Black Gold
Who says there's no class war in America?
Oil companies posted record profits in the third quarter of last year: For example, ExxonMobil - 75%, Royal Dutch Shell - 68%, and ConocoPhillips - 89%. That's profit.
The oil companies' good fortune just happened to come about in the same quarter that two powerful hurricanes devastated the Gulf Coast. In America, one man's loss is another man's windfall.
Americans paying dearly at the pump raised cries of price gouging. Outraged Washington politicians demanded that oil company executives appear before a Senate hearing to explain themselves. The Senators placed the corporate bigwigs under oath and grilled them for three hours, until the remorseful moguls tearfully apologized for taking advantage of a national calamity.
Ok, I made the last part up. In fact, the Senate never even bothered to put the execs under oath. And at the end of the sham hearing, it was the Senators who limped away with their tail between their legs:
[T]he executives, whose companies and parent corporations earned $32.8 billion during the last quarter, provided little beyond what the industry has been saying for weeks: Their profits are huge because the industry is huge; the companies are ready to invest billions of dollars to get more oil; and if Congress tries to punish them by imposing a windfall profits tax, it will only lead to fewer such investments.
But not every Washington pol is afraid of the big, bad oil companies. Last week, the chairman of the House Energy and Commerce Committee, Republican Joe Barton, launched an investigation of a major oil company for possible antitrust violations:
You will be surprised to learn that Barton, one of the top recipients in Congress of campaign donations from the energy industry, is not probing whether ExxonMobil or Chevron or any of the other oil giants engaged in price gouging when gasoline and heating oil costs skyrocketed the past few years.
No, the good congressman has set his sights on the only oil company that actually dared to lower its prices last year - at least for the poorest Americans.
After Hurricane Katrina shined a spotlight on poverty in America, Hugo Chavez pledged that Venezuela-owned Citgo would provide huge heating-oil discounts — as much as 60% — to low-income Americans this winter.
The program is already in effect in a number of northern states, although it has received very little publicity. It has been so successful, says Democratic Rep. Jose Serrano of New York, that "about 60 members of Congress from all parts of the country...are asking me, 'Can I set up a meeting with Citgo?' to see if they can get this kind of program in their district."
Lowering prices when demand is high? How unAmerican is that? No wonder Pat Robertson wants Chavez killed.
Cross-posted today at Blognonymous.
Comments
I think we should all start heating our homes and running our cars on Pat Robertson's holy milkshakes. Might be time to nationalize the oil companies, don't you think? I mean, they're stealing our oil, right? Paying no royalties? They're coming into our living room and stealing it. I thought jail was in order for thievery.
Posted by: Neil Shakespeare | February 25, 2006 02:27 AM
When a company produces and sells a product that everyone is so heavily dependent on, and that has such a great effect on the entire economy, it has a responsibility to more than its bottom line.
The oil companies took advantage of the situation last year to rake in huge profits, and America be damned.
Posted by: abi | February 25, 2006 09:14 PM
nice piece, i know you probably could have gone on for pages on this tiopic but the sheer amount of damning information was more than a mortal can cope with. hehe yea Chavez is Satan.. the miserable socialist thug.. who does he think he is letting poor people afford fuel?
Posted by: Left Of Center | February 27, 2006 03:24 PM
This would be an interesting post, if it were true.
Exxon Mobil made 36.1 billion for the year 2005. the most ever! however the profit margin was only 10.7%
Yahoo profit margin was 45.5%
citigroup was 33.4%
Intel was 24%
Apple was 22.7%
Nestle foods, the largest food company in the world had over 14% profit margin.
So first things first, you should get your facts right. Also if you want to talk about chavez, you should mention the fact that he is a communist dictator who oppresses his people, jails his political enemies, and will drive his economy into the ground to try to undermine the U.S. politcal process.
Posted by: Rhino | February 28, 2006 08:13 AM
ExxonMobil - 75%, Royal Dutch Shell - 68%, and ConocoPhillips - 89%. That's profit.
Isn't that exciting?
And to think I could have held on to my Crude NYMEX Oil futures and sold @ 65.oo/barrel.
Darn..
There goes my dreams for the new 2007 Hummer this year...
Posted by: AJ | February 28, 2006 10:30 AM
I wonder if Nestle ever had a cocoa spill they wouldn't pay to clean...
Actually, one of pur participants has a post on Nestle.
I am not sure what the point though is of pointing out that a few other companies made more. last I checked, we were not dependent on yahoo for heat, or transportation. While true we play a role in that, we also gave them access to publically owned land for drilling, this goes against both liberal thinking and laissez faire economics, does it not?
Posted by: Lily Branford | February 28, 2006 01:26 PM
The point lilly is that the profit margin is not nearly what it is for a lot of other companies. If we're going to impose windfall taxes on XOM why not on the others who make a lot more? Also XOM is oil, nestle is food, we need food don't we? we're dependent on food, and we subsidize these farmers. Should we impose a windfall tax on any farmers or food companies who make too much? And what about if XOM falls on hard times, like in the 70's? if they don't make at least a 5% profit should we give them more money?
And what about all the shareholders in the oil companies? Its not just the rich, everyones 401k plan and 403b(teachers) most of them invest in these companies. should we screw the hardworking plant worker or school teacher? because if we have a windfall tax, you can bet everything that XOM stock will tank. Oil companies don't set the price of oil, the market dictates the price. it's not manipulated by XOM. It is manipulated by OPEC, but unless you want to invade the Opec nations, and spill some blood for oil, there's not much we can do about that.
Posted by: Rhino | February 28, 2006 02:25 PM
Rhino, the post is true. I wasn't quoting profits for the year. I was quoting profits for the quarter that Katrina struck. The quarter in which oil companies exploited a tragedy to line their pockets.
Maybe the difference is too subtle for you. Sorry about that.
Posted by: abi | March 1, 2006 12:12 AM
abi, thank you for your condescending and insulting tone, it is very much appreciated and confirms what i already thought about you.
In any event, you're numbers are wrong. you stress in your post that these companies had these huge PROFITS, and again you say
"That's profit."
Well, THATS WRONG. now i'm not saying you're a liar, and i'm not saying you're stupid, but i'm not saying you're not either.
What i am saying is that if you're going to put something on your blog and put you're name to it, maybe you should do some research first and stop letting someone else do all your homework for you.
I have done my homework, and the profit margin for XOM for the year is 10.7%. there is no evidence of price gouging, and there is no evidence of manipulation.
Posted by: Rhino | March 1, 2006 09:12 AM
I'm sorry, Rhino, was I too hard on you?
I guess I don't have much patience for someone who pretends not to understand the concept of "quarter."
Posted by: abi | March 1, 2006 08:31 PM
abi look at the bottom line. No matter what the quarter was the end result is that the profit margin is in line with the rest of corporate America. And even if it wasn't, lets say it was 10 times the corporate average, why would we penalize them for having a successful business model? they put themselves in a position to be successful, they took the risks and they won. If you invest in the oil company stock and they win do you think you should have to give an even higher cap gains tax? If they lose you don't get a break, so why should you get penalized for being successful? and why should oil companies be penalized?
Posted by: Rhino | March 2, 2006 09:08 AM