Primer on Economic Inequality and Insecurity" (New Press, 2005). Eric Benjamin is a research analyst at United for a Fair Economy.