Big Oil is awash in big profits — while Gulf of Mexico is awash in spilled oil

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"Big Oil is awash in big profits — while Gulf of Mexico is awash in spilled oil"

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.

CAP’s Daniel J. Weiss and Susan Lyon have the whole story on Big Oil’s big profits in this repost.

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

Oil company

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.

Update:

Conoco and Shell will release their numbers Wednesday, Exxon on Thursday, and Chevron on Friday.

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12 Responses to Big Oil is awash in big profits — while Gulf of Mexico is awash in spilled oil

  1. Sue Wicks says:

    $1.9 billion @ GE. They of course still take tax refunds in the billions and do not pay U.S. taxes. We subsidize their sales.

  2. PeterW says:

    Hi Joe, In the first sentence, I think you meant 2010.

    [JR: Yes, thanks!]

  3. catman306 says:

    Grandchildren of the Robber Barons rule. A list of the top ten shareholders of each of these oil companies and the family genealogy of these individuals would likely reveal it is so.

  4. Merril Sandler says:

    Dictators like Chavez complain about excessive profits in an industry and then they sieze the companies. This charge sounds like totalitarianism.

  5. prokaryote says:

    Amazing(ly sickening) satellite photo of oil slick
    http://bit.ly/9wASkY

  6. prokaryote says:

    And another satelite image of the dirty oil spill, the stuff which ends up in our food chain.

    ESA’s Envisat monitors oil spill
    http://www.esa.int/esaEO/SEM990HMI8G_index_0.html

  7. Mark Shapiro says:

    Hurricanes pick up energy over the ocean, and lose it over land. What happens to them when they go over an oil slick? Do they still grow in power?

  8. prokaryote says:

    @Mark
    Oil lies as a film on the water and has a calming effect on waves. This means less turbulence in the path of the hurricane. Maybe this has a slight effect on the hurricane speed.

    Mixing Oil and Water
    Tracking the sources and impacts of oil pollution in the marine environment
    http://www.whoi.edu/page.do?pid=12467&tid=282&cid=2493

  9. Nathan says:

    I’ve been wondering if there is a penalty assessed to these companies for clean-up and environmental degradation from accidents like this. Is there some kind of insurance they have? Do they fund the coast guard and other agencies that clean up oil spills?

  10. Bill W says:

    Isn’t it interesting that as the cost of their raw materials (crude oil) goes up, the oil companies make more profits? Can anyone name another industry where that happens?

  11. Rich says:

    Horrible accident both in terms of loss of life and environmental damage. One correction, though…BP didn’t own the rig…it was owned by Transocean.

    @Bill W: Crude oil is a product, not a raw material, for the upstream (exploration & production) segment of the industry.

  12. cindi says:

    I just want to know who’s administration lifted the mandate that the oil rigs have to be capped? According to the news this could have been prevented with a $500 cap that is mandatory on the rigs in Great Britain????

    [JR: Haven’t heard anything like that. There is a $500,000 back off cut off switch that Norway and Brazil require that might have worked.]