"Big oil made over $600 billion during Bush years, but invested bupkis in clean energy, Part 1"
[This article is reprinted from the Center for American Progress website.]
- Details on Big Oil’s small investments in clean-energy technology and fuels, by company
- Read about Big Oil executives’ protests over President Obama’s proposal to reduce oil industry tax breaks
- Download a table of the Big Five’s nominal profits (.xls)
It should come as no surprise that last year’s record high oil prices also led to near record profits for big oil companies. The price of oil climbed from January 2 to July 14, 2008, repeatedly setting new price records until it peaked at $147 per barrel””more than twice the price of the previous year. The big five oil companies””BP, Chevron, Conoco Phillips, ExxonMobil, and Shell””made record profits during the first three quarters of 2008 due to these record prices. When oil prices collapsed along with the world’s economies, the oil companies’ profits were reduced, too. However, the big five companies still made a combined profit of $100 billion for 2008 ^ (see note below). The sum is the second-highest combined big oil profit on record, exceeded only by the 2007 combined total of $123 billion.
The 2008 big oil profits bring the grand total under the two terms of the Bush administration to $656 billion, which is nearly two-thirds of a trillion dollars. Given the urgency to restart the economy with clean energy investments, and the need to slash U.S. oil use, you would expect these wealthy energy companies to be taking steps to develop new clean-energy technologies and fuels to address these economic and security concerns. Despite their soaring earnings, the big five companies were very stingy with investments in renewable and low-carbon energy technologies and fuels that would reduce oil dependence. 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. This reality contrasts with their ads that promote greener, cleaner images.
After oil prices hit a record last July, the August unemployment rate hit a five-year high of 6.1 percent and has continued to rise. Some jobs losses were directly related to high oil prices, such as in the aviation industry, which was forced to make major cuts to be able to handle the high price of jet fuel. Further, as households were forced to cut back on spending to keep up with exorbitant gas prices, sectors such as retail also purged payrolls. In June 2008, CNN reported that “many economists say job losses could intensify during the rest of the year due to rising energy prices.”
ExxonMobil, the largest publicly-traded American corporation, accounted for nearly half the 2008 oil profits. With over $45 billion in net income for 2008, Exxon earned the equivalent of nearly $150 for every U.S. resident. Despite being the highest earner of all the oil companies, ExxonMobil invested the least in renewable energy””less than 1 percent compared to its 2008 profits. It also invested the least in absolute dollars.
While oil prices steeply declined in the fourth quarter last year, all but one of the Big Five saw net profits in excess of $20 billion. These enormous profits were primarily due to record prices at the pump, which squeezed the budgets of everyday Americans. The big oil companies were worried about the impact of these huge profits on their images while Americans were bearing the burden of record prices. So to soften the public’s perception, these companies launched a green public relations offensive to convince the public that they were part of the energy solution, instead of part of the energy problem.
Media tracking group TNS Media Intelligence reported that $52.5 million was spent by the oil industry on greenwashing advertisements””advertisements boasting about investments in wind and solar power or efficiency while the companies did very little””in the first quarter of 2008 alone. However, a CAP analysis of actual company investments in renewable energy and energy efficiency indicates that the PR campaigns are little more than empty rhetoric.
For example, ExxonMobil spent $100 million on advertising in 2007, (its 2008 advertising totals are unavailable). Some of its ads catalogue ExxonMobil’s “efforts” to combat global warming, with messages that include “saving energy and reducing greenhouse gas emissions.” This ad ignores the millions of dollars Exxon pumped into funding organizations that questioned the existence of global warming. Exxon’s television ads similarly talk about global warming, efficiency, and alternative energy sources, concerns not reflected in investments.
Chevron has its own advertising campaign to tout its green credentials. The company is spending millions to disseminate its “I Will” message on newspapers, television, and even on the sides of buses. But Chevron made a total of $23.9 billion in profits in 2008 while investing only 5 percent of its total profits in renewable and alternative energy ventures.
Other companies have also engaged in major greenwashing advertising campaigns in an attempt to protect their images during record gasoline prices and profits. BP has a whole series of cheerful animated commercials, and the BP logo itself is a green and yellow sunburst-like flower. BP’s profits for 2008 were $21.2 billion, yet it invested only seven cents in its alternative energy unit for every dollar of profit.
Similarly, Shell has recently launched a major new web advertising campaign that emphasizes the company’s focus on technology and innovation. However, the majority of these advertisements focus on technology for the extraction of hard-to-access petroleum reserves, such as tar sands, which produce huge amounts of greenhouse gases and toxic waste. In addition, Shell just announced a moratorium on investments in wind and solar energy (see “Big Oil’s small investments” section below).
The advertising campaign by the American Petroleum Institute””big oil’s lobbying muscle””reflects the oil industry’s real agenda. Instead of exaggerating the green credentials of oil companies, their “Energy Tomorrow” ads argue that oil is the fuel of the future. The latest advertisement advocates drilling for oil and gas in previously protected coastal waters. “Increased production of domestic oil and natural gas will”¦ drive our 21st-century economy”¦Maybe that’s why most people support putting more of America’s oil and natural gas to work.” The claim that increased production of oil and natural gas would drive the economy has been disputed by President George W. Bush’s Energy Information Administration, which determined that “access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030.”
Big oil investments, 2008*
|Company – 2008 data||Exxon Mobil||Shell||BP||Chevron||Conoco Phillips|
|Amount invested in stock buybacks and dividends (millions)||$40,100||$13,307||$11,644||$8,000||$11,029|
|Investments in stock buybacks and dividends compared to 2008 profits||88.7%||50.6%||55.0%||33.4%||^(see note below)|
|Amount invested in renewable energy (millions)||$10||$500||$1,500||$1,250||$650|
|Investments in renewable and alternative energies and efficiency compared to 2008 profits||<1%||1.9%||7.1%||5.2%||^(see note below)|
|Contributions to federal candidates and parties for 2008 election cycle (millions)||$1.2||$0.3||$0.5||$1.0||$0.7|
|Lobbying in 2008 (millions)||$29.00||$3.3||$10.5||$14.5||$8.5|
^ The net loss by Conoco Phillips is due to its write-downs of more than $34 billion for domestic oil exploration and production and an investment in the Russian oil company Lukoil. If not for these costs, the company would have made a nearly $18 billion profit, making 2008 the record year $134 billion for the Big Five.
And API’s assertion that “most people” support more oil and gas drilling is misleading at best. An NBC/Wall Street Journal poll asked “When it comes to addressing our energy problems, which one of the following do you think should receive the most emphasis?” (italics used for emphasis). Six of 10 respondents favored “developing alternative energy sources.” Only one quarter supported “exploring and drilling for oil in the United States.” A more recent poll by the Center for American Progress shows that 76 percent of Americans actually feel that “America ‘s economic future requires a transformation away from oil, gas, and coal to renewable energy sources such as wind and solar.” And by two to one, Americans favor more financial support and incentives for alternative sources of energy, such as wind and solar, over support for oil and gas.
The commitment of the oil companies to renewable energy is also undermined by how much they spend to counter legislation that would support clean energy development over oil. Case in point: More than $65 million was spent on lobbying by ExxonMobil, Chevron, Conoco Phillips, Shell, and BP in 2008. ExxonMobil had the second-largest lobbying expenditures of any company in any industry. What’s more, total lobbying expenditures in 2008 for the five companies far outstripped those of 2007, when $37.7 million was spent to pressure lawmakers to protect industry interests.
The big five companies also attempted to curry favor with politicians by donating money to campaigns via oil company political action committees. The 2008 cycle saw $3.6 million in contributions to federal candidates and parties. Four out of the five companies are in the top 10 of oil and gas contributors to federal candidates and parties. Unfortunately, these contributions and their lobbying efforts have been largely successful. Last year they were able to whittle down the repeal of $25 billion in tax breaks and recovered royalties to only $8.9 billion as part of the Emergency Economic Stabilization Act of 2008″”about one-third as much as originally proposed in June 2007.
The good news is that President Barack Obama’s proposed budget would further reduce taxpayer support for oil companies awash in profits. It would eliminate another $31.5 billion over a decade by repealing tax breaks and recovering lost royalties. The new measures include “closing loopholes, charging appropriate fees, and reforming how royalties are set.”
The Obama administration believes that oil companies don’t need any more money from taxpayers. Testifying before Congress on March 3, Office of Management and Budget Director Peter Orzsag urged elimination of some taxpayer support for big oil companies. “Although the administration supports the responsible production of oil and natural gas as part of a comprehensive energy strategy, excessive government subsidies distort market signals and slow the transition of the economy from fossil fuels to clean, renewable sources of energy.”
With a growing federal budget deficit, taxpayers should not have to subsidize companies that made two-thirds of a trillion dollars over the past eight years. On March 26, both the Senate and House Budget Committees included President Obama’s proposed cuts to big oil subsidies in the budget resolution. The House budget committee voted for the budget proposal by 24 to 15, while the Senate voted by a margin of 13-10 in favor. Both bodies plan to vote on their budget resolution this week.
The oil industry has alreay begun forcefully lobbying to preserve the handouts. The American Petroleum Institute is running radio ads that attack the budget proposal. The ads claim that lifting oil subsidies “could actually reduce local, state, and federal revenue.” In fact, a state-by-state analysis indicates that taxpayers would actually save money if the hefty subsidies and tax breaks for oil and gas companies were lifted.
API also urges people to write to Congress to “oppose … taxes and fees on the oil and natural gas industry.” Congressional allies of the oil industry such as Senator Mary Landrieu (D-LA) have joined the defense of handouts to big oil.
The bottom line is that big oil companies profited mightily during the Bush administration. Their $656 billion in profits enriched their executives and shareholders, while they invested precious little in the research of clean-energy technologies and fuels that are essential for our economy, security, and environment. Oil companies may be spending millions trying to convince people that they are committed to being part of a clean energy future, but their miserly clean-energy investments say otherwise.
Daniel J. Weiss is a Senior Fellow and Director of Climate Strategy at the Center for American Progress. Alexandra Kougentakis is a Fellow’s Assistant. For more information on the Center’s Energy policies, please go to the Energy and Environment page of our website.