Consumers on Fumes, Oil Industry Guzzles Profits
Consumers on Fumes, Oil Industry Guzzles Profits
Over the last year, gas prices have increased by 39 percent. Consumers are struggling to pay prices that average $2.23 per gallon. Meanwhile, the oil companies are raking in record profits, giving their executives fat raises and asking for billions in incentives from taxpayers.
OIL INDUSTRY COFFERS SWELLING WITH CASH: According to the Wall Street Journal, “Exxon Mobil Corp. and Royal Dutch/Shell Group both reported huge increases in first-quarter income, benefiting from the industrywide bonanza also swelling the coffers of their peers: high prices for the oil they pump and high margins for refining it.” [Wall Street Journal, 4/29/05]
RECORD PROFITS FOR EXXON: Exxon “said net income totaled $7.86 billion, or $1.22 a share, up 44% from $5.44 billion, or 83 cents a share, a year earlier…. Exxon’s results were a record first-quarter take for the oil behemoth… [Wall Street Journal, 4/29/05]
SHELL PROFITS UP 40% FROM LAST YEAR: Shell “reported net income of $6.8 billion … up 40% from $4.85 billion in the first quarter of 2004.” [Wall Street Journal, 4/29/05]
$30 BILLION IN EXTRA REVENUE FOR CONOCOPHILLIPS: The Houston Chronicle reports “ConocoPhillips, the nation’s third-largest oil and gas company, said today that first-quarter earnings soared year-over-year on high oil prices…. Total revenue was $38.9 billion, up from $30.2 billion last year….” [Houston Chronicle, 4/27/05]
EXXON’S HEADACHE — WHAT TO DO WITH $40 BILLION IN CASH?: Exxon Mobil’s “soon-to-retire CEO suddenly has a new anxiety: how to spend the windfall wrought by $55-a-barrel oil. By the end of April, Exxon will have a cash hoard of more than $25 billion…. If oil simply stays where it is now, Exxon’s cash could approach $40 billion in 12 months. By then [Exxon's CEO] is expected to have handed off the top job — and the headache of what to do with all that cash.” [Fortune Magazine]
OIL INDUSTRY EXECUTIVES GET 109.1% RAISE: The recent Wall Street Journal compensation survey found that oil and gas executives’ total direct compensation (2004) was about $16.5 million (median). And the median percent change from 2003 to 2004 was 109.1 percent. This was by far the highest of the industries profiled. [Wall Street Journal CEO Compensation Survey]
BILLIONS IN GIVEAWAYS TO OIL INDUSTRY TUCKED IN ENERGY BILL: In the Energy Policy Act of 2005, oil and gas companies will receive $515 million in authorized spending from the U.S. government, including “$125 million to reimburse oil and gas producers for 115% of the costs of remediating, reclaiming, and closing orphaned wells.” The bill also created a $2 billion ultra-deepwater fund to pay for research that companies are already pursuing without government help. On top of that, the bill provided $3.275 billion in new tax breaks to the oil and gas industry. [Taxpayer.net]
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what comment can I make?
May 9th, 2005 at 11:04 amJust because I love you guys – the correct spelling is “guzzle”
Can you tell I just finished grading finals?
May 9th, 2005 at 11:21 amDespite zooming oil and natural gas prices last year and the best cash flows in industry history, the top 15 energy companies let go another 21,000 employees, according to a report by energy consulting firm John S. Herold. My URL links several other stories on this issue.
May 9th, 2005 at 12:51 pm!!Am I agreeing w/ ThinkProgress? Well, maybe. The gov’t should not be in the R&D business. Of course the oil companies profits are sky high, they have no incentive to do their own R&D!
The gov’t should be relaxing restrictions on exploration…that’s pretty much it.
May 9th, 2005 at 1:33 pmAm I agreeing w/ Tony? Well, not quite.
The Government certainly should stop the giveaways, including and especially the tax breaks.
The record profits tell us something else. Market forces are NOT at work. We don’t have equilibrium. In part, because the demand for gasoline is in the short term inelastic.
Textbook def: “The situation where quantity changes by a smaller precentage than price along the demand curve.”
Plainer English: even though the price increases, people don’t buy less because they need the product.
But that’s only part of the explanation. The companies have record profits because they’ve raised prices disproportionally to their costs.
In an ideal market situation, once we’re beyond the immediate short term, the big oil companies should have been competing with one another on price driving the cost to consumers down.
Instead, we have just the opposite. The companies have kept the prices up, not competing with one another, and taking in record profits.
All this under the guise of shortages caused by terrorism.
It’s nonsense. Just buckraking that further adds to the real cost of Bush’s failing Iraqi policies. & guess who’s doing that buckracking.
Yup, market forces would be wonderful: if only we had them–and not an unofficial oligopoly–at work in the USA.
Classic example of informal collusion: what the Economist elsewhere calls “gentle non-price competition.”
Doesn’t seem so gentle to me. Not that we currently have a government interested in sound economics, either.
No freemarket here: just exploitation by Bush’s base of the American people. SSDD.
That’s pretty much it. & more exploration won’t help.
May 9th, 2005 at 4:00 pmthe government should invest in alternate energy sources by providing tax breaks and other incentives to companies who will research such things. Not tax breaks to companies so bloated with money its sick.
May 9th, 2005 at 4:21 pmThom- Supply has an effect on the prices as well. If OPEC were to increase supply 10 fold, the price would go down for consumers. Fixed costs (refining, basically) are so high that it is difficult for new firms to enter the oil market. If supply was increased, it would be more economically viable for firms to invest in more refining, because they could actually get some oil to refine.
May 9th, 2005 at 5:16 pmThom, et. al. Even if the companies were forced to break even, and the profits went directly to reduce the cost of each barrel of oil, the price decrease will be of only USD 3 at most. The real culprit of the high prices are the OPEC members who manipulate the offer of oil in order to keep the high prices.
May 10th, 2005 at 3:10 pmbest site of its kind :-)
June 19th, 2005 at 5:59 amsee that the point about how bush is getting the profit all that $$$$, were you wondering why Social security, medicare, school, etc gone down. that is the point why things have gone up because of that, why bush wants oil, fuel etc etc GET A HINT.
June 29th, 2005 at 3:54 pmLet’s see…December 2002 gas was about $1.00 a gallon around here…today $2.48. It took, what, nearly 75-80 years to get to $1.00 and 2 1/2 years to rise another 150%…and don’t even mention to me about how its still cheaper than 1973 adjusted dollars. Soybeans sold for around $6.00 a bushel then and they sell for about the same now. November 2004 issue of Kiplingers has an article stating that Exxon has more in reserves right now than they have sold in the last TEN YEARS!!! And now big oil gets a tax break…and Bush is tied to big oil…coincidence…I think not!!
August 9th, 2005 at 5:00 pm[...] I guess it’s just all a matter of supply and demand, right? Surely there’s nothing funny going on here. [...]
September 7th, 2005 at 1:03 am[...] Bush’s allies in Congress are using high gas prices as another excuse for massive giveaways to the oil industry. The Los Angeles Times reports that conservative "leaders in Congress announced plans to introduce new legislation or amend existing measures to bestow more tax breaks on the industry and provide other incentives left out of the big energy bill Bush signed into law in August." The oil industry hardly needs the help. Even before Katrina hit, oil companies were flush with cash. ExxonMobil’s profits are expected to exceed $10 billion in the third quarter of 2005, "more net income than any company has ever made in a quarter." Now the industry is using Hurricanes Katrina and Rita to jack up prices — and profit margins — even higher. [...]
September 27th, 2005 at 12:06 pmIM SICK OF ALL THE UP AND DOWN FROM GAS PRICES…IM GETTING A HYBRID.
October 27th, 2005 at 5:53 pmGetting a “hybrid”?
October 28th, 2005 at 2:52 pmIt still requires fuel so just get a Horse or Bycicle.
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January 29th, 2006 at 8:59 pm[...] Notwithstanding oil companies’ record profits, the real culprit of high gas prices, according to this morning’s letter to every member of Congress, is ethanol: [Refiners] face complicated challenges in switching to ethanol, which has numerous logistical difficulties in its transport. Unlike MTBE, ethanol cannot be shipped through pipelines. Ethanol is also currently more expensive than gasoline, and imports face a 54 cent per gallon tariff. [...]
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