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Big oil made over $600 billion during Bush years, but invested bupkis in clean energy, Part 1

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"Big oil made over $600 billion during Bush years, but invested bupkis in clean energy, Part 1"

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[This article is reprinted from the Center for American Progress website.]

It should come as no surprise that last year’s record high oil prices also led to near record profits for big oil companies. The price of oil climbed from January 2 to July 14, 2008, repeatedly setting new price records until it peaked at $147 per barrel””more than twice the price of the previous year. The big five oil companies””BP, Chevron, Conoco Phillips, ExxonMobil, and Shell””made record profits during the first three quarters of 2008 due to these record prices. When oil prices collapsed along with the world’s economies, the oil companies’ profits were reduced, too. However, the big five companies still made a combined profit of $100 billion for 2008 ^ (see note below).  The sum is the second-highest combined big oil profit on record, exceeded only by the 2007 combined total of $123 billion.

The 2008 big oil profits bring the grand total under the two terms of the Bush administration to $656 billion, which is nearly two-thirds of a trillion dollars. Given the urgency to restart the economy with clean energy investments, and the need to slash U.S. oil use, you would expect these wealthy energy companies to be taking steps to develop new clean-energy technologies and fuels to address these economic and security concerns. Despite their soaring earnings, the big five companies were very stingy with investments in renewable and low-carbon energy technologies and fuels that would reduce oil dependence. In fact, a CAP analysis of their investments reveals that the big five oil companies invested just 4 percent of their total 2008 profits in renewable and alternative energy ventures. This reality contrasts with their ads that promote greener, cleaner images.

After oil prices hit a record last July, the August unemployment rate hit a five-year high of 6.1 percent and has continued to rise. Some jobs losses were directly related to high oil prices, such as in the aviation industry, which was forced to make major cuts to be able to handle the high price of jet fuel. Further, as households were forced to cut back on spending to keep up with exorbitant gas prices, sectors such as retail also purged payrolls. In June 2008, CNN reported that “many economists say job losses could intensify during the rest of the year due to rising energy prices.”

ExxonMobil, the largest publicly-traded American corporation, accounted for nearly half the 2008 oil profits. With over $45 billion in net income for 2008, Exxon earned the equivalent of nearly $150 for every U.S. resident. Despite being the highest earner of all the oil companies, ExxonMobil invested the least in renewable energy””less than 1 percent compared to its 2008 profits. It also invested the least in absolute dollars.

While oil prices steeply declined in the fourth quarter last year, all but one of the Big Five saw net profits in excess of $20 billion. These enormous profits were primarily due to record prices at the pump, which squeezed the budgets of everyday Americans. The big oil companies were worried about the impact of these huge profits on their images while Americans were bearing the burden of record prices. So to soften the public’s perception, these companies launched a green public relations offensive to convince the public that they were part of the energy solution, instead of part of the energy problem.

Media tracking group TNS Media Intelligence reported that $52.5 million was spent by the oil industry on greenwashing advertisements””advertisements boasting about investments in wind and solar power or efficiency while the companies did very little””in the first quarter of 2008 alone. However, a CAP analysis of actual company investments in renewable energy and energy efficiency indicates that the PR campaigns are little more than empty rhetoric.

For example, ExxonMobil spent $100 million on advertising in 2007, (its 2008 advertising totals are unavailable). Some of its ads catalogue ExxonMobil’s “efforts” to combat global warming, with messages that include “saving energy and reducing greenhouse gas emissions.” This ad ignores the millions of dollars Exxon pumped into funding organizations that questioned the existence of global warming. Exxon’s television ads similarly talk about global warming, efficiency, and alternative energy sources, concerns not reflected in investments.

Chevron has its own advertising campaign to tout its green credentials. The company is spending millions to disseminate its “I Will” message on newspapers, television, and even on the sides of buses. But Chevron made a total of $23.9 billion in profits in 2008 while investing only 5 percent of its total profits in renewable and alternative energy ventures.

Other companies have also engaged in major greenwashing advertising campaigns in an attempt to protect their images during record gasoline prices and profits. BP has a whole series of cheerful animated commercials, and the BP logo itself is a green and yellow sunburst-like flower. BP’s profits for 2008 were $21.2 billion, yet it invested only seven cents in its alternative energy unit for every dollar of profit.

Similarly, Shell has recently launched a major new web advertising campaign that emphasizes the company’s focus on technology and innovation. However, the majority of these advertisements focus on technology for the extraction of hard-to-access petroleum reserves, such as tar sands, which produce huge amounts of greenhouse gases and toxic waste. In addition, Shell just announced a moratorium on investments in wind and solar energy (see “Big Oil’s small investments” section below).

The advertising campaign by the American Petroleum Institute””big oil’s lobbying muscle””reflects the oil industry’s real agenda. Instead of exaggerating the green credentials of oil companies, their “Energy Tomorrow” ads argue that oil is the fuel of the future. The latest advertisement advocates drilling for oil and gas in previously protected coastal waters. “Increased production of domestic oil and natural gas will”¦ drive our 21st-century economy”¦Maybe that’s why most people support putting more of America’s oil and natural gas to work.” The claim that increased production of oil and natural gas would drive the economy has been disputed by President George W. Bush’s Energy Information Administration, which determined that “access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030.”

Big oil investments, 2008*

Company – 2008 data Exxon Mobil Shell BP Chevron Conoco Phillips
Profits (millions) $45,220 $26,288 $21,157 $23,940 ($16,830)
Amount invested in stock buybacks and dividends (millions) $40,100 $13,307 $11,644 $8,000 $11,029
Investments in stock buybacks and dividends compared to 2008 profits 88.7% 50.6% 55.0% 33.4% ^(see note below)
Amount invested in renewable energy (millions) $10 $500 $1,500 $1,250 $650
Investments in renewable and alternative energies and efficiency compared to 2008 profits <1% 1.9% 7.1% 5.2% ^(see note below)
Contributions to federal candidates and parties for 2008 election cycle (millions) $1.2 $0.3 $0.5 $1.0 $0.7
Lobbying in 2008 (millions) $29.00 $3.3 $10.5 $14.5 $8.5

^ The net loss by Conoco Phillips is due to its write-downs of more than $34 billion for domestic oil exploration and production and an investment in the Russian oil company Lukoil. If not for these costs, the company would have made a nearly $18 billion profit, making 2008 the record year $134 billion for the Big Five.

And API’s assertion that “most people” support more oil and gas drilling is misleading at best. An NBC/Wall Street Journal poll asked “When it comes to addressing our energy problems, which one of the following do you think should receive the most emphasis?” (italics used for emphasis). Six of 10 respondents favored “developing alternative energy sources.” Only one quarter supported “exploring and drilling for oil in the United States.” A more recent poll by the Center for American Progress shows that 76 percent of Americans actually feel that “America ‘s economic future requires a transformation away from oil, gas, and coal to renewable energy sources such as wind and solar.” And by two to one, Americans favor more financial support and incentives for alternative sources of energy, such as wind and solar, over support for oil and gas.

The commitment of the oil companies to renewable energy is also undermined by how much they spend to counter legislation that would support clean energy development over oil. Case in point: More than $65 million was spent on lobbying by ExxonMobil, Chevron, Conoco Phillips, Shell, and BP in 2008. ExxonMobil had the second-largest lobbying expenditures of any company in any industry. What’s more, total lobbying expenditures in 2008 for the five companies far outstripped those of 2007, when $37.7 million was spent to pressure lawmakers to protect industry interests.

The big five companies also attempted to curry favor with politicians by donating money to campaigns via oil company political action committees. The 2008 cycle saw $3.6 million in contributions to federal candidates and parties. Four out of the five companies are in the top 10 of oil and gas contributors to federal candidates and parties. Unfortunately, these contributions and their lobbying efforts have been largely successful. Last year they were able to whittle down the repeal of $25 billion in tax breaks and recovered royalties to only $8.9 billion as part of the Emergency Economic Stabilization Act of 2008″”about one-third as much as originally proposed in June 2007.

The good news is that President Barack Obama’s proposed budget would further reduce taxpayer support for oil companies awash in profits. It would eliminate another $31.5 billion over a decade by repealing tax breaks and recovering lost royalties. The new measures include “closing loopholes, charging appropriate fees, and reforming how royalties are set.”

The Obama administration believes that oil companies don’t need any more money from taxpayers. Testifying before Congress on March 3, Office of Management and Budget Director Peter Orzsag urged elimination of some taxpayer support for big oil companies. “Although the administration supports the responsible production of oil and natural gas as part of a comprehensive energy strategy, excessive government subsidies distort market signals and slow the transition of the economy from fossil fuels to clean, renewable sources of energy.”

With a growing federal budget deficit, taxpayers should not have to subsidize companies that made two-thirds of a trillion dollars over the past eight years. On March 26, both the Senate and House Budget Committees included President Obama’s proposed cuts to big oil subsidies in the budget resolution. The House budget committee voted for the budget proposal by 24 to 15, while the Senate voted by a margin of 13-10 in favor. Both bodies plan to vote on their budget resolution this week.

The oil industry has alreay begun forcefully lobbying to preserve the handouts. The American Petroleum Institute is running radio ads that attack the budget proposal. The ads claim that lifting oil subsidies “could actually reduce local, state, and federal revenue.” In fact, a state-by-state analysis indicates that taxpayers would actually save money if the hefty subsidies and tax breaks for oil and gas companies were lifted.

API also urges people to write to Congress to “oppose … taxes and fees on the oil and natural gas industry.” Congressional allies of the oil industry such as Senator Mary Landrieu (D-LA) have joined the defense of handouts to big oil.

The bottom line is that big oil companies profited mightily during the Bush administration. Their $656 billion in profits enriched their executives and shareholders, while they invested precious little in the research of clean-energy technologies and fuels that are essential for our economy, security, and environment. Oil companies may be spending millions trying to convince people that they are committed to being part of a clean energy future, but their miserly clean-energy investments say otherwise.

Daniel J. Weiss is a Senior Fellow and Director of Climate Strategy at the Center for American Progress. Alexandra Kougentakis is a Fellow’s Assistant. For more information on the Center’s Energy policies, please go to the Energy and Environment page of our website.

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12 Responses to Big oil made over $600 billion during Bush years, but invested bupkis in clean energy, Part 1

  1. SecularAnimist says:

    Daniel Weiss wrote: “Given the urgency to restart the economy with clean energy investments, and the need to slash U.S. oil use, you would expect these wealthy energy companies to be taking steps to develop new clean-energy technologies and fuels to address these economic and security concerns.”

    Actually I would not expect anything of the sort.

    The business model of the oil and coal corporations is selling FUEL — mining and selling costly, scarce, FUEL.

    The business model of renewable energy is not selling FUEL — instead, it is selling the technology for HARVESTING ABUNDANT, UBIQUITOUS, ENDLESS, FREE ENERGY from the sun and winds and waters.

    To the fossil fuel corporations, wind and solar energy don’t simply represent competition from a new energy source. They represent the end of the basic business model of fossil fuels.

    Who needs to buy fuel, when you can harvest free energy forever?

    There will be corporate “energy giants” in the future. But they will more closely resemble Intel or Microsoft than ExxonMobil.

    The fossil fuel corporations cannot evolve. Their basic business model has no future. They are already obsolete and they know it. They are simply trying to fend off their inevitable extinction and keep those hundreds of billions of dollars in profits coming in as long as they can.

    And their fake, phony “greenwashing” propaganda is just part of their delaying tactics, along with their global warming denialist propaganda.

  2. Robert Nagle says:

    This is a stark, shocking and unsurprising article.

    I wonder: given that a large number of readers have to buy fuel, is it possible to identify any company that is less bad than the rest?

  3. PaulK says:

    Hard to assess without knowing the criteria used by CAP.

    Does the 4% include, for example, investments in cogeneration, biofuels, and in company efficiencies?

    What is the profit compared to capital investment or gross sales or taxes?

    What is the value of the dividends paid from the profits to the retirees, educational institutions and foundations who hold stock in these companies?

    If ExxonMobil had the second-largest lobbying expenditures of any company in any industry, who was first? How does it compare with lobbying expenditures by GE?

  4. PaulK says:

    SecularAnimist,

    Alternative energy is not and will never be free. It is a losing argument to claim that it is. That is why I’ve formed Replacing Fossil Fuel for like minded people to work within the market to bring down the costs.

  5. SecularAnimist says:

    PaulK wrote: “Alternative energy is not and will never be free.”

    Of course wind and solar energy are free.

    The equipment needed to harvest them — e.g. wind turbines & photovoltaic panels — is of course not free. But then, neither is the equipment needed to burn coal or oil, or the equipment needed to produce controlled fission of uranium, free.

    That much, wind and solar energy have in common with fuel-based energy sources. It costs money to put up wind turbines and photovoltaic panels, just like it cost money to build coal-fired power plants and nuclear reactors and internal combustion engines.

    The difference is, that with wind and solar there is no fuel to be burned or fissioned. There is just an endless supply of free, ambient energy to be harvested.

    So sure, in a solar-wind based economy, there will be companies that profit from manufacturing and selling the technology needed to harvest wind and solar energy — just as there are companies today building coal-fired power plants, residential gas furnaces, internal combustion engines, etc.

    But ExxonMobil won’t be making tens of billions of dollars profit per year selling fuel for the wind turbines and solar panels.

  6. Jacal says:

    Daniel Weiss wrote: “Given the urgency to restart the economy with clean energy investments, and the need to slash U.S. oil use, you would expect these wealthy energy companies to be taking steps to develop new clean-energy technologies and fuels to address these economic and security concerns.”

    Actually, I also would not expect anything of the sort.

    What is it so difficult for folks to again remember that these are public companies owned by their shareholders, not by the Gov’t or some altruistic board. They exist to make a profit for their shareholders, not to save the world. Someday, yes, someday, when clean-energy technologies and fuels become profitable, then companies like Exxon will be in those technologies as well, but never before.

    Tom Friedman and his ilk are again trumpeting the profit in total dollars and leaving out the essential fact that Exxon’s net profit was a measly 9.47%. My own company’s net profit is over 11%, and we’re considered to have excellent margin. Perhaps Tom should join their board and tell the shareholders and pension fund owners with Exxon shares within how they should make even less profit by over-investing in technologies that won’t earn a return and just barely produce results.

  7. PaulK says:

    SecularAnimist,

    Making at least some alternative energy free is the purpose of replacefossil.com.

    The idea is that a way to bring down the price of alternatives to consumers is to see that some consumers get it for free. I believe there are many people who want to hasten the transition to 21st century energy willing to participate.

    Our first partnership is with the Beverly Arts Center, a regional educational and performance facility in Chicago. Minimal deployment is $5,000 – $8,000 solar water heating to assist the forced air system. A below ground temperature electric heat pump for heating and air conditioning costs about ten times more.

    I’m hoping to have enough success with the Arts Center that Habitat for Humanity will also agree to partnership.

  8. K L Reddington says:

    Big oil. I like the addition of the word “big” added by certain people with a common attitude. Exxon Mobil generates BIG Tax for the government. 100 Billion dollars a year. Between severance taxes, advalorem taxes, tax royalties, employer pay roll taxes, gasolene tax value added taxes and property taxes Exxon collected and remitted over 100 bILLION>

    I had even a problem in the 80′s using FASB standards reflect income from what I call inventory profits as earnings.
    Example. If a tanker in July held 1 million barrels of oil (there are 3,000 chemicals tankers) and they anchored off shore and waited 2 weeks to unload, they could earn by reason of price increses 5 milion dollars. That is not calssical earnings. That is earniongs by reason of speculation. If southwest airlines locked in jet fuel prices by contract, they could make an additional 5 million a month savings during the same months.
    Some ethonal plants had corn contracts at 6 dollars a bushel and the market was 4 dollars. They filed bankruptcy because they wanted out of their contracts. That is fraud. As a CPA we report fraud.
    Now if Exxon has a tanker with a million barrels and crude a few months ago fell to 35 dolars, they get write downs and save income taxes. I do not call them an efficient operator by reason of their incomes being from inventory profits.

    I was aware last June that several liberals in securities and several Arab entities were manipulating the hedges of crude upward. Exxon benefitted from this. I also know who was setting up profits from naked shorts. There is no industry that supplies more tax revenue for the feds than does energy. None even close. And a lot of that is actually earned outside the US and taxed here.

    Today several persian gulf countries have much lower revenue. I also know several of those countries lost about half a trillion on the wrong side of speculation when crude dropped. I am a strong proponent for highly increased North American drilling. Drilling costs will double in 4 years. Whether people pump and produce the oil is a different matter. The prairie of america contains a lake that is huge. The Ogallala aquifer. We will need the water one day. The aguivfer is over the Hugoton embayment of the Anadarko basin, I know of several gas storage fields that are huge and gas that is gathered is stockpiled for future use. Crude underground storage is also a way for reserve. wind generation has extremely high eneger storage costs. fossil fuel storage costs are extremenly low.

  9. Leland Palmer says:

    Yes the profits of the Bush years were extreme.

    Greg Palast says that one of the motives for invading Iraq was to restrict the supply of oil coming from Iraq, and drive up oil prices. Another motive was to stabilize oil prices, and keep Saddam from swinging them up and down by sudden decisions:

    http://www.alternativeculture.com/books/saddam.htm

    n the sanitary words of the Council on Foreign Relations’ report (written up by Jaffe herself), Saddam’s problem was that he was a “swinger”:

    Tight markets have increased U.S. and global vulnerability
    to disruption and provided adversaries undue potential in-
    fluence over the price of oil. Iraq has become a key
    “swing” producer, posing a difficult situation for the U.S.
    government.

    Now hold on a minute: Why is our government in a “difficult” position if Iraq is a “swing producer” of oil?

    The answer was that Saddam was jerking the oil market up and down. One week, without notice, the man in the moustache suddenly announces he’s going to “support the Palestinian intifada” and cuts off all oil shipments. The result: Worldwide oil prices jump up. The next week, Saddam forgets about the Palestinians and pumps to the maximum allowed under the Oil-for-Food Program. The result: Oil prices suddenly dive-bomb. Up, down, up, down. Saddam was out of control.

    “Control is what it’s all about,” one oilman told me. “It’s not about getting the oil, it’s about controlling oil’s price.”

    So, within days of Bush’s election in November 2000, the James Baker Institute issued this warning:

    In a market with so little cushion to cover unexpected
    events, oil prices become extremely sensitive to perceived
    supply risks. Such a market increases the potential lever-
    age of an otherwise lesser producer such as Iraq…

    I met with Falah Aljibury, an advisor to Goldman Sachs, the Baker/CFR group and, I discovered, host to the State Department’s invasion planning meetings in February 2001. The Iraqi-born industry man put it this way: “Iraq is not stable, a wild card.” Saddam cuts production, or suddenly boosts it, playing games with the U.N. over the Oil-for-Food Program. The tinpot despot was, almost alone, setting the weekly world price of oil and Big Oil did not care for that. In the CFR’s sober language:

    Saddam is a “destabilizing influence… to the flow of oil
    to international markets from the Middle East.”

    With Saddam out of control, jerking markets up and down, the price of controlling the price was getting just too high. Saddam drove the oil boys bonkers. For example, Saddam’s games pushed the State Department, disastrously, to launch, in April 2002, a coup d’etat in Venezuela.

    This could not stand. Saddam delighted in playing cat-and-mouse with the USA and our oil majors. Unfortunately for him, he wasn’t playing with mice, but a much bigger and unforgiving breed of rodents.

    Saddam was asking for it. It was time for a “military assessment.” The CFR concluded:

    Saddam Hussein has demonstrated a willingness to
    threaten to use the oil weapon to manipulate oil mar-
    kets… United States should conduct an immediate pol-
    icy review toward Iraq, including military, energy,
    economic, and political/diplomatic assessments.

    The true motive to invade Iraq, Saddam’s “manipulation of oil markets,” was there, but not yet, in April 2001, the official excuse.

  10. Leland Palmer says:

    Considering the role of James Baker and the Council on Foreign Relations, and their direct links to David Rockefeller and ExxonMobil, in the invasion of Iraq and the subsequent record oil profits of the Bush years, we should certainly be concerned about the positions of the CFR on global warming:

    Link to what I think is a 60 Minutes video clip of Scott Borgerson (Visiting Fellow at the CFR, in other words he’s on the payroll) promoting the economic benefits of a melting Arctic, being “interviewed” by Dan Rather (another CFR member):

    http://www.cfr.org/content/bios/Borgerson1.mp4

    If you go the CFR website, and search for Borgerson (he’s not hard to find, having written a series of articles there touting Arctic resources), you’ll find such gems as:

    2009

    May 5, 2009
    Prepared Remarks: The Global Implications of a Warming Arctic
    Testimony before the House Foreign Relations Committee

    May 2009
    The National Interest and the Law of the Sea
    Council [CFR] Special Report No. 46

    Addressing the Crisis in America’s Oceans
    Expert Brief

    March 28, 2009
    An Arctic Circle of Friends
    Op-Ed
    New York Times

    March 25, 2009
    Prepared Testimony on U.S. National Security Interests in the Arctic Before the House Committee on Foreign Affairs

    October 15, 2008
    Sea Change
    Article
    The Atlantic

    Scott Borgerson visually explores the changing Arctic using an interactive map.

    September 24, 2008
    Palin’s Alaska Makes Case on Climate Change
    Op-Ed
    USA Today

    September 15, 2008
    Is the U.S. Prepared for the Melting Arctic?
    Transcript

    August 19, 2008
    Russia’s Other Front
    Op-Ed
    Huffington Post

    President Bush is right to demand an immediate end to the looting and shooting in Georgia by Russia, but he should also turn his attention to recent aggressive Russian activity in the opening Arctic, writes Scott Borgerson

    March 10, 2008
    Homeland Security is Like a Poorly Equipped Junior Varsity Squad
    Author:
    Scott G. Borgerson, Visiting Fellow for Ocean Governance

    March/April 2008
    Arctic Meltdown

    Foreign Affairs Article — Summary

    Wake up, Henry Hudson: Thanks to global warming, the Northwest Passage will soon be open for business.

    December 13, 2007

    August 8, 2007
    An Ice-Cold War
    Author:
    Scott G. Borgerson, Visiting Fellow for Ocean Governance
    Op-Ed
    New York Times

    ExxonMobil, David Rockefeller, and the CFR promoted the invasion of Iraq, apparently according to Greg Palast to gain more control over oil prices, which subsequently went up, up, up.

    Now the CFR is promoting the economic benefits of a melting Arctic, and appears unaware of the danger of igniting a methane catastrophe.

    We should be very, very worried about this, IMO.

  11. Gary says:

    What about the CFR’s new report explicitly downplaying the potential for Alberta’s tar sands to rid America of its dependence on Middle East oil?

    http://www.cfr.org/publication/19345/canadian_oil_sands.html

    Read the report. I mean, to say that the Council on Foreign Relations is obsessed with big oil is unfounded. Check out climatesecurity.blogspot.com for more!