It's the Obscene Profits, Stupid! Exxon's Enormous Gains from the U.S. Keep Growing

By Nomi Prins, The Wip. Posted May 6, 2008.

How sad. Exxon Mobil, the universe's largest publicly traded company, which also happens to be enjoying some of its biggest profits ever thanks to the almost doubled price of oil during the past year, didn't quite live up to Wall Street expectations this week. In fact, its stock fell nearly 4 percent the day it announced its first quarter of 2008 earnings.

Unfortunately, this does not make the pain at the pump pulsing through the nation any more bearable. Apparently, Exxon could have made more profit, had it not chosen to hold back further gas price hikes. Instead, earnings in its refining business (which converts crude oil to gallons of useable gas) weren't as strong as it had wanted. Yes, that's right - Exxon would have made even more money had they passed more pain onto the public. They were just being "nice." Right.

As people contemplate paying $4 per gallon for gas, not to mention the havoc those higher oil prices wreak on their home fuel costs, Exxon isn't really skimming less off the top in order to be a Team America player. Nor does Exxon feel the same pain from these high oil prices that ordinary citizens feel while driving to school, work, the grocery store or childcare. The $21.7 million paycheck (18 percent more than last year) of Exxon's CEO, Rex Tillerson, certainly covers a whole lot of gas.

No, that Exxon didn't quite live up to Wall Street expectations is just pre-election spin, ensuring that whichever candidate gets into the Oval Office doesn't try to take some of their profits away by taxing them. (Not that they'd have to worry if John McCain wins the election.)

Exxon posted an almost $11 billion profit for the first quarter of 2008 on a staggering $117 billion in total revenue, which was up from $87.2 billion in revenue last year (or, more than a third of the projected 2008 $311 billion US deficit.) Part of Exxon's windfall still came from higher gas prices, which on average, rose about 30 percent over the year, as oil prices rose from $60 to $100 at the end of the last quarter it reported.

Plus, Exxon's earnings were up 17 percent versus the same quarter last year, pulling in the second-highest quarterly earnings in US history for any corporation. To put it in perspective, Exxon's last earnings for all of 2007 were a record $40.6 billion, which puts them in the running, if oil prices stay where they are, to come in at about 10 percent above that for 2008.

So, is Exxon joining the "go-green, don't be dependent on foreign oil" mantras popular in this election cycle? Are they spending some of that hard-earned cash on alternative energy sources? Not so much. Instead it was busy investing in itself, buying back $31.8 billion of its own stock out of that $40.6 billion profit, compared with just $3.3 billion in US capital investment. Says Tyson Slocum, Energy Director at Public Citizen, "This discrepancy certainly shows that motorists aren't getting any bank for their buck out of it."

And Exxon wasn't the only one struggling to beat their previous record profits. Oil companies around the world were feeling the love from record crude oil prices. Firms like BP and Royal Dutch Shell Plc, despite flat production over the quarter, posted stellar, even better than expected first quarter earnings, up 64 percent and 25 percent in profit respectively. ConocoPhillips' first-quarter earnings increased 17 percent to $4.1 billion.

On Friday, Chevron added to the oil company euphoria, posting a net income rise of 37 percent for the first quarter of 2008, and revenues of $65 billion, up from $33 billion, though also citing more limited refining profits (the 'downstream' part of their business - upstream is oil production). Like Exxon, Chevron also chose to use its profits to buy its own stock - underscoring that the best investment for oil companies is - oil companies. The firm bought back $2 billion of its own stock during the first quarter.

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Nomi Prins is a senior fellow at the public policy center Demos and author of Other People's Money and Jacked: How "Conservatives" are Picking your Pocket (Whether you voted for them or not).

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