Held up without a gun

Big oil rakes in the cash

I was out driving/just a taking it slow
Looked at my tank/ it was reading low
Pulled in a Exxon station/out on Highway One
Held up without a gun
Held up without a gun

“” Bruce Springsteen

Springsteen’s song could not be more true today. Big Oil is once again riding high oil prices to large profits (see below) while American consumers get stuck with a $2.7 billion gasoline bill in the first quarter of 2010 due to higher oil prices. But the problems with oil go beyond these companies’ profits. Rising oil prices also add more filthy lucre to the coffers of hostile regimes, including Iran. CAP’s Daniel J. Weiss and Susan Lyon have the story in this repost.

Meanwhile, the Gulf of Mexico is suffering a huge oil spill while taxpayers spend billions of dollars paying for tax loopholes for Big Oil. And Big Oil spends record amounts of money to pressure Congress to cement these loopholes in place and defeat clean energy legislation. Adding injury to insult, big oil opposes energy and global warming legislation that would reduce our reliance on oil.

Enough is enough. We need Congress to stand up to Big Oil and pass legislation that addresses the problems with oil profits and oil use. Sens. John Kerry (D-MA), Lindsey Graham (R-SC), and Joe Lieberman (I-CT) are working on legislation that would reduce oil dependence and put a declining limit and rising price on carbon. These measures would reduce our dependence on oil, increase national security, create jobs, and cut pollution.

Mo’ prices, mo’ problems

U.S. crude oil prices rose from $31.76 per barrel in January 2009 to $85.17 by April 29, 2010 after a price slump at the end of 2008. This is an increase of nearly 160 percent over a 15-month period. The Energy Information Administration recently predicted that oil prices will rise to above an average of $81 per barrel by this summer while average gasoline prices will likely exceed $3.00 per gallon this spring. Drivers will pay 17 percent more for gas compared to summer 2009“”$174 million per day, or an average of $602 per household annually. Energy price volatility like this hurts consumer and business investments, causing families to delay buying a car and spend less on buying or upgrading their homes. Businesses also cut investments, while profits surge in the oil and gas industry.

While higher prices brought higher profits to Big Oil, they also brought higher gasoline prices that cost American consumers millions during the first quarter. A CAP analysis determined that higher oil and gasoline prices forced Americans to spend $2.7 billion more on gasoline during the first quarter compared to what they would have spent had prices remained steady after the first week.

Big Five: We’re in the money

big oil profits, Q1 2009 vs. Q1 2010

Much of the U.S. economy is slowly recovering from a deep recession, but oil companies continue to prosper. The big five oil companies””BP, Chevron, ConocoPhillips, ExxonMobil, and Shell””announced huge first quarter profits””four of the five companies announced profits larger than analysts predicted. As the chart below shows, big oil saw profits in the first quarter of 2010 that far eclipse analysts’ projections and are significantly higher than 2009 profits as well.

Big five oil company profits for the first quarter of 2010 vs. first quarter 2009

Oil company Q1 2010 projected profits by Financial Times (in billions) Q1 2010, actual profits (net income) Q1 2009, actual profits Q1 2010 profits compared to Q1 2009
BP $4.8 $5.6 $2.4 +133%
Chevron $3.7 $4.6 $1.8 +156%
ConocoPhillips $2.0 $2.1 $0.8 +163%
ExxonMobil $6.8 $6.3 $4.6 +38%
Shell $4.0 $4.9 $3.3 +49%
Total $21.3 $23.5 $12.9 82%

BP’s 2010 first quarter profits were $5.6 billion, a 135 percent increase over the first quarter of 2009. This profit was 50 percent higher than predicted by The Financial Times. Shell announced that its profits had risen by 49 percent since the first quarter of 2009. Chevron’s profit was $4.6 billion, a 156 percent increase, while ConocoPhillips had $2.1 billion in profits. The world’s largest private oil company, ExxonMobil, had a first quarter profit of $6.8 billion, which was 38 percent more than 2009.

Iran: Thanks for high oil prices

Higher oil prices also benefit nations that are hostile to U.S. interests””even if we don’t purchase any oil from them””such as Iran. Every $1 increase in the price of oil provides an additional $1.5 billion to Iran annually.

Conversely, adoption of a shrinking limit on carbon pollution that reduces it by 80 percent by 2050 would reduce the use of oil and lower its price, costing Iran approximately $1.8 trillion in lost oil revenues over the next 40 years””over $100 million a day. These petrodollars fund and prop up unfriendly regimes, enabling them to support terrorists in other nations.

Sea of fire

Oil companies deserve to earn a profit since oil exploration and development can be financially and technically risky business. At the same time, though, they must produce this oil in a safe and environmentally sustainable manner. Yet despite rhetoric to the contrary about advances in environmental safeguards, the spill off the Louisiana coast shows that offshore oil development still poses a threat to its workers and risk to the ocean and coastal environment.

BP owns the oil rig that exploded and sunk in the Gulf of Mexico last week, causing what CNN reports officials say “could become one of worst spills in U.S. history.” Tragically, there are 11 missing rig employees who are presumed dead. The well continues to leak 210,000 gallons of oil per day into the Gulf of Mexico””five times the original estimate. This growing oil slick already covers an area larger than West Virginia and and oozed onto the Louisiana shore early this morning. A major portion of the oil slick looms only five miles offshore. This major oil spill could be the worst environmental disaster since the Exxon Valdez spill in 1989, and it is a tragic reminder that we must dramatically reduce our oil use.

The Exxon Valdez spill cost Alaska’s fishermen an estimated $800 million in damages to their livelihood. This oil spill could bring an economic Armageddon to the gulf coast seafood industry. Bloomberg reports:

Louisiana is the largest seafood producer in the lower 48 states, with annual retail sales of about $1.8 billion, according to state data. Recreational fishing generates about $1 billion in retail sales a year, according to the state.

BP should be required to place its first quarter profit of $5.6 billion in an escrow account to provide compensation to the fishermen whose livelihoods are threatened. These funds should also be used for cleaning up the soon to be blighted shores.

Oil tax loopholes: More money for the misbegotten

Despite high prices and profits, big oil companies still want taxpayer-funded loopholes even though some conservative oil men believe they are unnecessary. In 2005 former oil man and President George W. Bush noted that with higher oil prices big oil does not need tax breaks to explore and develop oil fields.

I will tell you with $55 oil we don’t need incentives to the oil and gas companies to explore. There are plenty of incentives. What we need is to put a strategy in place that will help this country over time become less dependent.

Yet even with today’s prices more than 50 percent higher than $55 per barrel, Big Oil companies want to maintain tax loopholes that siphon additional billions of dollars from U.S. taxpayers. Taxpayer money pays for the tax breaks claimed by Big Oil, but the industry claims that closing these loopholes is really a new energy tax on them. American Petroleum Institute President Jack Gerard stated:

With America still recovering from recession and one in ten Americans out of work, now is not the time to impose new taxes on the nation’s oil and natural gas industry. New taxes would mean fewer American jobs and less revenue at a time when we desperately need both. A robust U.S. oil and gas industry is essential to the recovery of the nation’s economy.

Contrary to this assertion, cutting the subsidies to Big Oil would help our economy while shrinking the federal budget deficit. In fact, a state-by-state analysis indicates that taxpayers would actually save money if the subsidies and tax breaks were lifted. A recent CAP analysis found that the effective federal income tax rate in the United States for major oil companies is lower than the effective tax rates they face abroad””sometimes close to 50 percent lower. The report also determined that subsidies to the oil industry will cost the U.S. government about $3 billion in lost revenues next year and nearly $20 billion over the next five years.

These estimates are only the initial assessment””they still vastly underestimate the help that the oil industry receives from the government via extensive hidden tax code benefits as well.

Big Oil squeezes the Capitol

Given the generous subsidies Big Oil receives, it should come as no surprise that this industry is fighting hard to keep their loopholes and block reform. There was record oil and gas industry lobbying in 2009. These companies spent at least $154 million on squeezing Congress that year””more than 16 percent higher than 2008. Big Oil’s lobbying and political arm””the American Petroleum Institute””alone spent at least $7.3 million on lobbying in 2009 and another $1.3 million more in 2010 to kill legislation. API has also spent millions of dollars running expensive print, TV, and radio ads to do the same. The American Petroleum Institute alone “doled out $75.2 million for public relations and advertising” in 2008.

Congress must act

In short, Big Oil’s profits climb higher and higher as American consumers feel more and more pain at the pump. This needs to stop.

Sens. John Kerry (D-MA), Lindsey Graham (R-SC), and Joe Lieberman (I-CT) are developing bipartisan comprehensive energy legislation that would reduce oil dependence and put a declining limit and rising price on carbon. These provisions would increase American energy independence (and our national security), create jobs, produce “Made in the USA” clean energy technologies, and cut pollution. The bill should also establish much stricter safeguards for existing offshore oil production.

Additionally, Congress should cut subsidies to big oil and level the playing field for safe, clean energy sources. Further, we need to curb the economic, social, and environmental damage that our consumption of dirty fuel causes. To achieve these many goals, Congress must act swiftly to pass bipartisan comprehensive energy and climate reform.


We used the weekly price and quantity data supplied by the EIA’s U.S. prices and consumption database to calculate how much more Americans spent on gas in the first quarter of 2010 relative to what they would have spent had prices remained steady after the first week of January 2010. Using their data from the “Finished Motor gasoline product supplied” and “Conventional retail gas prices” sections, we multiplied the average weekly product supplied value times that week’s recorded price, doing this separately for each week of the first quarter. From here, the initial week’s value was subtracted from each other week’s to obtain how much more was spent each week relative to the first. Aggregating this column resulted in the final figure.

Daniel J. Weiss is a Senior Fellow and Susan Lyon is a Special Assistant for Energy Policy at American Progress.

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15 Responses to Held up without a gun

  1. NFJM says:


    Joe, it is time to create an OPIC (Organization of Petroleum IMPORTING Countries) to work together on issues regarding the mitigation of the demand. This can be achieved by the following measures:

    – FUEL SWITCH (ex. dump your heavy oil based heating and switch to pellets; shut down oil-fired power plants and set-up NGCC power plants)
    – ENERGY EFFICIENCY (goes without saying)

    Together we are stronger to resist the market power. This power IS in the hands of suppliers and is only going to be even more in their hands… unless we all act together (US, EU, AUS, CN, NZ, etc)

  2. Chris Dudley says:

    Pursuing a domestic oil production policy is the same as pursuing a high oil price policy just because our oil is so difficult and risky to produce. Economically, we would do much better to pursue a low oil price policy by conserving enough oil that high cost producers (like BP in the Gulf) can not stay in the market. If we force the price of oil down below $20/barrel, there will also be much less money available to fuel conflicts that have the potential to disrupt global oil supplies and thus oil supply security would be enhanced. Pushing domestic production actually reduces oil supply security because it is a high price policy.

  3. mike roddy says:

    We’re still seeing Congress give money to the oil companies in the form of depreciation allowances and various tax writeoffs and credits. All they’re willing to do now is whine about the spills a bit, not go after oil and coal for chronic corrupt and dishonest behavior that runs counter to the national interest. When we finally bring up a climate bill, it (incredibly) includes eviscerating EPA regulatory powers.

    The Democrats have a winner with this issue, if they don’t mind angering Landrieu and a few others. Most Americans hate the oil companies, and most Congressmen sit in a hot tub with them and their lobbyists, lighting refreshments with $100 bills.

    It’s been a long time since an industry faced attack from the government, due to systemic corruption and a quite phony free market ideology. There is precendent for it, however. Kennedy and Eisenhower faced down major corporate sectors. Oops, that was 50 years ago. Maybe there are some Senators left who can remember what being an American is supposed to mean.

  4. Rocky Raneldo says:

    BP doesn’t own the oil rig that burned. The story needs a corrrection.
    Transocean is the owner and driller. Transocean lost 9 workers in the fire. BP owns the old Amoco and Sohio companies here.
    I suspect the chances are very high that this is insured by AIG. We know who owns AIG. Yes this will come as a business expense because of our tax laws.

  5. Leif says:

    Capitalism and by extension, Corporations, C&C, must be charged with acknowledgment of and protection of Earth’s life support systems and the sustainability of humanity in all corporate decisions first and foremost and profits secondary. Humanity can not and will not survive long term with these two powerful forces working against Earth’s and Humanities’ long term sustainability. Mankind created Capitalism and Corporations, it is past time to give this powerful creation a HEART.

    There will still be an opportunity to make profits, just not on the backs of the poor or the disregard for natural life support systems.

  6. Jeff Huggins says:

    Suggest Comparison

    I suggest that, at some point, ClimateProgress ought to do a post that poses the question (or matter) of a comparison between these two situations:

    1. Holding an oil company accountable for all costs associated with cleaning up an oil spill and also being accountable, or at least partly accountable, for all damage that results from the spill.

    And …

    2. Holding oil and coal companies accountable for all costs associated with removing excess CO2 from the atmosphere (in an amount that corresponds to the contribution of their own products) as well as holding them accountable for all damage that results from climate change.

    As we know, the law already calls for the accountability described in Item 1 (as I understand it). Well, there are very strong comparisons between Item 1 and Item 2. Indeed, many events that might fall into Item 1 can reasonably be described as accidents, negligence, etc., but not being “purposeful” or done in the face of the knowledge that such damage will result. In contrast, decisions that result in the sorts of problems and damage that fall into Item 2 are mainly purposeful and are done in the face of the knowledge and warnings about climate change. Put another way, there is an even stronger (much stronger) argument to begin holding companies accountable for Item 2 costs and damage than for Item 1 costs and damage.

    Some people might want to argue that we (consumers) buy the gasoline and use the electricity (generated from coal) that such companies provide, so the companies themselves shouldn’t be held accountable. That argument might be partly valid, and might mitigate some (not nearly all) of the accountability that the companies themselves should have, IF IT WEREN’T FOR THE FACT THAT many of those companies (and, indeed, the ones that should be held most accountable) are using their lobbying and advertising and PR efforts to confuse public concern and to block or delay legislation that would help society shift to other energy sources and, thus, that would provide the infrastructure and choices that the public need in order to make those personal shifts. In other words, the “pushers” are not merely passively supplying the damage-creating products: They are ALSO working hard to confuse the public about the likely damage of such products, working hard to block legislation that would facilitate societal movement to safer products, and doing everything in their power to keep the public addicted to such products.

    It seems to me that there is a VERY STRONG case (and it will only get stronger and stronger) that such companies should be held financially and (in some cases) criminally accountable.

    Joe, perhaps at some point you folks could do a post that would make such a comparison, with the help of one of your lawyers who could educate us, briefly, about the clause in the Law that will be used to hold BP accountable for the spill.

    The companies that are creating damage and keeping us addicted to oil and coal will only begin to change their ways when they understand that they will be financially and perhaps criminally accountable for their decisions. Not will small fines or slaps on the hand. But instead, with penalties and liabilities that amount to much more than the money they are presently making by keeping us addicted in the first place.



  7. The phrase “Congress must act” is not at all encouraging.

    Any other solutions?

  8. alexy says:

    Not on topic, but…a nice, concise, lucid analysis of temperature trends and variations…with a short term forecast to boot.

  9. prokaryote says:


    January 25, 2010
    Oil spill at Texas port dumps 450,000 gallons

    April 6, 2010
    Exxon Mobil paid no federal income tax in 2009

  10. Michael Tucker says:

    “…adoption of a shrinking limit on carbon pollution that reduces it by 80 percent by 2050 would reduce the use of oil and lower its price.” – Lower prices? Really?

    I think we do need to tax carbon (limit carbon pollution) but I don’t see the direct connection between that and enjoying a lower price for oil. If that were true I can imagine the majority of Americans would insist that we establish the “shrinking limit on carbon” immediately.

    I agree that we must remove subsidies from Big Oil and from the food-to-fuel companies. We need to establish subsidies for biofuel companies that do not use food to make fuel. It is in our government’s interest to GET US OFF FOREIGN OIL.

    For the moment we are enjoying a slight surplus in the oil supply chain so prices have been pretty flat BUT any slight possibility of disruption to that supply cause prices to immediately jump up. Supply struggles to keep up with demand even with a slow economy. Once we start building houses and commercial property again we will really see the price go up!

    China DOES buy oil from Iran and Venezuela. Since we support the Chinese economy (and China supports our economy) then WE DO SUPPORT IRAN AND VENEZUELA! You can’t avoid the reality that we desperately need to get off foreign oil but it will be years before any kind of real production is available from non-food based biofuel.

  11. Sasparilla says:

    Cannot wait to buy my first EV/EREV (electric car) and start to take myself “off rig”.

  12. Big oil received billions in NEW subsidies under the Green economic stimulus plans in US, Canada, Europe. “Alternative energy is never going to catch up to what the fossil fuel industry has received.”

    What exactly is FOREIGN OIL? Oil companies are transnational and they are the ones that control oil supply and prices, not countries in most cases. Countries that have oil are powerfully influenced by oil companies ie US, Canada, etc. I mean how is it possible that Exxon the world’s most profitable company does not have to pay any taxes in the US?

    This focus on Foreign Oil strikes me as a misdirection. No body worries about food sourced from other countries, an arguably more important ‘resource’.

  13. Stephen Watson says:

    Nice try Sasparilla (#11) – you’ll just be beholden to Coal (Massey?) and Gas companies instead of oil. Electric cars are still part of the problem – and they currently rely on an oil based infrastructure to keep them running. Sadly (so I understand) the USA is designed almost exclusively for the car and plane so you have a big problem. If you can, get out of your car – walk, cycle and take public transport. Not easy but it’s the future. Walking and cycling really are “off rig”

  14. MiMo says:

    Totally agree that using less oil will be good (imported or not), but so I don’t understand why high petrol price are depicted as something bad in the article…high prices are what is needed to reduce consumption and make other forms of energy more competitive (and cycling and walking).

    Actually, current petrol prices in the US are arguably way too low, in Europe the price per gallon is around $5, not under $3.

    The point of cap&trade legislation (or any similar initiative) would be to make petrol MORE expensive, not less.

  15. ewh says:

    MiMo raises a good point. The thing that bothered me about the Springsteen bit at the beginning of this article, and a lot of the complaining about oil company profits is the underlying supposition that we’re entitled to cheap gasoline and other petro-products. We’re never going to deal with climate change or peak oil until we realize we aren’t so entitled.