ExxonMobil posted fourth-quarter profits of $10.7 billion.
Last quarter, you may recall that they posted profits of $9.9 billion, which was the record at that time. But these heady times we’re living in won’t sit still for a period as long as several months. Hah! The very idea. So we have a new record. The king is dead. Long live the king!
Some of you might find it alarming that humongous oil companies have essentially got the rest of the world hostage, at barrel-point, or held over a barrel, and other puns as well. We don’t even have to draw a diagram, here. Oil price high. Consumer pay through nose. Oil company make out like bandit.* It’s pretty clear that oil companies are essentially robbing oil consumers blind.
So why should we let them do this? If only oil executives would descend from their board-rooms and bathe us in the effulgence of their wisdom! Fortunately for us, the U.S. Senate recently had hearings on this exact subject (although oil executives apparently aren’t effulgent so much as oppugnant).
Therein, execs do a lot of whining, complaining about environmental regulation, how they can’t drill everywhere they want to, limited access to the best oil fields, environmental regulation, Russia causing the price of oil to be low for several years, and environmental regulation. (I’m not exaggerating about the environmental regulation!) Also lots of fulminating about the free market and how it should be left to do its own thing.
This is balls. Most of the increased cost of gasoline is explained by one factor, and one factor alone: oil price. Quoth the head of the FTC:
The vast majority of the Commission’s investigations and studies have revealed market factors as the primary drivers of both price increases and price spikes. … The world price of crude oil, a commodity that is traded on world markets, is the most important factor in the price of gasoline in the United States and all other markets.
Despite all the complaints of oil executives, despite their grumbling about what a difficult, technical industry petroleum production is and how long the investment cycle is, the fact is, their high profits bear absolutely NO RELATION AT ALL to the high costs they may or may not be incurring. They do not deserve high profits because of unusual circumstances that required much more of them. Their high profits come only because they are fortunate enough to be standing in the right spot at a particular historical juncture.
I thought this quote (ironically) said it best:
“If it’s Google, no one asks about the profits because they’re too busy buying the stock,” said Amy Myers Jaffe, associate director of the energy program at Rice University. “Exxon is different. We have these emotional feelings related to gasoline because there’s no readily available substitute.”
Sorry, Amy – that’s not an emotional reaction. When someone exploits their position of dominance and the inflexibility of the market they are in to make tons of cash, that’s just robbery. We don’t tolerate it from monopolists – why should we tolerate it from the oil industry as a whole?
I won’t suggest that price controls should be put in place. It would be essentially impossible to control the price of crude. Actually, I don’t think there’s really anything constructive that can be done about this situation (short of repeating tropes about alternative energy sources). This is just capitalism, plain and simple. Some get rich. Others watch.
* Who, I am told, use plenty of tongue.