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. And if history is any example, these profits — gained at the expense of American consumers, from prices that are helping to slow the American economy — are going to go straight towards enriching oil executives.
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.