Chevron’s Doubled Profit Caps Oil Industry’s ‘Vampire Attack on Economy’
Current Oil Price Breather Is Right Time for Action to Prevent Next Speculative Bubble, Says Group
October 31, 2008
Santa Monica, CA — The oil industry’s third-quarter reports ended
today with Chevron Corp, which more than doubled its profits to $7.9
billion while the U.S. and world economies slid toward recession, said
Consumer Watchdog. Nearly $1.5 billion of the increase came from higher
profits on the sale of refined fuels even as drivers cut their
consumption sharply—the opposite of what would happen if the laws of
supply and demand applied to the oil industry.
“These profits show the extent of the oil industry’s vampire attack on
a weakened economy,” said Judy Dugan, research director of the
nonprofit, nonpartisan Consumer Watchdog. “Fuel and energy prices bled
away the reserves of family budgets and corporate treasuries. Energy
inflation deepened the effect of the financial markets’ meltdown. We
shouldn’t be lulled into thinking it won’t happen again.”
Chevron’s third-quarter profit nearly equals its $8.2 billion profit
for all of 2003, the year in which the major oil companies began their
steady march of new record profits, said Consumer Watchdog. Its profit
over the first three quarters of 2008, $19 billion, already exceeds
2007’s record full-year profit of $18.7 billion.
Even Chevron’s cash on hand rose more than $3 billion from last year to
$10 billion—well above its $2 billion increase in “capital and
exploratory expenditures” to increase production. The company also
continued a three-year, $15-billion stock buyback program.
“As with all of the major oil companies, the cash pile-up and stock
buybacks are symptoms of corporate bloat,” said Dugan. “Instead of
actively developing new oil sources or putting real investment into
renewable energy, Chevron and others are unproductively putting the
money under the corporate mattress. Yet even if oil goes to $40 a
barrel, they’ll still turn a profit.”
Consumer Watchdog said Congress and the White House must not be lulled
by oil prices that have dropped to near $60 a barrel into inaction on
needed oversight and regulation of oil futures markets and the oil
business itself.
“If government puts energy policy and market reforms on the back
burner, we’ll be headed right back to $145 oil and $4.50 gasoline, or
worse,” said Dugan. “Chevron’s high refining profits in the last
quarter show how the oil business will make up for lower oil prices
with bigger profits at the pump, even though consumers keep cutting
back.”
Regulation and Reforms Needed
Consumer Watchdog urges that Congress, regulators and the White House enact the following reforms:
– Oversee and regulate oil refining, to prevent production cutbacks that would keep the price of fuel artificially high;
– Remove taxpayer subsidies to oil companies, including revisions of
so-called royalty relief, with proceeds to fund renewable energy
development and tax rebates to low-income consumers;
– Plug the loophole that allows Exxon and friends to sell oil to their
own overseas subsidiaries, driving up the price on paper before
bringing the oil to the U.S. This allows the company to evade U.S.
taxes;
– Oversee and regulate energy futures markets to quell speculative
bubbles like the one this year that drove crude oil prices to over
$145 a barrel. Such regulation should require financial speculators to
pay higher margins–put more money upfront on trades—and bar exotically
constructed trades that encourage manipulation; and
Despite dropping energy prices, demand steady support for green energy,
including transportation fuels and vehicles, energy conservation and
wind and solar energy.
For detailed data and charts on oil company profits since 2000, click here to see Oilwatchdog.org’s “Monster Oil Profits Database,” a downloadable Excel chart organized by company and accompanied by quarterly profit charts.
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