NEWS RELEASE:
ConocoPhillips Kicks Off a ‘Profit Orgy’ By Major Oil Companies
2nd Quarter Report Shows Industry Still Buying Its Own Stock, Not
Investing Record Profits in New Oil or Renewables, Says Consumer
Watchdog; Congress Must Act
July 23, 2008
Santa Monica, CA — ConocoPhillips is the smallest of the Big Five Oil
companies, but it made an enormous leap in revenues and profits in the
2nd quarter as the U.S. economy and consumers suffered, said Consumer
Watchdog. Its $71.4 billion in revenue and $5.4 billion in net profits
were all-time records that will fuel consumer anger–and should push
Congress to pull back taxpayer subsidies as well as regulate
speculative oil markets.
“Conoco’s record is only the kick-off for a profit orgy by all of the
major oil companies,” said Judy Dugan, research director of the
nonprofit, nonpartisan Consumer Watchdog. “The company spent $2.5
billion on buying back its own stock, in comparison to only $288
million spent on oil exploration. That shows where its corporate
priorities are. Why would they spend money exploring drilling for more
oil, when they can make record profits producing less oil?”
Conoco’s spending pattern, which will be replicated by the other major
oil companies, is good reason to ignore calls to open protected areas
of the U.S. to more drilling, said Consumer Watchdog. Oil companies are
declining to develop oil leases they already own, shunning U.S. energy
priorities in favor of corporate profit. As a recent draft Government
Accountability report showed, the oil companies are also reaping tens
of billions of dollars from so-called “royalty relief” intended to spur
exploration—even as the companies decline to explore.
Click here to see info on the draft GAO report.
“Congress will surely hear the public outrage as these profit reports
put a spotlight on oil companies’ profit-seeking at the expense of the
U.S. economy and its energy needs,” said Dugan. “That should focus
lawmakers’energy on regulating speculative investments in completely
unregulated oil markets, and on pulling back taxpayer subsidies. Those
public billions should be developing renewable energy that will
actually start freeing the economy from its oil-profit malaise.”
It was also notable that ConocoPhillips increased its profit from
refining oil into gasoline and diesel fuel over what it made in the 1st
quarter, even as gasoline soared to over $4 a gallon and diesel fuel
pushed $5 a gallon, said Consumer Watchdog. Much of that came from the
price of diesel, which rose far above the price of gasoline and
produced commensurately higher refining profits in 2008.
Click here to see Consumer Watchdog’s report on diesel prices and profits.
Across the rest of the economy, producers were trying to swallow the
raw material and transportation cost increases caused by oil prices,
rather than pass them along fully to consumers, said Consumer Watchdog.
Conoco’s increased profit on refining may indicate that fuel prices
will not match any drop in the price of oil, as companies seek to
further increase their profits on refining.
“Conoco and others will defend their profits as only a modest
percentage of overall revenues,” said Dugan, “but it is ‘return on
capital employed,’ that really describes profitability. That’s the
higher number that the oil companies will report later, in
presentations to investors. Last year, for instance, Exxon’s ROCE was
32%, about twice what’s considered a robust average for industrial
companies.”
Click here to see critique of profit reporting.
(For extensive, accurate comparison data on oil company profits back to 2000, see the Consumer Watchdog/OilWatchdog “Profits Monster” database.
To permanently quell the volatility in prices of oil and gasoline, Consumer Watchdog has called for:
– White House action to release oil from the Strategic Petroleum Reserve.
– Regulation of all energy commodity trading.
– Increases in the amount of margin funds that traders must put up in energy markets to help suppress speculation.
– Senate approval of an alternative fuels bill 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 require 60 votes for
passage. A similar House measure was removed from the federal energy
bill by the Senate last year under pressure from the oil lobby. (Find
text of HR 5351 at http://thomas.loc.gov/
– Oversight of refinery operations, including regulation of 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 production. Only government
regulation to control the supply of gasoline, nationally and
regionally, will keep supplies adequate to control prices.
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