This week the big five oil companies will release their second-quarter 2007 profit figures.[1] Due to near-record gasoline prices and persistently high crude oil prices, these net earnings will be like Christmas in July for senior executives and shareholders of ExxonMobil Corp., Royal Dutch Shell Group, BP PLC, Chevron Corp., and Conoco Phillips Co.
Cramped refinery capacity has in part made gasoline more expensive.[2] A report released July 23 by OilWatchdog.org calls for government investigations into oil companies’ refinery operations—both the nature and duration of outages and the suppression of inventory, which combined to spike prices and profits.
These profits pile on top of the billions of dollars already in the bank for these big five oil companies. From 2001 through the first quarter 2007, ExxonMobil, Shell, BP, Chevron, and Conoco Phillips earned a combined net profit of $455.6 billion[3]—nearly half a trillion dollars in profit. ExxonMobil Corp. broke the record for highest net earnings of a publicly traded company in 2004, 2005, and 2006.
These five companies have become awash in cash from swelling profits during the Bush presidency despite burgeoning concern about America’s growing oil dependency. Growing numbers of public officials and ordinary citizens recognize that while the big five profited from our oil consumption, so too did nations hostile to us.[4] And burning oil produced millions of tons of carbon dioxide pollution that will exacerbate global warming.[5]
President Bush finally acknowledged the dangers of oil dependency in 2006 when he noted that “America is addicted to oil.”[6] Later that year, he said that America must “get off oil.”[7] His comments, combined with these growing concerns, boosted interest in the development and deployment of clean alternative fuels and energy sources.[8]
The big five, with their billions of dollars in profits, have had an unprecedented opportunity to address growing energy concerns and lead the way to a clean-energy future. Many of these companies began to advertise and publicly commit to such investments. Royal Dutch Shell Group, for instance, claims to “run a range of conservation programmes to promote energy efficient technology.”[9] Yet the big five spent only one half of 1 percent of their profits—$2.5 billion—on investments in clean alternative energy solutions. This is a small fraction of the overall investment in biofuels. Big oil instead spent 38 percent of their profits—$171.6 billion—on stock buybacks.[10]
An analysis of the big five oil companies’ claims versus their practices shows that their priorities are somewhat different from their publicly-stated ideals. These priorities include:
- ExxonMobil Corp. has invested millions of dollars into studies that deny the existence of global warming, using tactics straight from the tobacco industry’s playbook.[11]
- Royal Dutch Shell Group’s production of oil from tar sands, which produces two and half times more global warming pollution than ordinary oil production.
- BP PLC slashed maintenance funds, despite its mega profits, leading to Alaska’s largest on-land oil spill. “Severe company budget cuts at a time when BP PLC was making huge profits put pressure on managers to ignore corrosion protection at the oil company’s North Slope (Alaska) pipelines that sprung leaks last year, according to internal company documents.”
- Chevron Corp. and Conoco Phillips Co. worked to dissuade their service station franchisees from selling E-85 (85 percent ethanol, 15 percent gasoline) to owners of flexible fuel vehicle, which would reduce oil and gas use and diminish the emissions that cause global warming.
While the big five oil companies continue to make miserly investments in clean alternative energy, the Congress this year took the lead to spur investments in new fuels. The House of Representatives passed the Clean Energy Act, H.R. 6, in January, which would invest $14 billion in tax incentives for research and deployment of the next generation of biofuels and production of electricity from wind and solar power.
Then the Senate in June attempted to pass an ambitious $24 billion bipartisan tax incentives package sponsored by Sens. Max Baucus (D-MT) and Chuck Grassley (R-IA). The Senate bill—in addition to enacting H.R. 6’s energy provisions—would have provided tax incentives for more energy efficiency and the development of carbon capture and storage technology to reduce global warming pollution from power plants. Both of these bills would have paid for these tax incentives with savings from closing oil company tax loopholes and recovering unpaid royalties from oil and gas production in federal waters in the Gulf of Mexico.
The big five oil companies, along with their trade association, the American Petroleum Institute, vigorously opposed these tax packages. Even though the Senate clean-energy tax package would recover a scant $24 billion out of $455 billion in profits—5 percent of total profits since 2001—the big oil companies pressured enough senators to oppose it so that it was not added to the Senate energy bill.[12] The senators that voted to block this bill received more than two times the campaign contributions from oil and gas interests than those senators who voted for the clean-energy tax package.[13] Baucus and Grassley hope to pass this package in time to include it in the final energy bill that will likely pass this fall.
The big oil companies forcefully oppose provisions in the upcoming House energy bill that would close special provisions to benefit them created by the Energy Policy Act of 2005. The House bill would:
- Create fees to cover the increasing administrative costs for opening federal lands to oil and gas development.
- Repeal the lax arbitrary deadlines for drilling permit approvals.
- Restore environmental reviews for numerous oil and gas activities on public lands.
Representatives of the American Petroleum Institute and the big five oil companies are roaming the halls of Congress right now to convince enough representatives to sink these essential environmental protections.
Energy independence and global warming reduction are atop Americans’ domestic agenda. A recent poll found that 29 percent of Americans believe reducing dependence on oil and coal to stop global warming is the most important domestic priority, with only health care topping it as a concern at 32 percent.[14] And energy dependence and global warming far outdistance education, economic globalization, and retirement security as top concerns.
This response would have been unthinkable just a few years ago. A Democracy Corps survey last month also found that voters reacted more positively to a proposal to increase development of clean alternative energy technologies than to any other initiative—more so than expansion of health insurance, investments in stem cell research, or even stronger port security.
Despite their advertising claims, and Americans’ strong desire for energy independence and global warming reduction, the big five oil companies remain opposed to this agenda and stuck in the past. Instead of investments in low-carbon alternative fuels and leadership to help our nation launch a low-carbon energy future, they continue to invest their gigantic profits into self-enrichment while paying little more than lip service to investments in new clean alternative-energy technologies.
As the second-quarter profit figures become public this week there will be deafening cheers in the boardrooms of BP plc, Chevron Corp., Conoco Phillips Co., ExxonMobil Corp., and Royal Dutch Shell Group. Meanwhile, the American families whose hard-earned dollars create these profits will continue to long for a clean-energy future that will include significantly more fuel-efficient cars and biofuels that will reduce their fuel costs and global warming pollution.
Endnotes
[1] BP plc releases profit figures on July 24; Conoco Phillips Co. on July 25; ExxonMobil Corp. and Royal Dutch Shell Group on July 26; and, Chevron Corp. on July 27.
[2] The New York Times, July 21, 2007.
[3] See Chart #1.
[4] In 2005, 11 percent of our oil came from Saudi Arabia, 9 percent from Nigeria, and 11 percent from Venezuela, according to The United States Energy Information Administration; available here.
[5] Oil combustion for transportation produces approximately 28 percent of U.S. greenhouse gas emissions. U.S. Environmental Protection Agency, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2005 (April 2007); available here.
[6] State of the Union, Jan. 31, 2006.
[7] Dec. 20, 2006, available here.
[8] The Bush administration has yet to propose or support policies that would enable the United States to “get off oil.”
[9] See chart.
[10] Testimony of Tyson Slocum, Director, Public Citizen’s Energy Program, “Gasoline Prices, Oil Company Profits, and the American Consumer,” Before the U.S. House Committee on Energy and Commerce, Subcommittee on Oversight and Investigations, May 22, 2007. Available here.
[11] All information sourced in chart.
[12] On June 21, 2007, the Baucus-Grassley tax package failed by a vote of 58-35 to end debate on it. Senate rules require 60 votes to invoke “cloture,” end debate, and vote on a bill or amendment.
[13] “Big Oil’s Favorite Seantors,” Center for American Progress Action Fund, June 25, 2007. Available here.
[14] “Americans Feel New Urgency On Energy Independence and Global Warming,” Center for American Progress Action Fund, April 18, 2007. Available here.