The PR departments of the major oil companies are madly developing
their spin for the yet-another-record 2nd quarter profits
they’re about to report.
What they’ll say: "Without these
gigantic profits (including billions in taxpayer subsidies), we
couldn’t explore and drill and supply oil for the future." "We’re not
really so rich, compared to other industries." "The oil industry is
volatile, so this offsets our huge losses in other years." "It’s OPEC
stealing your money, not us." And a perennial favorite, "We pay crippling taxes." Oh, really? Let’s take these points one
at a time.
Exploring and drilling. ExxonMobil alone spent $31.8 billion in 2007 on buying back its own stock in 2007, more
than three times the $10 billion that the entire industry spent on
buybacks five years earier, according to a 2008 Congressional study. At
the same time, major companies are squeezing maximum profit from
current fields to make the quickest buck, while spending only a few
billion on exploration and drilling.
From the study:
Exploration of new oil fields went from just $6 billion in
2003 to $10 billion in 2006. The evidence from their financial filings
indicates that the big five oil companies have not responded to the
overwhelming market signals by devoting a larger share of their soaring
profits and cash flow to exploration of new fields. Plenty of
opportunities exist for new exploration on federal land. According to
the U.S. Minerals Management Service, production is currently occurring on just 20 percent of the 38.5 million acres of
outer continental shelf that oil and gas companies currently hold
drilling rights to. Onshore, oil companies hold the drilling rights to
nearly 43 million acres of federal land and are only producing on 28
percent, according to the Bureau of Land Management.
The same companies also have huge tracts of undeveloped existing leases in the Gulf of Mexico. Yet President Bush and the CEOs of Exxon, Chevron, Shell and friends continue to demand
that Big Oil be allowed to drill off the U.S. coasts and in the Alaskan
wilderness reserve. But the Congressional report show that the same
companies will manage everything they own to maximize profits, not to
make the U.S."energy independent," much less reduce gasoline prices.
"We’re not so rich."
When the oil companies report profits, starting with Conoco Phillips
this Thursday, they’ll calculate their profits as a percentage of
revenue. They’ll say, "we’re only a little above average" at 10% or
12%. Yet when they later talk to investors, they will crow about their
profits as a percentage return on capital invested–in a range of the
high 20s to low 30s. Spectacular, stupendous profits compared to other
industries. Yet they won’t report these numbers in the same breath with
the 2nd quarter press releases, which pulls reporters into their game of minimizing profits.
Profit ups and downs. None
of the major oil companies has had so much as a losing quarter since
2002, and even then only Chevron and Conoc posted very small
single-quarter losses. The last six years have been up, and further up,
yet the oil companies still exert their lobbying might to preserve
billions of dollars a year in taxpayer subsidies as some kind of
rainy-day fund. See the charts and database at OilWatchdog’s "Oil Profits Monster" for
details. Even with outlandish stock buybacks (see above) the major
companies are awash in unspent billions (see the cash on hand line in
the coming profit reports).
"It’s OPEC, not us, getting rich."
Below is a New York Times chart on the 2007 oil revenues of the major
Middle East oil producers. Staggering, yes. But compare Saudi Arabia’s
$206.5 billion to Exxon Mobil’s 2007 revenue of $404.5 billion. Saudi
Arabia’s profit margin was no doubt much higher than Exxon’s, but in
the raw money game it’s dwarfed by this single private company.
|
||||||
 |
 |
|
||||
|
|
|||||
|
|
|||||
|
||||||
Higher taxes. The U.S. corporate tax rate is 35%, but it’s also loophole city. U.S.
law kindly allows the major oil companies to skip taxation on profits
earned overseas as long as they stay overseas, which is an incentive
for these companies to hire and operate outside the U.S.Oil companies
also get to pay taxes on on their oil reserves as though every gallon
was bought at the price of the highest drop in the tank. This "last in, first out" accounting
saves them billions. So with these and other accounting tricks, a whole
lot of income is never even booked for tax purposes. One other oil
company trick is comparing worldwide oil company taxes to what ordinary Americans pay,
and saying "See, we really are good citizens, funding our government!" But these comparisons
are also full of lies and omissions, which start with excluding every tax we serfs
pay except the federal income tax. And you’ll notice that Exxon doesn’t break out its taxes by country, which would give an accurate picture of the pittance that Americans are actually getting back.
So when those profit reports
roll out and the excuses and evasions begin, the good citizens paying
$4.50 a gallon with no good alternative should resist the
impulse to weep for Exxon.