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Big Oil greed greater issue than supply and demand

The Pantagraph (Illinois) - November 6, 2004
Editorial


Big Oil greed that government officials choose to ignore is the best way to describe the "crisis" that is causing gasoline and natural gas prices to soar.

They want us to believe that interruptions at production fields throughout the world are creating more demand for oil than can be supplied, thus causing prices to escalate.

How can anyone possibly believe that when the world's largest oil companies are raking in record profits for the third quarter just ended Sept. 30? Here is an example:

  • Exxon Mobil Corp., the world's largest publicly traded oil company, had record third-quarter profits of $5.68 billion, or 88 cents per share versus 55 cents per share in the same period last year. Profit up 60 percent.

  • Chevron Texaco, the second biggest U.S. oil company, netted $3.2 billion, sending its per share profit from $1.01 in the same period a year ago to $1.51 in the last quarter.

  • Conoco Phillips, the nation's third largest oil company, earned $2.86 a share vs. $1.90 a share a year ago.

  • Unocal Corp., on a smaller scale, had earnings of $1.23 per share last quarter vs. 58 cents a year ago. Profit up 112 percent.

And it is not just American companies.

  • Britain's largest oil company, BP, had a 43 percent increase in profit to $2.1 billion.

  • Without giving figures on oil companies operating in Russia, it has been reported that Russia had adjusted its budget to reflect $17.6 billion from taxes and duties on oil industry profits this year. The budget originally showed $2.9 billion. Russia's taxes and duties skim off about 90 percent of the profits when oil exceeds $25 a barrel.

With figures such as these, it's hard to believe the oil production interruptions have as much to do with the high prices of gasoline and natural gas as the companies would have us believe. We will concede that terrorists blowing up pipelines in Iraq; political unrest in the Nigeria oil producing region; attempts to oust the oil-controlling Saudi monarchy; scandals over oil profits and control in Russia; and hurricanes in the Gulf of Mexico are bound to have affected the supply.

But when we see profits increasing from 50 percent to as high as 112 percent, it suggests the real culprits are in the Big Oil board rooms, refineries where gasoline blends vary from state to state to keep "outside" gasoline out of the local turf and perhaps, to a smaller extent, the more local distributors.

And what is government doing? Nothing visible. And why should it? While we're gullible enough to believe the old "supply and demand" reasoning and pay the going rate for gasoline, the federal government is collecting 18.4 cents on every gallon of gasoline sold. And every state adds a per-gallon tax, varying from 8 cents in Alaska to 36.1 cents in Hawaii. The Illinois gas tax is 19 cents per gallon. Some communities also have local taxes added. Neither federal or state officials are going to rock the boat much because a reduction in gasoline tax revenue means they have less to spend.

We could go on a conservation kick as we did in the mid- and late '70s and at the time of the Gulf War in 1991. People bought smaller cars that used less fuel. But history tells us that won't last. As soon as gasoline prices dipped, the era of the gas-guzzling vehicles returned.

So, where is the problem? It is with us — consumers willing to pay the going price when gasoline soars above $2 per gallon. We talk about buying more fuel efficient vehicles but fill the roads with gas guzzlers because we want them and they provide a measure of safety for our families. Car manufacturers have introduced hybrid cars, but are in a ticklish situation — demand is greater than production, but not great enough to take other models off line to devote to the hybrid cars.

The more we drive, the more gasoline we need. And because we won't let exploration for new supplies within the United States damage our environment, we have to depend on more imports. When anything happens in countries exporting oil to the United States, it's an excuse to increase prices. And as evident by Big Oil profits, anytime those companies see an opportunity to gouge U.S. consumers, they'll do it.

The best way to put Big Oil in its place is to hit its piggy banks. With the kind of profits they're making, why do they need any tax loopholes or subsidies from the U.S. government. U.S. consumers have to put unrelenting pressure on U.S. House and Senate members to stop oil industry price-gouging now.


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