BETWEEN THE LINES: Is Big Oil Cashing in High Gas Prices?
Over the last several months U.S. consumers have seen gasoline and heating oil prices skyrocket. The OPEC nation's decision to cut back production is one reason prices at the pump are now approaching $2 per gallon in some parts of the country. Like a few other commodities in the marketplace, the price of oil affects the cost of virtually all other products and services.As oil prices rise, so does the rate of inflation, a situation that has in the past caused the economy to falter. While public attention on increased gas prices have focused mostly on OPEC production, little attention, if any, has been paid to the role of big oil companies like Texaco and the recently merged British Petroleum/Amoco companies.Scott Harris spoke with Wenonah Hauter, executive director with Public Citizen's Critical Mass Energy Project, who examines the role U.S.-based oil companies may have played in the dramatic rise in energy prices.Wenonah Hauter: There a number of things coming into play to make oil prices go way up. The simplistic way of looking at this is that it's just the oil-producing nations doing this to the United States. But you had better believe that the oil industry also had a hand in this. The oil producing nations are very, very dependent on the oil industry for capital investment and new technology for drilling, and with just few exceptions, the oil companies have extremely close relationships with the nations that produce oil -- countries like Saudi Arabia, Kuwait and Mexico.Another thing that is happening is that a real killing is being made in the futures market from speculation on barrels of oil, where a single barrel of oil is sold many times over. We should wonder what kind of inside information the oil industry or other players may have and what kind of money has been made in the last six months or so. We'd like policy makers to look into that.And also, the rise in oil prices is going to help the domestic agenda of the oil companies who drill in the United States. They're going to be able to leverage these high oil prices to do things like change policy to drill in the Arctic and to reduce environmental regulations.So those are a few things besides the cut in production that are causing prices to go up.Between The Lines: What in your mind is the role of the large oil companies in this latest round of price hikes? Have they been cashing in as was the case back in the 1970s, where there was an oil embargo as a result of the U.S. backing Israel during the Middle East War? We found in that case, after some investigation, that the big oil companies had managed to really gouge the public.WH: Well, we certainly think there is a lot of cooperation going on. And we might call it collusion. An example is their 1999 revenues in comparison with their 1998 revenues. And we will be looking at this again when their first quarter of this year's revenues and net income comes in.Some evidence for this becomes clear when you look at what kind of profits they were experiencing by the end of 1999, as compared with 1998. Let me just read you some of the percentages: Arco has had a 165 percent increase in profit. Texaco has had a 36 percent increase in profit. Shell, 38 percent. Phillips, 46 percent. Conoco, 18 percent. BP/Amoco, 35 percent. These are some of the very biggest oil companies, the major privately-owned companies. Only Exxon-Mobil did not do well at the end of last year, and that's because of the merger and many expenses associated with that.So profits are increasing and we'll have to look at the last couple of months to know what's happened recently. But just by examining their net income, we know there's some funny business going on.BTL: What can we do to find out if indeed the oil companies have been taking advantage of the OPEC cut in production to increase their profits?WH: I think that we have to really demand a Congressional investigation. To look at exactly what's happened over the last year and to get to the bottom of it. Now, the problem of course, is that there's a lot of posturing on Capitol Hill about oil prices going up, and not a lot of real examination of what's going on. That, unfortunately, is because of the tremendous amount of influence that the oil industry has on public policy and on the law-making of Congress. If you look at the 1997-1998 election cycle, the oil industry spent about $77 million lobbying Congress, and made about $4.5 million in campaign contributions. We know this is an election year, and raising money is one of the major endeavors of both of the parties, and the idea that they're going to take a serious look at what the oil companies are doing is unlikely. But that's what people should demand.Wenonah Hauter is executive director with Public Citizen's Critical Mass Energy Project. Contact Public Citizen by calling (202) 546-4996 or visit their Web site at http://www.citizen.org