Oil company profits underscore need for reform
BP just announced first quarter profits of $5.6 billion, a 135% increase over the first quarter of 20. This profit was 50% higher than predicted by the Financial Times.
BP owns the oil rig that sunk in the Gulf of Mexico last week, with 11 employees still unaccounted for and presumed dead. It is also leaking 42,000 gallons of oil per day. This growing oil slick is expected to hit Louisiana’s fragile coast on Saturday.
The big five oil companies””BP, Chevron, ConocoPhillips, ExxonMobil, and Shell””are poised to report their first quarter profits this week. And it should surprise no one that rising oil and gasoline prices will lead to higher profits compared to 2009. A research note from Citigroup determined that, “The year-on-year increase largely reflects the strength of crude oil prices.” The Telegraph made the same assessment, saying, “energy companies are benefiting from higher oil prices.”
Gasoline prices increased by nearly 3 percent during the first quarter, while gasoline consumption was up 4 percent. American consumers spent $65 million more on gasoline during the last week of the quarter compared to the first week. This is a 6 percent increase in total spending between the first and last week. Rising prices and demand bring little surprise to the expected announcements that oil company profits are on the rise.
Oil company profits
Estimated net income
Financial Times profit predictions
Other profit predictions
|BP||$4.8 billion||Up 85 percent (FT)||Almost doubled Q1 2009 earnings (Telegraph)|
|Chevron||$3.7 billion||Roughly doubled (FT)||09|
|Conoco||$2.0 billion||More than doubled (FT)||Up 62 percent (BloggingStocks)|
|Exxon||$6.8 billion||Net income roughly doubled (FT)||$6.56 projected, up 44 percent (Reuters)|
|Shell||$4.0 billion||Up about 30 percent (FT)||Up 35 percent (Reuters)|
This increase in consumer costs and oil company profits is relevant to the upcoming debate on bipartisan, comprehensive clean energy and global warming legislation. Opponents of reform will claim that such legislation would increase prices. But the reality is that the status quo policies have already harmed American families. An analysis of household energy spending between 2002 and 2007″”the nonrecession years””found that the average household spent $1,130 more on energy in 2007. Nearly 85 percent of this increase was due to the rise in gasoline prices.
The first quarter oil company profits and consumption data suggest that profits will continue to rise absent bipartisan, comprehensive clean energy legislation that reduces oil dependence, creates jobs, and cuts pollution. This data is another reminder that it is imperative for the Senate act to change the status quo.
Conoco and Shell will release their numbers Wednesday, Exxon on Thursday, and Chevron on Friday.