Oil Execs to Be Asked to Justify Profits

[Avery L. Breath]

Oil Execs to Be Asked to Justify Profits
    By H. Josef Hebert
    The Associated Press

    Tuesday 01 November 2005

    Washington - Top executives of three major oil companies will be asked by senators next week why some of their industry's estimated $96 billion in record profits this year shouldn't be used to help people having trouble paying their energy bills.

    Lee Raymond, chairman of Exxon Mobil Corp., Jim Mulva, chief executive of ConocoPhillips, and John Hofmeister, president of the U.S. unit of Royal Dutch Shell PLC, will be among the industry executives to be questioned at a Senate hearing, according to congressional and industry officials.

    The officials spoke on condition of anonymity because a final list of witnesses yet to be completed. The three companies together earned more than $22 billion during the July-September quarter this year when crude oil prices soared briefly to $70 a barrel and motorists were paying well over $3 gallon at the pump after Hurricanes Katrina and Rita struck the Gulf Coast.

    Spokesmen for Exxon Mobil and Royal Dutch Shell would not confirm Tuesday that their executives had been called to testify. ConocoPhillips did not immediately return a call seeking comment.

    There is growing distress among both Republicans and Democrats in Congress about the huge profits reported by oil companies last week.

    On Tuesday, Sen. Charles Grassley (news, bio, voting record), R-Iowa, chairman of the Finance Committee, said oil companies "should do their part" and donate some of their third-quarter earnings to low-income families and senior citizens having trouble paying energy bills, including high heating bills this winter. Grassley cited industry analysts as estimating that the 29 major oil and gas companies are expected to earn $96 billion this year.

    "You have a responsibility to help less fortunate Americans cope with the high cost of heating fuels," Grassley, whose committee deals with tax legislation, wrote in a letter to the chief of the American Petroleum Institute, the industry's lobbying arm. He also said companies should invest more of their profits in exploration and production and refining capacity to increase supplies.

    Earlier in the day, Sens. Byron Dorgan, D-N.D., and Chris Dodd, D-Conn., renewed their call for passage of a windfall profits tax on oil companies. They hoped to put such a proposal - a 50 percent tax on the sale of oil over $40 a barrel - into a tax bill later this month, they said. The revenue would be given to consumers in form of an income tax rebate.

    These huge profits "come as a windfall, falling into the laps of the big oil companies with little or no additional effort or expense," argued Dorgan.

    The Bush administration also has discussed internally a possible proposal to link funding of the federal low-income energy assistance program to oil industry profits. But Energy Secretary Samuel Bodman said he remains opposed to a windfall profits tax, arguing it was a failure in the 1980s and would be counterproductive.

    Advocates for low-income energy assistance said that because of soaring fuel costs, as much as $5.2 billion may be needed to help poorer families pay winter heating bills. Congress provided about $2 billion for the program last fiscal year.

    In an interview last week, John Felmy, chief economist at the American Petroleum Institute, which represents the major oil companies, said the industry in the coming years plans to invest $86 billion in marketing, refinery expansions, oil exploration and production. "We are an industry already doing a lot. ... We're already investing vast amounts," Felmy said.

    Senate officials said other industry executives and some state attorneys general who have pursued price gouging complaints also were expected to testify at the Nov. 9 hearing. The joint hearing by the Energy and Natural Resources Committee and the Commerce Committee was announced last week by Senate Majority Leader Bill Frist, R-Tenn., as oil companies announced record profits.

    Exxon Mobil, the world's largest publicly traded oil company, announced earnings for the third quarter of $9.9 billion, on revenue of $100 billion. Royal Dutch Shell said it had profits of $9 billion, while ConocoPhillips earned $3.8 billion, nearly double profits a year earlier.

    House Majority Leader Dennis Hastert, R-Ill., urged oil companies to invest more earnings in new refineries and - in answer to a question at a news conference - did not rule out taxing oil company windfall profits. Frist said Congress should consider a federal energy price-gouging law.

    "Consumers are increasingly feeling that they are being taken for a ride," Sen. Larry Craig (news, bio, voting record), R-Idaho, said at a hearing last week.

  -------

[winder]

Their profits are high because margins increased dramatically when supply did not keep up to meet demand.

Suppose supply and demand dictate a $2.00/gallon price and it costs 1.90 to make, leavining $0.10 for the oil company in profit.  Now a few hurricanes later and many miles driven in evacuating, etc. and the supply demand balance allows $3.00, put cost went to only $2.50.  Now the profit is $0.50.  So profits went up by $0.40 or 5x per gallon, yet overall demand did not decrease by a loss of 80%.  My figures are only illustrative, not exact.

The profitability of oil companies is driven (pun intended) by the lifestyle choices that all Americans make, inlcuding driving small houses known as SUVs.  They consume more gas per mile and people drive more miles in these things.  Yet the consumption by an SUV has an impact on the price paid not just by the SUV-owner, but by Mr. Econobox-driver.  Mr. SUV driver consumes 4x more gas and causes there to be less supply for Mr. Econobox-driver.  Who is bothered more by a price increase?  I would suspect Mr. Econobox-driver since he spent less on his car and had lower operating costs to start with, being a cost conscious individual.  Mr. SUV-owner through money to the wind already.

I think there should be a tax on SUVs and a credit for fuele-economical vehicles.  Natural gas is less impacted by these choices.  Heating oil is a victim of the gasoline balance as well.  What SUVs consume is not avaiable for home heating.

Its chicken-shit on the part of the government to criticize the oil companies on their profits, profits that the government allowed to occur by refusing to increase the fleet average fuel economy requirements for automobiles and leaving the SUV classified as a light truck when it is used by and large as a passenger vehicle.  The politicians take no risk in criticizing the oil companies, but are doing nothing to make sur ethe situation does not occur again.

Oil companies would be foolish to invest in new refineries if demand actually falls in the near future from any backlash or awakening by people or a shift in technology (hydrogen, fuel cell, natural gas powered, etc.).

[Avery L. Breath]

don't suv drivers actually get a tax break?  I though shrub brought something of the like about.  Utility vehicle tax break or such.  I think the rules have tightened up a bit more lately but am pretty sure just a couple years ago a person could ride off 100% of the sale price...... not to mention the commute mileage.

[senorsalvia]

Yeah, a few years ago evrone seemed to notice that there was a huge loophole concerning vehicle tax...  Seems that Clinton signed a bill that allowed vehicles of 6000lbs or more to be exempted from sales tax..  When peeps noticed that Hummers were a few hundred lbs over that, they began buying those vehicles like hot cakes and avoiding 7-9 thousand in sales tax-----------  AmeriKKKa, whatta place--   sal

[Avery L. Breath]

Fourth-quarter earnings top targets for world's largest oil company

The Associated Press
Updated: 9:47 a.m. ET Jan. 30, 2006


IRVING, Texas - Exxon Mobil Corp. posted record profits for any U.S. company on Monday â€" $10.71 billion for the fourth quarter and $36.13 billion for the year â€" as the world’s biggest publicly traded oil company benefited from high oil and gas prices and demand for refined products. The results exceeded Wall Street expectations.

The company’s earnings amounted to $1.71 per share for the October-December quarter, up from $8.42 billion, or $1.30 per share, in the year ago quarter. The result topped the then-record quarterly profit of $9.92 billion Exxon posted in the third quarter of 2005.

Exxon’s profit for the year was also the largest annual reported net income in U.S. history, according to Howard Silverblatt, a stock market analyst for Standard & Poor’s. He said the previous high was Exxon’s $25.3 billion profit in 2004.

The results for the latest quarter included a $390 million gain related to a litigation settlement. Excluding special items, earnings were $10.32 billion, or $1.65 per share. The result topped Wall Street’s expectations. Analysts surveyed by Thomson Financial predicted earnings of $1.44 per share.


Quarterly revenue ballooned to $99.66 billion from $83.37 billion a year ago but came in shy of the $100.72 billion Exxon posted in the third quarter, which was the first time a U.S. public company generated more than $100 billion in sales in a single quarter.

By segment, exploration and production earnings rose sharply to $7.04 billion, up $2.15 billion from the 2004 quarter, reflecting higher crude oil and natural gas prices. Production decreased by 1 percent due to the lingering effects of hurricanes Katrina and Rita, which battered the Gulf Coast in August and September.

The company’s refining and marketing segment reported $2.39 billion in earnings, as higher refining and marketing margins helped offset the residual effects of the hurricanes.

Exxon’s chemicals business saw earnings, excluding special items, decline by $413 million to $835 million, as higher materials costs squeezed margins.

For the full year, net income surged to $5.71 per share from $3.89 per share in 2004. Annual revenue grew to $371 billion from $298.04 billion.

[Stonehenge]

I don't have any problem with an industry making big profits if they do it honestly. I'm a little suspicious about collusion on prices. Outside of that, it's none of the governments business how much they make. This is just socialism. Take from those who have and give to those who have not.

[Avery L. Breath]

When you have record oil prices putting the squeeze on the average low income consumer and record oil proffits at the same fricking time by the big oil companies, something is not on the level.

[Hyakitaki]

I would say "HAHAHAHAHAHHAHA THEY ARE FUCKED THOSE CORRUPTED PEICES OF MOTHER FUCKING SHIT BASTARD ASS FUCKS!!!!"

Then I realize....the system evaluating them is far from corrupt.  They will get off scott free even though they milked in major profits.  They can just fly around in their jumbo jets drinking and partying, while pinning the little guy underneath the heal of their shoe.

I mean I understand why selling a NATURAL RESOURCE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

(I want to put more exclamation but stopped for reasons of page space)

But ya I can understand why selling a natural resource back to us is legal.  I mean I could understand if they charged us for the costs it took to get from the earth and the cost of employees wages calculated in.  That would mean though an unwavering charge for gasoline no matter what the supply may be at.

THIS WORLD IS INCREDIBLE AND IT'S SPAWNED SUCH INTELLIGENT BEINGS WITH SUCH POWER AS OURSELVES!  WHY DO WE HAVE TO FUCK IT UP WHY!!!!


-Matt

[winder]

They made huge profits because the market would support the prices.

Consumption is up because of people driving big vehicles willy nilly.
They haven't invested much capital lately in new refineries, so their costs are essentially fixed.

The last barrel sold is the most profitable barrel.

Hey, at least they are being honest about their earnings, something that Ken Lay and company at Enron were not.

[Avery L. Breath]

I understand the machinations of supply and demand, however I still reserve the right to be outraged by this particular situation.  Seems to me, they are proffiteering just a little too boldly..  Just because the price of oil goes up on the market, doesn't mean the oil companies can or should jack up their price beyond the price increase of obtaining the oil  Demand hasn't gone up that much.  They can still make a descent proffit, without gouging the consumer in the process.  Their cost in producing the gas has not gone up one cent.

[Veracohr]

I'm not so sure that's the right way to go about getting people help with their bills. While I won't say the oil companies deserve the profit they extort from us, forced charity isn't charity at all.

[winder]

Supply went down in September.  Two big Gulf of Mexico hurricanes hurt production at the wells and through the refineries.

I don't see that the government should tax the companies outrageously.

Perhaps the corporate taxes should be eliminated all together.  But that's a debate for another time.

Maybe some companies should be nationalized.
Or subsidies to other programs suspended to provide subisidies for necessities like gasoline/heating oil/natural gas.

Or a tax credit incentive program to encourage the oil companies to help the needy.