Energy

Published on April 2nd, 2008 | by Jennifer Lance

30

The Big Oil Company Scam

352431020_f95734437a-1.jpgWe are all feeling the prices at the pump and the ramifications of increased oil prices throughout our economy, so why are the big oil companies still making record profits? Not only are these big oil companies reaping in record amounts of money while consumers suffer, they are also still receiving federal subsidies. What’s up with that?

Personally, I don’t understand how the oil companies can justify passing the entire burden off on the American people of the rising cost of gasoline considering our current economic recession. Exxon Mobil Corp., BP America Inc., Shell Oil Co., Chevron Corp., and ConocoPhillip know high fuel prices are hurting consumers, but on Tuesday they defended their profits of $123 billion last year as in line with other industries. “Our earnings, though high in absolute terms, need to be viewed in the context of the scale and cyclical, long-term nature of our industry as well as the huge investment requirements,” said J.S. Simon, Exxon Mobil’s senior vice president.

On April Fool’s Day, the biggest joke of all is being played on American families by Big Oil,” said Rep. Edward Markey, D-Mass. Markey wants oil companies to invest 10 percent of their profits to develop renewable energy, as well as relinquish up to $18 billion in tax breaks over 10 years. This money would then be used to support renewable energy and conservation. The oil companies’ response to this proposal is that they have already spent $3.5 billion over the last five years on renewable fuels, and they reject any tax increases. That may be, but it hasn’t been enough, or all of our cars would be getting at least 50 mpg. Without government intervention, the oil companies will continue to gouge the American consumer while making record profits. “These companies are defending billions of federal subsidies … while reaping over a hundred billion dollars in profits in just the last year alone,” stated Markey, chairman of the Select Committee on Energy Independence and Global Warming. The House of Representatives has already approved legislation that will end tax breaks for big oil, while using this revenue to support wind, solar and other renewable fuels. The Senate has yet to pass this legislation.

According to AP writer H. Josef Herbert, “Recently oil prices reached a peak of $111 a barrel. While declining a bit in recent days, the price remains above $100 and there’s talk of $4 a gallon gasoline in the coming months.” Oh yes, the threat of $4 a gallon; I paid $3.99 a gallon today. I have always felt that American gas prices were too low prior to the Bush administration — that these prices did not adequately reflect the value of this limited resource. Now that we are experiencing high gas prices, I can’t help but wonder what I am paying for when oil companies are making record profits and the “supplies of both gasoline and oil seemed to be adequate.” I wouldn’t mind paying the current price for gasoline if the oil companies’ profits were slashed in order to bring about new developments and change in American energy use.





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About the Author

Jennifer lives on 160 acres off-the-grid in a home built with her own two hands (and several more skilled pairs of hands) from forest fire salvaged timber. Her home is powered by a micro-hydro turbine, and she has been a vegetarian for 21 years. Jennifer graduated from Humboldt State University with a degree in art education and has been teaching art to children for over 16 years. She also spent five years teaching in a one-room schoolhouse before becoming the mother of two beautiful children. Jennifer has a Master's Degree in Early Childhood Education and is currently teaching preschool, as well as k-8 art. She enjoys writing, gardening, hiking, practicing yoga, and raising four akitas. Jennifer is the founder and editor of Eco Child's Play (http://ecochildsplay.com) "I’ve always been concerned about the earth and our impact upon it. Now that I have children, I feel compelled to raise them with green values. From organic gardening to alternative energy, my family tries to leave a small carbon footprint." Please visit my other blog: http://reallynatural.com



  • Hello Luddites.

    Levying higher taxes on oil companies only reduces the amount of money that they can invest in finding more oil (among other things). Many oil companies have fantastic R&D departments and I think it would be better to force them to research renewable fuels, rather than take the money from them and give it to the government who tends to use it inefficiently. Politicians only pay attention to the whim of the moment and don't consider long term goals. Ex. Biofuel subsidies are getting misused at the taxpayer expense: (http://www.treehugger.com/files/2008/04/subsidizing-palm-oil-splash-and-dash.php)

    Another example of political whims, adding Ethanol to fuel was a huge mistake. Sure, ethanol is cleaner burning that gas, but it is much less efficient. Due to the extremely high octane rating of ethanol, oil companies are reducing the amount of octane that they add to the gas to compensate. This makes it cheaper per gallon for oil companies and less efficient for consumers (in terms of mpg). This means you create less emissions, but you have to fill up your tank more ( = more emissions). It's all a wash…

    If you ask me, I'd rather not give money to the gov't to waste, I'd rather leave it with oil companies but mandate that they spend it on R&D for renewable energy.

  • Riding Dirty

    Why is gasoline high?

    Government taxes it 50 cents to oil company profits of 8 cents per gallon.

    Government regulates the oil industry that further adds cost per gallon.

    Environmentalists lobby politicians to prevent oil retrieval in ANWAR and in the Western USA.

    Environmentalists have successfully lobbied politicians to prevent new construction of refineries and nuclear power plants that would significantly lower costs.

    Did you know?????

    that the oil shale in the Western USA contains 5 times more oil than the oil in Saudi Arabia, AND this oil can be retrieved in situ for less than $80 a barrel !!!!

  • Uncle B

    That's how Capitalism works! Just because my widgets are selling more than your gizmo's doesn't mean I have to share profits with anyone! What it does mean is that I made sound and timely investments while you were out buying flashy cars and mammoth houses or whatever. I bought a bike, and oil stocks, I bet on oil, I won fair and square.You didn't. Next time around, make better judgments and you can join me in the winner's circle. I'll give you a little tip, just so you won't feel too jaded. Buy Uranium stocks, nuclear is going to be big next, but it too, won't last forever, so when you see a good profit to be made, jump to something else, like solar, if nothing else comes along in the meantime.

    P.S. Always buy low, sell high.

  • The Real Deal

    I'm a student in Houston, one of the biggest energy cities in the world. We are home to major headquarters for such giants as Exxon/Mobil, BP, and some of the biggest names in oil exploration and drilling. At the University of Houston, where I currently attend, the entire curriculum for Chemistry, Chemical Engineering, Mechanical Engineering, and Business is custom made so that we can be the next generation of cogs in the oil industry.

    With all of that said, I can tell you a thing or two about the oil industry. Yes, they do in fact receive the highest tax breaks of any industry, but not just on the federal level. Houston and the surrounding cities actually resort to paying THEM money to stay in and around the area, thus fueling our economy. On top of all of this, they are making record-breaking profits, and I'm not just talking about profits in the here and now; I'm talking about the history of mankind.

    What do they do with these profits? I honestly can't tell you what they do with them. My school is going to pot. Our buildings are falling down and our sidewalks are crumbling, all the while we beg these companies to give us a tiny sliver of their record-breaking profits. There is no mass transportation to speak of in Houston, and what little there is involves archaic bus lines that are not uncommonly packed to 120% capacity. As a whole, Houston has the second highest commute time, the second worst pollution levels (we just dropped a spot this year), and has one of the highest rates of car ownership of any major city (a family of 3 typically has 4-5 cars). Oh, and don't get me started on the Texas attitude towards large trucks and SUVs.

    I'm sick of people defending this industry. When railroads and electricity corporations gouged consumers, we had federal intervention that *gasp* resulted in electricity at a reasonable price for all consumers, as well as a decrease in steel prices and a boost in the economy as a whole! What a concept!!

    The time for the government to get involved was 10 years ago. Every second that goes by is a second too long that these corporations have to screw the consumer and the world market as a whole.

  • zevgoldman

    "Many oil companies have fantastic R&D departments and I think it would be better to force them to research renewable fuels, rather than take the money from them and give it to the government who tends to use it inefficiently."

    By forcing the first you arrive at the second. Why do you think governmental coercion is any different than governmental taking or any more effective?

    The find of an oil reserve in South Dakota, maybe North Dakota, in the early 1950s is estimated to hold as much as 200 billion barrels of oil. Recovery of the oil became cost effective when oil went above forth dollars a barrel. Hundreds of millions of dollars are now being spend developing that oil reserve.

    As a reference, that oil reserve may be as much as ten fold larger than the current Saudi oil reserves.

    Currently there is some discussion about crude oil being abiotic instead of a fossil fuel. Some scientists believe that crude is constantly produced by some process within the earth that I'm not entirely familiar with.

  • http://ecopolitology.org Timothy B. Hurst

    Am I in the right place? I thought this was Red,Green, & Blue. But after reading these comments, I'm not so sure.

  • zevgoldman

    Real Deal
    “What do they do with these profits? I honestly can’t tell you what they do with them. My school is going to pot. Our buildings are falling down and our sidewalks are crumbling, all the while we beg these companies to give us a tiny sliver of their record-breaking profits.”
    Simple economics indicates the profits go to the share holders. That includes millions of working people who have 401k plans invested in some portion of the oil industry.
    The oil industry and buildings falling down or sidewalks crumbling in Houston are unrelated. Those problems are usually the result of poor city government. As for you school crumbling, that certainly isn’t the fault of the oil industry. It easily could be the result of poor administration or a reluctance on the part of state government to fund the school to a higher degree.
    I think you would be surprised at the amount of money your school receives from the oil industry and other industries.
    What do you expect the government to do if it gets involved in the oil industry? It’s government’s refusal to allow oil drilling in much of the U.S. and off of our coasts that has made us so reliant on foreign oil and driven up the price of crude oil by limiting the supply to nations who wish to see the United States fall, excluding Canada.
    Do you really want the government deciding what type of vehicle you may drive and how many vehicles you may own? Government is too involved in the lives of American citizens now.
    As inefficient as business is, it is far more efficient than government. That is the result of the profit motive.There is no incentive for a government to be efficient.
    I don’t doubt for a moment that Houston gives tax breaks to all forms of business. The reason is to keep the jobs in Houston. Cities vie constantly to woo large corporations away from one location to another.
    If the tax payers of Houston are willing to pay for effective mass transit they will have it. It’s done through taxation. I would very much enjoy mass transit where I live but tax payers don’t want to foot the bill, therefore, we don’t have it.
    Don’t beg for something you have no right to. Bust your back side and get rich yourself, but don’t ask for a hand out.
    Relying on the government makes one lazy and needy. It destroys you character and ambition. Government is to be watched closely at all time, but not relied on.

  • Patrick

    Timothy, I agree… it looks like the BigOil investors got to this article first and commented- BigOil actually has full time people scouring the Internet for articles that demote oil and promote solar and the like- and they hop right in and start posting their propaganda. These people are sick and greedy, they have lied to us and ripped us off since the first people in government had their own oil companies way back when- they have manipulated the government with their profits to keep them from getting clean and cheaper alt energy off the ground. Why would they want some other company collecting energy as it falls from the sky (solar/wind) when they can pump it and charge so much more, even if they do push us to war over it and pollute our skys and risk our health and rip us off and keep us dependent and steal from our tax dollars so the can search for even more of it.

    If you ask me, this article is watered down. America has only just begun to wake up to the evils of Oil and Coal and is not nearly as infuriated as they should be. THE ROOT OF THE MAJORITY OF ALTERABLE EVIL ON THE WORLD TODAY IS OIL. Wars, lies, rip offs, scum on the air, maybe global warming, stealing our tax money, corruption to no end- it is sick and I think these CEOs should be ripped out of their positions and put in prison- no one working for any oil company should be forgiven, they all carry the blame, every last oil and gas employee and investor- greedy sick people of a time that is quickly coming to pass. The next war- is the WAR ON OIL.

    Here’s a great start explaining how Solar can power 90% of the US:
    http://gas2.org/2008/03/25/how-solar-panels-could

  • zevgoldman

    Patrick;

    Watch out for the black helicopters and the blue helmets also. Can you substantiate one thing that you posted? Your ramblings sound like the wild conspiracy theories of the fringe right in the 1990s.

    I found this site through Firefox stumble.

  • http://infoindonesia.wordpress.com Agus Nizami

    If you want to Stop the Rocketing Oil Price And US Occupation in Iraq and Afghanistan, please spread this article to your friends:

    To read and sign the petition, click:

    http://www.petitiononline.com/OilPrice/petition.h

    Petition Stop the Rocketing Oil Price And US Occupation in Iraq and Afghanistan!

    To: US Congress and US Government

    VOA news said that US Congress call 5 biggest oil companies due to the rocketing oil price while the oil companies’ profit reach US$ 123 billions.

    There is one oil company profit US$ 40 billion while its investment cost only US$ 100 millions. The profit is 40,000%!

    The Oil Companies argue that the rocketing price caused by the high of International Oil Price that reach more than US$ 100/barrel. On the other hand, Oil Companies such as Exxon Mobil, Chevron, Unocal, etc are the Cartel who controlled all oil from its sources all over the world including Arab and Indonesia (except Iran). That is why the rocketing “International Oil Price” is caused by the Cartel: The US Oil Companies which operate all over the world.

    The US Oil Companies’ Monopoly increased after 2 biggest oil exporter countries: Iraq and Afghanistan fall into US occupation. These 2 countries’ oil is monopolized by the US Oil Companies.

    President George W Bush and Vice President Dick Chenney are working in oil field. That is why the US Oil Companies get a strong support from the US Government.

    To stop the rocketing oil price, the monopoly of US Oil Companies’ Cartel should be stopped. Stop US occupation in Iraq and Afghanistan so the oil monopoly by the US Oil Companies that make the rocketing oil price end here.

    Stop the US Occupation in Iraq and Afghanistan now!

    Sincerely,

    The Undersigned

  • zevgoldman

    Agus Nizami

    Think about fact checking before you post something so erroneous. OPEC keeps crude oil prices up by limiting production as the worldwide demand increases which is reflected in the price of crude futures.

    The U.S. Oil cartel you imagine is a pipe dream. I think the companies you mentioned, if combined, may not be as large as Royal Dutch Shell, the largest oil company in the world.

    Do you really think Iraq and Afghanistan are the two largest oil exporting nations? If so you are horribly wrong. I'm not aware of Afghanistan having any meaningful oil reserves.

    The crude oil that is pumped in Iraq isn't under the control of American oil companies. It is under the control of the nation of Iraq.

    Your claim that a one hundred million dollar investment became forty billion dollars in profit is non-sense. Oil companies often spend far more than an hundred million dollars in drilling wells before they find crude.

    If you are sincere in wanting the cost of crude oil to come down, and to reduce American's dependence on foreign oil, lobby for less restrictions on domestic drilling for crude oil.

  • Tom

    I can't understand all of these people who are defending oil companies. You people must be heavily invested in their stock. Oil consumption pollutes our air, destroys the environment when it is drilled and when it is processed. The tax breaks they get are ludicrous. . . and you people are defending this. You people are o.k. with a dirty world left over for your children.

    How about putting this much effort into renewables. How about pulling out your investments and getting rid of oil companies once and for all. Invest in solar, wind and hydro. You'll smell better!

  • zevgoldman

    You don’t understand because you lack historical perspective. Our environment is far cleaner than it was thirty five years ago and has become cleaner with each passing year. Oil companies have made tremendous strides in reducing the pollution that oil exploration and transportation once produced.
    If solar, wind and hydro are ever able to replace crude oil, it will be far in the future. Nuclear energy such as employed by France can certainly go far in reducing our dependence on foreign oil.
    I’ve posted a related news article you may find of interest.

    35 Firms OK’d to Bid on Iraq Oil Deals
    Sunday April 13, 1:30 pm ET
    Iraq Qualifies 35 International Oil Companies to Bid for Future Oil and Gas Contracts

    AMMAN(Yahoo)Thirty-five international oil companies have qualified to bid for future oil and gas contracts to develop one of the world’s largest oil fields, an Iraqi oil ministry statement said Sunday.
    “The total number of the companies and consortia that participated in the prequalification process was 120 from various nationalities,” said the ministry’s petroleum contracts and licensing office.

    The office listed 35 companies that it said were qualified. They include, among others, BP PLC, Chevron Corp., Exxon Mobil Corp., Royal Dutch Shell PLC, Lukoil Holdings, China National Petroleum Corp., Edison International SpA and Eni SpA.

    The contracts office, however, said it would continue updating the process of qualifying companies “especially those that didn’t pass (the qualification process) by updating their information with the view to allowing as many as possible of the IOCs to participate in the next licensing round.”

  • Wes

    Oil is the reason the US is in a recession and some people don't understand that we are talking Profit here and not Revenue. If it was just revenue going up because the Oil Companies were selling more fuel then it would make sense, but this is profit! Billions in record profit why? Simple the less they produce the more GAS cost and the more profit they make! We all need to support efforts for alternative fuels to make this a competion so that some day Gas will be like soda…..50 to 75 cent. Also the Government makes so much money on taxing Gas it really doesn't want it to go down. Americans are so tired of hearing BS excuses like well a Camel triped and fell on the oil pipline so Gas is expected to go up! I really hope Gas Companies become like Cigarette Companies!

  • http://msn m. bayliff

    I UNDERSTAND THE OIL COMPANIES ARE KEEPING THE LID

    ON ACTUAL OIL RESERVE QUANTITIES IN ALASKA. IS THIS

    ACCURATE AND ARE NATURAL GAS AND OIL PRICES BEING

    KEPT INFLATED FOR SOME CRUEL REASON?

  • P.A. Bullock

    We need to boycott all oil products for one day a month. The effects of supply and demand are a big part of what effects oil prices. Lets say the 15th of every month we refuse to buy gas and the entire nation does this. The oil companies would be haveing a bitch fit. Please America fill up on the 14th of every month and then just drive by all those money hungry gas stations on the 15th!!!!

  • P.A. Bullock

    I learned last night that the U.S. gets a bigger slice of the oil pie from Canada than the middle east and at a bargin 50-78 dollars per barrel so why is it that the price per gallon is reflected by the price of oil from the mid east? Hummm I'm pretty sure a 5th grader could figure that out.

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  • http://www.trexblogsforinternetgold.com Re Talmage

    Everyone complains about the high price of gas, etal. 2 comments:

    1. The percentage of net profit of oil companies is lower than the average of almost all other major companies.

    2. The REAL problem is that the environmentalists will not allow additional drilling, regardless of the newer technologies that virtually eliminate ecological damage, and, the same goes for neuclear energy, and "clean" coal-burning energy plants.

    The result is that within two years we could be selling energy to othe nations — if the kooks would let us!!

    Rex Talmage

  • Sallie Kranitz

    What or who do the big oil companies give/support?

    I heard recently that they give to teacher retirements.

    And how much oil do we buy from Canada? And how much is it a barrel? I feel that we ( US ) are being held hostage by the greedy oil companies.

    SK

  • Matthew

    The facts seem to state that the gouging at the pump is primarily caused by two things.

    1. Increase in demand from competing emerging countries such as China and India.

    2. Taxes at the pump. Here in NYS, diesel taxes are over 65 cents per gallon.

    Compare with supposed big oil profits of about 10 cents per gallon. Remove all 'big oil' costs (24 cents), and you're still well above $3 dollars a gallon.

    Oil is typically a long-run commodity, nand only supply/demand for the short-term. Increasing vehichle fuel economy will definitely help in the short term, but may result in long-term production and refining cut backs, thus only leading to a steady increase for longer term. This is backed-up by comparing countries where usage is less. Prices are invariably higher.

    Summarizing, increasing infrastructure (all forms of power) and removing obstacles imposed by well-meaning environmentalists will see far-reaching goals of increasing domestic production.

  • Floyd

    when are you f_ _ ken republikins going to stop trying to blaim clinton for all the bullshit bush has done to the Unites States, and our standing in the world. bush is nothing more than a CON-MAN. The one difference I see is that the people I watch are in prision, bush is running free. he should get his money and all the money his family has made off his chosen war taken away and given to all the military who have suffered under His war. he needs to go to prision, put on an open yard and told to suck it up…..

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  • Ray Thomas

    "Exxon Mobil 2Q 2008 profit sets US record"

    For one, I do NOT like seeing things like this when our country is in a recession and on the verge of a depression and "Big Oil" isn't at least partly to blame? Fuel costs directly affect every aspect of your life if you're middle or lower class.

    zevgoldman, you must be entrenched in oil investments to be so defensive of the oil companies and do NOT dictate to people about asking for government to step in and take those profits and put them into the economy. Yes, politicians can be corrupt and so can government, but I'm watching corruption right now in the headlines and you're applauding it? Go invest some more in "Big Oil". You know it's not gonna last much longer if we can get "Big Oil George" out of the whitehouse.

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  • http://MySpace Jerry House

    Regarding oil profits, price fixing, tariffs etc., During the 80's while working for the world;s largest cereal manufacturer, the Federal Trade Commission filed suit that we were a monopoly..along came Reagan and he prevailed in "deregulating" most industries….it has taken 20 years to feel the impact; it is big business along with their PACs and lobbists, the trucking, airlines, The Recipracle Trade Agreements, Nafta…the S&L scandels….and Tort reforms, America needs public servants that oversee and police the greed the Insurance lobby the AMA lobby……make your representatives be servant

  • http://MySpace Jerry House

    Be wise enough to know if you are being represented by your senator, congressman….if not get active and let them feel your pain…..imagine. If this continues we all will be broke, but the Industrialists will continue to make profit in this "Global Economy" what about OUR AMERICAN ECONOMY ?

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  • http://Gmail.com Jennifer K Jensen

    if roketing oil prices contenu tis economey well fall to a bernig obliveon.

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