Record
first-quarter profits, up a staggering 17 percent to $10.89 billion
reported today by ExxonMobil, the world's largest oil company, came as the
result of crude oil profits driven by unregulated speculative trading, said
Consumer Watchdog. Soaring gasoline and diesel prices have devastated the
U.S. economy and helped push consumers deeper into debt, yet President Bush
and Congress have engaged in mindless finger-pointing and failed to take
obvious steps to ease the pain.
"With gasoline prices topping $4 a gallon in some cities and averaging
$3.60 nationwide, nobody is surprised to see the latest string of
outrageous profits posted by Big Oil," said John M. Simpson, consumer
advocate with Consumer Watchdog (formerly the Foundation for Taxpayer and
Consumer Rights). "But what people cannot understand -- and will not forget
-- is that their elected representatives are shirking their responsibility
to take obvious steps that will ease the crisis."
"People are driving less, but for every trip they cancel, rising prices
at the pump more than wipe out their savings," said Simpson. "They pay a
second time as inflation at the grocery store is driven by fuel surcharges
on every truck delivery."
The nonprofit, nonpartisan Consumer Watchdog and its Oilwatchdog.org
project have called for action to quell market speculation and cut back
taxpayer subsidies to oil companies (see below), but the most obvious
immediate action is for the White House to stop buying market-priced oil
for the federal Strategic Petroleum Reserve, which is at record high levels
above 700 million barrels, and start selling a fraction of the reserve back
into the market.
At a Rose Garden News Conference this week Bush refused to stop
purchases for the reserve. He also blamed Congress for not allowing oil
drilling in the Arctic National Wildlife Refuge (ANWR) even though it would
take a decade before oil could be obtained if drilling were allowed today.
"Purchases for the reserve, at these record oil prices, come straight
from the pockets of taxpayers, and by taking oil off the market they fuel
continued speculation," said Judy Dugan, Consumer Watchdog research
director. "Yet President Bush has turned a deaf ear on pleas by Congress
and consumer advocates to take the small, painless and beneficial step of
curbing this excess.
Exxon's profits were a record for a first quarter and were the second
highest ever for any U.S. corporation. Exxon's 2007 fourth quarter earnings
of $11.66 billion are the all time record. During the first quarter of 2008
the oil giant piled up profits at the rate of $5.08 million an hour or
$84,000 every minute.
With the announcement of record profits, Exxon also said it had bought
back $8 billion in its own shares.
"This is money that could have been used to lower prices for consumers
and invested in alternative energy research," said Simpson. "Instead the
company is taking a short-term, profit-maximizing approach that has even
upset some of its most important shareholders."
On Wednesday descendents of John D. Rockefeller, who founded Standard
Oil, ExxonMobil's precursor, called a news conference in New York to say
the oil giant is overlooking its effect on the environment and the future
of alternative energy. They also backed a resolution that would split the
roles of chief executive officer and chairman, now held jointly by Rex
Tillerson.
"When America's first family of oil speaks, ExxonMobil should pay
attention," said Simpson.
Exxon's refining profits did not match the increases from oil sales,
but that was in part because the oil giant is selling its own petroleum at
inflated prices to their own refineries, said Consumer Watchdog. The
current upward spike in pump prices is unlikely to stop even if crude oil
prices abate, because refiners are now working to boost profits on their
end of the business.
"When one uses the spreadsheet to compare the price at the pump with
the quarterly company profit reports, it is clear the companies have
inflated bottom lines by raising pump prices far in excess of any actual
increased cost incurring from the highly publicized increase in the
commodity price of crude," said Tim Hamilton, independent oil analyst.
"Since the average pump price for regular unleaded was back at $3.11 during
the first quarter, next quarter profit reports can be expected to reflect
prices approaching $4 at the pump and set yet another new record."
Consumer Watchdog has called for:
- Action by President Bush to stop adding to federal Strategic Petroleum
Reserve and sell from the reserve to stabilize and drive down oil
futures price.
- Closure of the "Enron Loophole" in commodity trading
regulation. A regulatory measure in the federal farm bill (S.2058 by
Sens. Dianne Feinstein and Carl Levin) would regulate trading markets to
help stop speculative oil pricing.
- Senate approval of an alternative fuels bill (HR 5351) funded by
withdrawing $1.8 billion a year in unjustified taxpayer subsidies to oil
companies. This measure, passed by the House, has not been taken up in
the Senate, where opponents are using a filibuster tactic to block
passage. A similar House measure was removed from the federal energy
bill by the Senate last year under pressure from the oil lobby.
- Oversight of refinery operations, including regulation of national
gasoline supplies. In the last decade, the average on-hand supply of
gasoline has dropped from 30 days' worth to about 22 days. This
makes prices increasingly sensitive to any cuts in gasoline production.
Consumer Watchdog (formerly The Foundation for Taxpayer and Consumer
Rights) is a leading nonprofit, nonpartisan consumer advocacy organization.
SOURCE Consumer Watchdog
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