Oil
Price Spike, As Exxon And Others’ Profit Skids, Shows Potential For New
Economy-Killing Energy Roller Coaster, Says Consumer Watchdog
Santa Monica, CA — On the same day that Exxon Mobil reported a second
quarter profit of $3.95 billion dollars, down 66% from last year, the
price of oil on speculative markets rose more than $3.00 a barrel,
Consumer Watchdog noted. Yet the same forces that cut Exxon’s
profit—copious supplies of oil and fuels on world markets–should still
be curbing the price of oil.
“The price of oil is still being driven by trading on speculative
markets,” said Judy Dugan, research director of Consumer Watchdog. “The
same forces that drove oil prices to $147 a barrel a year ago and
gasoline prices to $4.00 and above remain at work, even though the
economy is showing only small signs of recovery. Consumers are still in
the grip of record joblessness and wage stagnation.”
The nonprofit, nonpartisan Consumer Watchdog praised the Obama
administration’s recent hearings in the Commodity Futures Trading
Commission on the need for broad oversight of energy and commodity
trading. The new head of the commodities regulator, Gary Gensler, has
signaled support of regulation that would put reasonable limits on the
energy and commodity trades by large funds that are simply gambling on
price without either selling or buying actual oil.
BP, Shell and Conoco Phillips showed similar profit drops this week
for the second quarter, all of them citing steep reductions in oil
consumption and a squeeze on refining profits as both gasoline and
diesel consumption fell in tandem with the economy.
“The more than $3.00 a barrel jump in oil prices today followed the
stock market, not the oil business”, said Dugan. “Yet energy traders
operate under much looser rules than stock traders, because commodity
markets were developed to let producers hedge their losses—not to
provide a gambling opportunity for traders.”
Consumer Watchdog has called for limits in energy markets including
aggregate curbs on the size of trades by speculators, including
subsidiaries; regulation of electronic markets that are currently
exempted; and far greater transparency and public reporting of trading
activity.
“The time to act is now, before a new price spike in energy markets
can stomp the fragile start of economic recovery,” said Dugan.
Consumer Watchdog has also backed proposals to eliminate taxpayer
subsidies for major oil companies, including a White House proposal to
tax oil produced in the Gulf of Mexico to compensate for oil royalty
relief mistakenly granted in federal contracts in the late 1990s.
Today’s temporarily lower profits are no reason to continue those and
other subsidies, said Consumer Watchdog.