Conoco’s Loss: Consumer Group Sees Trend of Major Oil Companies Waiting Out Recession, Not Investing for Recovery
Santa Monica, CA — Conoco Phillips’ CEO today deflected questions on
the company’s layoff plans, investment cutbacks and refineries, saying
the company was hunkering down for a “significant multiyear recession.”
If other oil companies follow suit, they will not meet demand as the
economy recovers and prices will be back on a damaging roller-coaster,
said Consumer Watchdog.
The nonprofit group also noted that much of the near $32 billion in
write-offs reported by Conoco could have been booked in whole or in
part at any time over the last few years, but would provide a bigger
tax advantage now, coming off of an otherwise astoundingly profitable
year.
“How many Americans can say ‘Because of the spike in the price of
gasoline in 2008, the value of my SUV plummeted, and I’m going to write
down $15,000 of its value on my tax form,’ ” said Judy Dugan, research
director of Consumer Watchdog.
If Conoco’s paper write-downs are disregarded, the company’s quarterly
profit comes to $1.9 billion and the yearly profit is $16.4 billion.
Conoco’s cash reserves fell to under $1 billion, but before the company
stopped buying back its own shares in October, its buybacks came to
over $8 billion in 2008 alone, said Consumer Watchdog. That is
essentially a separate piggy bank, filled from the pockets of consumers
who were paying over $4 a gallon for gasoline at the pump. But CEO Jim
Mulva said Conoco was halting planned refinery upgrades and much of its
exploration. That could mean supply shortages later as the global
economy recovers, and another round of price spikes. Deferred upgrades
also keep refineries going at higher pollution levels.
“We’ll get a clearer picture as the rest of Big Oil reports its profits
over the week, but appears that the proceeds of five years of record
and near-record profits won’t be going to increasing oil exploration or
development of cleaner and cheaper energy sources,” said Dugan. “They
won’t be investing at all in ways that could aid economic recovery.”
Independent oil industry analyst Tim Hamilton said that small
businesses couldn’t get away with with taking Conoco-like write-offs,
and now it’ll be small businesses also trying to restart the economy.
“The big businesses with cash are sitting on it and the small
businesses hurt by high energy prices are asked to carry the load for
America.”
Conoco CEO James Mulva, in a conference call with analysts, also
declined to pinpoint the source of a $537 reduction in book value at
two unidentified refineries, calling it a competitive issue. This
information should be public, said Consumer Watchdog. Infrastructure or
production problems at major refineries could cause large local
disruptions in supply and pricing, an issue of economic security.
Consumer Watchdog has called for increased regulation and oversight of
refineries, to make their operations more transparent and smooth out
price spikes caused by production cuts.
(For historical data on oil profits, see OilWatchdog’s “Oil Profits
Monster” database, a free resource on detailed profit figures since
2000, at: www.OilWatchdog.org. The database takes into account all mergers since 2000.)
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