This week, the Big Five oil companies announced their first quarter profits, which, with oil well over $100 per barrel, came to more than $30 billion. Exxon alone registered nearly $11 billion in profits, a 69 percent increase over their first quarter profit a year ago.
If history is any example, these profits “” gained at the expense of American consumers, from prices thatare helping to slow the American economy “” are going to go straight towards enriching oil executives. WonkRoom has the story.
As a new report from Citizens for Tax Justice shows, Big Oil, between 2005 and 2010, spent the vast majority of its net profits boosting dividends and purchasing its own stock “” actions that largely help line CEOs’ pockets:
Among the largest five oil companies, less than 10 percent of after-tax profits went to exploration for new oil fields during the 2005-2009 period. Meanwhile, the percentage of net profits used to pay dividends and buy back stock was 58 percent in 2005, 73 percent in 2006, 72 percent in 2007, 71 percent in 2008 and 89 percent in 2009. These figures are high in comparison to other industries.
For 2010, it makes sense to focus on four of the largest oil companies, leaving out BP because of its disastrous problems during the year. In 2010, these four companies spent 60 percent of their profits on dividends and stock repurchases, and just 18 percent on exploration. In other words, the companies spent 3.3 times as much on dividends and stock buybacks as they did on exploration in 2010.
In 2008, when oil companies were making sky-high profits, they invested very little of that in alternative energy. 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.” Exxon made $45 billion in profits that year, and will come close to that record if high oil prices persist.
At the same time, the oil companies “” along with their Republican allies in Congress “” are vigorously opposing yet another attempt by President Obama and Congressional Democrats to cut the almost $4 billion in subsidies that are spent on oil companies each year. “Over the last week as earnings season has approached, the Democratic Party leadership again talked about removing what they call $4 billion in oil industry subsidies,” wrote ExxonMobil’s vice president for public and government affairs Ken Cohen on Exxon’s blog. “The simple truth is that these are legitimate tax provisions to keep U.S. industry internationally competitive “” to keep jobs from being exported to other countries.” But as these companies have shown, huge profits just get plowed into more accumulation of wealth for oil CEOs.
– A WonkRoom cross-post.
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How old is the oil infrastructure (refineries ect)? Paints a picture of an industry determined to milk all it can before the manure hits the fan.
With the majority of refineries in the US old and designed for light sweet crude and the majority of new oil heavy and sour, it will not be long before most processing is done offshore. Imports will be in refined products not crude.
The US oil industry is playing a very short term game, not at all interested in the medium let alone long term position.
It’s time to put pressure on oil industry Boards, since they are the ones enabling these absurd executive salaries, and they could stop them if they wanted to. There is even a theory that the Rockefellers were behind Lee Raymond’s $400 million golden parachute at Exxon, just to get rid of him.
Fossil fuel industry Boards are controlled by stockholders, and the voting power lies with the wealthiest Americans. They will prop up people like Boyce and Tillerson because they want someone to do their dirty work- despoil the environment and our climate future, lie in public about climate change, and come up with lots of “campaign contributions” to politicians to keep the money rolling in.
There was a story about a few enlightened Rockefeller family heirs who wanted to do the right thing, but got overruled even within their family. They must be emboldened through holding big fossil fuel company shareholders responsible. It’s time to put pressure on the super wealthy owners of these companies, including hypocrites like Gates and Buffet, who want it both ways.
There are many ways to do this. The Big Greens are scared of them, but they can be defeated, and they will have to be defeated.
Um, don’t dividends go to all shareholders, not just the executives? And don’t stock buybacks help all the shareholders equally?
- How is it that Republicans say that it is not conservative to subsidise businesses at all, but then go subsidize the biggest and most well established ones? That hypocrisy is not right.
- Oil companies pay little to no corporate taxes in the US already. How is it that companies who do not pay their fair share get to lobby and influence policy like they do? That unmerited influence is not right.
- Many argue that corporate tax cuts create jobs, but we see with oil companies that they not only pay little or no US taxes, but in fact receive handouts from the feds and STILL cut US jobs. Handouts for job cutters are not right.
- The US cannot drill its way out of high prices at the pumps. Giving these companies handouts not only does not change that fact, it mostly just raises oil executive salaries while increasing the federal debt. Worse, it helps restrict our collective ability to invest in alternative strategies that do have a shot at either reducing the price at the pump or getting us off oil altogether with time. Government subsidizing dependance on yesterday’s fuel is not right.
- The burning of fossil fuels like oil is a huge reason we are destabilising the natural climate and atmosphere. Handouts helping destroy the planet’s livability are not right.
Not to be defending oil companies and all, but I’m guessing executives are a pretty darned small fraction of the shareholders of the Big Five. Dividends and stocky buy-backs are a pretty inefficient way for them to reward themselves. But then, why wouldn’t all the shareholders want exactly the same thing? Short term bennies are all the rage for everyone.
Anon (#5)
However, the pension plans and the individuals building 401Ks or other personal retirement plans are not looking for what you call “short term bennies.”
Big Oil are regarded as safe blue chip stocks for long-term growth and income.
BP has some charts that show some of the demographics of its shareholders, by number of shares and by nationality of shareholder (though not by age or institution vs. individual):
http://www.bp.com/extendedsectiongenericarticle.do?categoryId=9010453&contentId=7019612
JustAskin wrote: “Um, don’t dividends go to all shareholders, not just the executives?”
Yes, they do (assuming preferred stock didn’t take all of the current payout — which sometimes happens.)
“And don’t stock buybacks help all the shareholders equally?”
Yes they do, by raising the price of the shares and reducing their dilution.
But the problem with both these actions is that they indicate a short-term outlook. When available oil is diminishing sharply and burning it with abandon threatens our long-term future, the prudent policy would be to invest more in renewable energy so that these companies will still be around and producing profits for the children of current shareholders. It would also help assure those children a more livable world. “Eat, drink, and spew carbon” is not a forgivable excess when it affects the fate of everyone.
Another, more immediate concern is that when the country has an enormous, burdensome deficit and oil companies are making record profits, fighting to maintain their subsidies is dangerous hypocrisy.
Chris – I believe Exxon used much of the stock it bought back to acquire Mobil, and ExxonMobil used some of the repurchased stock it bought back to acquire XTO.
You have to say that, when any future human survivors, or, (more likely) alien investigators, examine the circumstances that led to the destruction of human civilization this century (as seems absolutely certain, barring a miracle)they will be gob-smacked by the ease with which a tiny, infinitely ruthless, global caste of insatiably avaricious psychopaths was able to destroy humanity. There seems, moreover, to my eyes at least, something that goes far beyond the normal laws of rationality, of natural selection and every religious and moral philosophy I have ever encountered, in the hubristic and relentlessly destructive ethos of the parasite class. And the other 99% of humanity are being led like lambs to the slaughter, stupefied with the soma of mass media ‘celebrity’ and the anomic consumption of shite. Absolutely amazing, mystifying and harrowing.
Joe,
With all due respect, your headline is misleading. A reasonable reader could, and probably would, infer that oil company executives were paying themselves billions in bonuses, not rewarding their shareholders through dividends and stock buy-backs. That was certainly my interpretation.
I have no doubt that executive compensation at these companies is incredibly, and probably grotesquely, rich. But people who invest in very successful companies deserve to get great investment returns. I’m a clean energy guy through and through, but I invest in fossil fuel companies because that’s where the money is. After all, I’ve got a mortgage to pay and a kid to put through college.
After the great global eco collapse when the survivors (hopefully) are trying to design a new way to live together, one thing that they must leave out is these blood sucking stock and shares monsters. They are as responsible for the mess we are in as anything else.
Once you make maximizing shareholder value the premier criterion for a productive organization you automatically get a conflict of interest between that criterion and everything else like OH&S and paying decent wages and the latter lose, always! Thats why there are a spate of accidents because every corner and cost is cut to increase dividends. They are a pox on our society and we should start phasing them out now, ME
EricG, why are you bothering to put a kid through college, when the means you employ, profiting from fossil fuels, therefore from the destruction of climate stability, the acidification of the oceans and the wide dispersal of heavy metals, (particularly mercury)etc, all ensure that your offspring, and theirs, will live in a world of unprecedented horror? Surely the profit motive has some moral limitations? ‘What does it profit a man, if he gain the whole world etc’… just in case you consider yourself a ‘Christian’.
@ Mulga:
Why are we putting our daughter through college? Geeze, I don’t know. She wants to go and it seems like a good idea. You might want to get down off your high horse and spend some time in the real world.
EricG #13. Ah yes, the real world! Would that be the same real world that is currently gearing up to wipe us out? ME
EricG, when I hear the expression ‘real world’ it has the same effect on me as that other horror ‘tough love’. Emetic. I certainly do not criticise your efforts to educate your child, only the means you have chosen to pursue that admirable end.