Rising gas prices expected to increase Exxons earnings by more than 50%

Back in July 2008, Senate GOP blocked bill limiting oil speculation

I thought I would combine a couple of posts from my colleagues at Think Progress.  I’ll let you decide if there’s any connection.

I’ve never been one to say that speculators are the primary driver of oil price fluctuations, since we are at or near the peak in conventional oil production “” and that means oil prices will inevitably see higher highs and higher low.  But others think they are playing a significant role now — bigger than they did in the 2008 run-up (see Goldman Sachs says speculation behind much of recent oil price rise: “Net speculative positions are four times as high as in June 2008”).

If speculation is playing a bigger role, then, as TP explains, we know who is to blame and whoo is getting rich:

According to the Commodity Futures Trading Commission “” the government’s commodity markets watchdog “” speculative positions in energy are currently at an all-time high and several analysts (including those at Goldman Sachs) have concluded that speculation is pushing up gas prices. Thanks to the Dodd-Frank financial reform law that was signed by President Obama in July 2010, the CFTC is allowed to set “position limits” on such speculation, but the final regulations won’t be implemented until early 2012.

But the CFTC could have gotten started on its rulemaking two years earlier were it not for Senate Republicans. In July 2008, the House overwhelmingly passed a bill directing the CFTC to limit speculation in the oil market. However, Senate Republicans filibustered the bill in the Senate, preventing it from ever coming up for a final vote:

Senate Republicans on Friday blocked a vote on legislation to rein in speculation in the energy markets, instead calling for energy votes that would expand domestic petroleum production and more nuclear power development. Democrats, in a 50-43 vote, failed to gain the 60 votes needed to bring the speculation bill forward for consideration on the Senate floor.

Amongst Republicans, only Sens. Olympia Snowe (R-ME) and Susan Collins (R-ME) voted for the legislation (while Senate Majority Leader Harry Reid (D-NV) voted against it as a procedural matter, allowing him to bring the bill up for consideration later). At the time, Senate Minority Leader Mitch McConnell (R-KY) said that “we don’t have a problem with taking a look at speculation,” but that the GOP would refuse to move forward unless the bill included opening up more federal land for drilling (which would have a negligible effect on gas prices).

Having the CFTC begin in July 2008 the work that it began last July would have brought limits on speculation online this summer, instead of next, if the CFTC were working on the same timetable it is now. Technically, Dodd-Frank called for speculation limits to be in place three months ago, but the CFTC missed its deadline, in part due to conservative opposition to the limits.

Purely coincidentally, no doubt, while the public suffers through higher gasoline prices, there’s one group that stands to benefit, a group that just happens to be a major donor to the GOP, as TP reports:

The country’s five biggest oil companies “” BP, Chevron, ConocoPhillips, ExxonMobil, and Shell “” made a total profit of nearly $1 trillion over the last ten years. In 2008, ExxonMobil broke its own record for most profitable year for a public company in history by making more than $45 billion. And according to an analysis in the Wall Street Journal, rising oil prices in 2010 mean that Big Oil’s profits this year “could come close to rivaling the industry’s record year in 2008“:

First-quarter crude prices averaged about $100 a barrel, or about 20% higher than a year ago, pushed upward by oil-supply concerns due to political unrest in the Arab World and a recovering global economy. That spike is expected to lift earnings by about 50% at Exxon Mobil Corp., and about 33% each at Chevron Corp. and ConocoPhillips, compared with a year earlier.

Despite these sky-high profits, House Republicans voted unanimously last month to preserve the billions in subsidies that oil companies receive from the federal government every year. Gas prices in many parts of the country are currently higher than $4 per gallon.

5 Responses to Rising gas prices expected to increase Exxons earnings by more than 50%

  1. Kota says:

    As if the irony couldn’t get any more hideous.
    Wall streets criminals get bailed out on the taxpayer dime and the fossil fuel companies hell bent on causing the next global extinction event certainly don’t need the money and yet the taxpayers all get to keep subsidizing their own economic and physical destruction.

  2. Theodore says:

    The tens of billions in profits we are seeing now will become hundreds of billions after oil production actually falls steadily for a year or more. The price of gasoline must rise to the point where consumption is constrained by that price, but the cost of production will only increase slowly.

    Renewable energy would have reduced the impact of this extreme profit situation. I believe this is the only motive people need to deny the reality of climate change. The prospect of making that much money can alter brain chemistry. Reality is subject to imaginative reinterpretation by that enhanced chemical environment. Delusional thinking seems quite reasonable when those delusions, transferred to the public at large, have the potential to create profits on a scale never seen before. Money intoxicates those who possess it. Extreme amounts of money alter the ways in which the mind works as reliably and easily as psychoactive drugs.

  3. Robert says:

    Isn’t speculation just part of the capitalist model? It’s just people buying oil which is still in the ground in the hope that it will be worth more later.

    Speculators who found themselves on the wrong side of the equation when oil fell from £147 to $35 in 2008 won’t be in a hurry to repeat the experience.

  4. prokaryotes says:

    In a world at it limits, where the most destructive process earns the most value, wide spread long lasting destruction is the ultimate consequence. Climate and humanitarian doom is what follows.

  5. Robert says:

    prokaryotes – it is true that there is nothing built in to the capitalist system to encourage environmentally reponsible behaviour. On the contrary, the system rewards actors who can externalise the costs and internalise only the profits. It is particularly easy to externalise those environmental costs which involve treating the atmosphere as a global dustbin.

    We appear to have set up a system designed to extract and waste finite resources as fast as possible and with no regard for the environmental damage or for the future.

    I wish the answers were as easy to describe as the problem. Unfortunately they all seem to require totally trashing the current system and starting again. This will happen at some point I suspect, but not without pain.

    Mk2 technological civilization is bound to look a little different. We will still fight like cats but it cannot be built on fossil fuel because you would never be able to access what’s left without the infrastructure and energy we have available today. Oil would never have caught on if we had had to start deep ocean drilling day one. Without access to fossil fuel there will be severe limits on our population and the amount of damage we can do to each other and the planet.