Record Profits at Oil Companies Draw Criticism The big oil companies come under attack for earning billions in profits as gasoline prices have soared. Oil executives say their companies' earnings aren't excessive. But lawmakers are talking about reining them in, and a debate is brewing on how to help consumers.
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Record Profits at Oil Companies Draw Criticism

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Record Profits at Oil Companies Draw Criticism

Record Profits at Oil Companies Draw Criticism

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From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.


And I'm Robert Siegel.

It's not a bad time to be in the oil business, to say the least. Today, the world's biggest oil company announced that it earned more than $8 billion in the first three months of the year. ExxonMobil's earnings came on top of the $3.3 billion Conoco-Phillips earned during the first quarter. Chevron is said to announce its quarterly profits tomorrow. Big profits of the oil companies may seem like salt in the wounds of drivers, who were already smarting from gasoline prices of nearly $3.00 a gallon or more.

And as NPR's Scott Horsley reports, the companies are taking steps to soothe the expected backlash.

SCOTT HORSLEY reporting:

Since many of the dollars now filling its bottom line ultimately come from testy drivers filling their gas tanks, Exxon knows it has to tread softly. Company spokesman Russ Roberts notes that days before its big earnings announcement, the company ran full-page newspaper ads, arguing that today's big profits help meet tomorrow's growing energy needs.

Mr. RUSS ROBERTS (Spokesman, Exxon-Mobil): We certainly understand it's tight for everyone these days and it's difficult to pay high gasoline prices, but our job is to bring supply to market.

HORSLEY: The oil supplies Exxon brought to market in the first three months of the year sold for an average of about $60 a barrel. That's 40% more than the oil it produced a year ago. Like farmers, who prosper when the price of their crops rise, Exxon and other big oil producers are the beneficiaries of soaring crude oil prices. But senior energy analyst Fadel Gheit of Oppenheimer and Company says oil companies can no more control those prices than a farmer can dictate what he gets for a bushel of corn.

Mr. FADEL GHEIT (Senior Energy Analyst, Oppenheimer and Company): Oil is the most global commodity you can think of. It is no one country or one company that really can manipulate oil prices or corner oil prices. It's just impossible.

HORSLEY: Crude oil production accounted for more than three fourths of Exxon's profit during the quarter. The company made another $1.2 billion refining crude oil into gasoline and other products. Gheit says not so long ago, many companies were abandoning the refinery business.

Mr. GHEIT: Companies were selling refining capacity like scrap metal and, before you know it, you know, you're printing money now.

HORSLEY: Profits from both crude oil and refinery operations have made oil companies a target for angry drivers and the politicians who speak for them.

Senator BYRON DORGAN (Democrat, North Dakota): I'm not opposed to profits, but I am opposed to profiteering.

HORSLEY: Democratic Senator Byron Dorgan of North Dakota wants to tax what he calls windfall profits that oil companies earn on prices over $40 a barrel. His proposal went nowhere last year but with the return of high gasoline prices, Dorgan says even some of his Republican colleagues have begun to give the idea a second look.

Senator DORGAN: The American people have all the pain paying these prices at the pumps and all of the gain is going into the corporate treasuries.

HORSLEY: President Red Cavaney of the American Petroleum Institute says many critics just don't understand the way his industry works.

Mr. RED CAVANEY (American Petroleum Institute): They can castigate us, they can penalize us with taxes but you know what taxes are going to do? That's going to give us even less to invest.

HORSLEY: Dorgan's proposed windfall profits tax would exempt money that oil companies invest developing new sources of oil. Oppenheimer's Fadel Gheit says the companies might spend more on new development if they weren't hampered by shortages of manpower and drilling locations.

Mr. GHEIT: It's so tempting right now to think that oil companies are purposely holding the money and not want to spend it. If you see, my God, $75 oil, why wouldn't the oil company be chasing it? Because there are so many factors that are not in their control that will not permit them to do that.

HORSLEY: Exxon spent nearly $5 billion in the first quarter on exploration and expanding oil fields. The company also spent $6 billion buying its own stock back in an effort to boost the share price.

Scott Horsley, NPR News.

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