The world’s oil industry giants made a remarkable amount of money during the third quarter. Just four of the largest companies — Exxon Mobil, Royal Dutch Shell, BP and ConocoPhillips — reported almost $30 billion in profits for the period. Total revenues exceeded the gross domestic product of many developed nations, let alone those in the Third World.
With gasoline selling for more than $3 per gallon, and natural gas prices at the wholesale level nearly double those of a year ago, how could they not prosper?
But with winter looming, and constituents facing ruinous winter heating bills, a Congress that less than four months ago handed the industry an estimated $6 billion in new tax incentives and other relief suddenly seems scandalized. Senate Majority Leader Bill Frist and House Speaker Dennis Hastert, who led the Republican charge for a new energy policy, have joined those calling for an investigation into possible price-gouging. Opportunists, says Frist, should be exposed, and ashamed.
Ashamed? Congress once let tobacco industry officials lie about their knowledge of the ill effects of cigarette smoking, and never pursued anyone for perjury.
As for Hastert, he wants to know why the industry, hard-won tax incentives in hand, is not throwing money at new infrastructure, especially a pipeline that would bring Alaskan natural gas to the Lower 48 states. That’s a fair question, but what Hastert and company should be asking themselves is why an industry with $100 billion in cash needs any tax breaks at all.
You can only spend that kind of money so fast. The industry is seeking new reserves, and a few companies have announced capacity expansions at their refineries. Some are buying back stock, or increasing shareholder dividends. Those are a corporation’s proper responsibilities. And if a $10 billion quarterly profit seems outrageous, keep in mind that many banks and pharmaceutical companies enjoy better profit margins than Exxon Mobil.
High gas prices, painful as they may be, are having a welcome, predictable effect. Oil prices closed Monday at less than $60 per barrel for the first time in three months. Some predict $50 by the end of the year.
Maybe the Congress should be taking care of its own affairs, and leave the business of finding, refining and distributing energy to the oil industry. If the Congress wants relief for shivering homeowners and apartment dwellers, Uncle Sam should write the check.
Yet the Senate has twice in recent weeks rejected efforts to fully fund the Low Income Home Energy Assistance Program, or LIHEAP, which last year helped 4 million households stay warm. The need this winter will be far greater. But LIHEAP supporters in the Senate have not been able to muster the 60 votes needed to get funding for the program up to the authorized $5.1 billion. President Bush requested only $2 billion.
While hurricanes Katrina and Rita were giving oil company profits a boost because supplies were constrained, they also — finally — jolted a pseudo-conservative Congress into a little of that ol’ time budget religion. After overspending by hundreds of billions of dollars the last five years, members are casting about for $50 billion in cuts that will partially offset hurricane relief costs. House Republicans, led by the aforementioned Hastert, have taken their ax to, among other things, food stamps — minus $844 million — and school lunch vouchers. Guess it’s OK for the federal government to gouge the poor out of nourishment, but don’t let those nasty oil companies gouge on gasoline!
With a windfall profits tax taken off the table, some have suggested the industry voluntarily contribute to a fund that would ease the burden of heating bills, as some utilities in the Northwest do. Unless executives take a lot more heat, don’t expect that to happen.
The oil chieftains have been summoned to appear next week before Congressional committees investigating huge profits. They are sure to be lectured about the harm they are doing. Meanwhile, House and Senate both work on new legislation that will open up sensitive land like the Arctic National Wildlife Refuge to exploration. The Congress just cannot do enough for the industry, all the while it criticizes.
If hypocrisy was combustible, the U.S. would be exporting energy.
Caldwell owns less than 100 shares in an oilfield services company.
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