Raking in Profits at the World's Expense

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http://www.alternet.org/story/31789/

 

Raking in Profits at the World's Expense

 

By Matthew Wheeland, AlterNet. Posted February 6, 2006.

 

 

The record-breaking profits recently announced by ExxonMobil and

ChevronTexaco come hand-in-glove with exceptionally -- and artifically

-- high energy prices.

 

Last week, within days of each other, Chevron and ExxonMobil announced

record quarterly and annual profits for the second year running. These

are not your average earnings statements. These are profits on an

inconceivable scale, profits that dwarf the income levels of most

countries.

 

ExxonMobil announced $36 billion in profits -- in profits -- last

year. That's three billion dollars every month, which if ExxonMobil

were a country would make it the 90th richest country in the world.

This astronomical number is a 42-percent increase from last year's

record-breaking profits. Chevron also bested its record profits for

the second year in a row, raking in $27.4 billion in 2005. This is,

once again, the company's highest profits in its 126-year history.

 

It is no surprise that these announcements come as Americans are

paying record prices at the pump, as well as for heating oil and

natural gas. Many oil industry critics, as well as most drivers, can

connect the dots.

 

Tyson Slocum, acting director of Public Citizen's energy program, said

oil companies are taking advantage of consumers. " Oil prices are

definitely arificially high, " Slocum said, " in large part because of

anti-competetive practices by major oil companies. We've documented

it, government investigations have documented it. " Slocum testified

before the Senate on Wednesday about the price squeeze induced by

mergers in the oil industry. In the past 15 years, there have been

more than 2,600 mergers in the oil industry, which Slocum says makes

this kind of price manipulation almost inevitable.

 

" In 2001, the Federal Trade Commission did a major investigation of

gasoline markets and found that oil companies could intentionally

withold capacities from the marketplace in order to create some

scarcity to drive prices up. Now when they create scarcity, they're

not actually creating scarcity like long gas lines, but they're

creating shortages that, in the wholesale market translate to higher

retail prices. If that sounds familiar to you, because that's exactly

the economic strategy pursued by Enron and other electricity companies

in California where they literally were taking power plants off line,

creating shortages that caused the prices of electricity to skyrocket

and they made tons of money. "

 

It's not just the big-business-friendly policies that rule Washington

these days that have caused both high gas prices and even higher oil

company profits. Between last year's intense hurricane season (which

is expected to be as bad or worse this year), and ongoing concerns

about Middle East oil, the public has been primed to expect high prices.

 

But many experts dispute the reality of those facts on the ground.

Antonia Juhasz, author of The Bush Agenda and an AlterNet contributor,

says that blaming high prices on the war in Iraq is a misleading

argument. " One of the reasons that high oil prices have been sold to

the American public is that there is a tighter supply because of a

disruption in supply coming out of iraq, " Juhasz said in a recent

phone interview. " The reality is that there is more oil coming out of

Iraq today to the U.S. than at almost any other time in history. It's

not steady or as much as the Bush Administration had hoped for, but

it's certainly more than was the case in the last 30 years and it

certainly there's no reason to justify increased oil prices. "

 

The sad truth of the matter is that gas companies have always been

quick to raise prices, and glacially slow to bring them back down.

Steve Kretzmann, executive director of Oil Change International,

explained the trend: " The oil industry takes the opportunity of the

price of crude going up to pass on the price increase to the pump.

They basically take whatever excuse they can get to raise it. And then

you'll notice, when the price goes back down there's nowhere close to

a corresponding decrease in the price of gas. It's pretty clear that

they're getting this coming and going. "

 

As he wrote on his blog at PriceofOil.org, " ExxonMobil is Old School,

the Bad Boy of Oil. ExxonMobil pretty much ignores the ruckus about

looming environmental catastrophe and goes about their business. "

Kretzmann said ExxonMobil has earned this reputation as the biggest,

baddest player in the biggest, baddest industry through a few

well-established tactics. " Exxon is pretty much the top funder of

climate skeptics, and of the major oil companies they have the

smallest investments in alternative energy, " Kretzmann said. In the

past, former Exxon CEO Lee Raymond has made it clear that he thought

climate change was a hoax.

 

Bringing up discussions of Exxon Valdez right now are especially

pertinent in light of Exxon's breathtakingly arrogant actions at the

end of last month. Just three days before announcing its world-beating

profits, Exxon's lawyer Walter Dellinger asked the Ninth Circuit Court

of Appeals to erase the punitive damages stemming from the 1989 Exxon

Valdez oil spill in Alaska.

 

The punishment currently stands at $5 billion, a mere 15 percent of

the companies profits this year, and the company has instead asked to

shell out just $25 million in payment. This request comes after 16

years of steadily fighting any responsibility to make amends to the

residents of the Prince William Sound area that was devastated by the

negligent spill.

 

Orli Cotel, a media coordinator for the Sierra Club, put the costs in

perspective. Cotel said about 30,000 plaintiffs are listed in the suit

Exxon is fighting. " Twenty-five million dollars seems like a lot, "

Cotel said, " but if you divide it by 30,000, it comes to like $830 per

person, " or $52 a year since their livelihoods were destroyed. Cotel

noted that in the 16 years since the spill, more than 3,000 of the

plaintiffs, mostly fishermen in the Sound, have died without receiving

any compensation.

 

" Exxon is basically saying, 'We've made more money than any company on

Earth and we refuse to help out these poor fishermen whose businesses

we've crippled.' It's more than offensive, it's morally wrong. "

 

Cotel pointed out that the second episode of the Club's new television

show, Sierra Club Chronicles, details what life has been like in the

town of Cordova, one of the fishing economies ruined by the spill. The

show, which airs on Feb. 8, features some particularly damning Exxon

footage from 1989.

 

" Right after the Valdez spill, " Cotel explained, " Exxon held a town

hall meeting, and we've got footage of their spokesperson standing up

in front of the crowd of people saying, 'You are lucky, and you don't

know how lukcy you are because this was Exxon and it wasn't some other

company, and Exxon does things right, and we're going to do right by

you.' And you know, it was pure PR. "

 

With profits like these, Exxon -- as well as Chevron and almost any

oil company -- can afford to ignore its promises as easily as it does

the basic idea of good corporate citizenship. Which is why Public

Citizen's Tyson Slocum testified before Congress last week [PDF] to

urge a governmental fix to the problem. The first step in the group's

proposed solution is a windfall tax, which would in essence label

these undeniably excessive profits as such and allow Congress to take

a portion of the profits and put them to better use.

 

Slocum said that using the windfall tax idea -- used in a very similar

situation by Jimmy Carter in 1979 -- will take some of the extra

zeroes off those profits and redirect them towards necesary projects

like improving mass transit, increasing sustainable fuel programs, and

making our homes and buildings more energy efficient. " These are all

investments that ExxonMobil will never make, but they are investments

that are necessary if we're going to get our way out of this energy

crisis. "

 

Matthew Wheeland is AlterNet's managing editor.