Anyone who’s pulled up to a gas pump lately to fill up their car, and that would be most of us, has no doubt noticed that the price of gasoline is dropping. This, of course, is a good thing. The price of gasoline is a case where less is always better, but it does obscure a question that deserves an answer: When oil companies are making record profits, how much is too much?
Yes, I remember enough of my freshman Econ classes to understand market forces and the impact it can have on supply and demand. These concepts are all well and good when you’re talking about elective items, like hamburgers or paper towels. If the price goes up to the point where you can no longer afford these items, you simply stop buying them and/or find alternatives. One of two things will happen: either prices will drop when demand does, or you’ll grow accustomed to your alternative and move on. Unfortunately, at this point in our history, there IS no alternative to gasoline. It’s not as if you can build a refinery in your backyard and produce your own alternative automobile fuel, right? So, those of us who drive, and again, that’s most of us, are hostage to oil companies and their increasingly rapacious pricing policies. And that, from the sound of things, is just the way they like it.
A sudden interruption in oil supplies sent prices and profits skyrocketing, prompting Exxon’s chief executive to call a news conference right after his company announced that it had chalked up record earnings.
“I am not embarrassed,” he said. “This is no windfall.”
That was January 1974, a few months after Arab oil producers cut back on supplies and imposed their short-lived embargo on exports to the United States. Oil executives, including J. K. Jamieson, Exxon’s chief executive at the time, were put on the defensive, forced to justify their soaring profits while the nation was facing its first energy crisis.
Three decades later, their successors are again facing contentions that oil companies are making too much money and have failed to expand production.
Politicians and other critics are asking why the industry allowed its refining capacity to tighten.
Exxon Mobil, the world’s largest oil company, said yesterday that its third-quarter net income jumped 75 percent, to $9.92 billion. Its profit in the first nine months of this year - $25.42 billion - already equals its full-year earnings for 2004. This year’s sales, which topped $100 billion in the last quarter, are expected to exceed those of Wal-Mart.
Another oil giant, Royal Dutch Shell, reported a 68 percent jump in profits yesterday, to $9.03 billion. Chevron is expected to post a profit of more than $4 billion today.
There has been renewed talk of a windfall profits tax, whose proceeds could be used to help those struggling to pay their heating bills this winter. Now, I was a History major, and I spent my time in Econ daydreaming about seeing Jane Seymour naked, but while I think the idea has some merit, part of me worries that this is only a short-term solution. Indeed, what DO you do about an industry that has no problem with fleecing the American public, a captive market, in order to line their own pockets and those of there shareholders? Of course, if I were smart, I’d be buying stock in these companies, but I’m not, so I guess I’ll continue to muddle through (DAMN those pesky ethics and morals of mine….).
I don’t pretend to know what the answer is. In this current political climate, regulation clearly is not going to fly. Given that Big Oil has the Bush Administration in it’s hip pocket, the odds of anything concrete being done to reign in the industry’s rapaciousness and greed hovers somewhere between slim and none. Is it right that so much wealth is transferred from hard-working Americans into the coffers of oil companies? To a certain degree, yes, because that is how markets work, and consumers can ultimately influence, if not control, pricing and demand. There has to be a point, though, where enough is enough. If the cost of producing a gallon of gasoline was such that it warranted price that gasoline at $3.00 a gallon, that would be one thing. Clearly, though, that is not the case, and the lion’s share of the higher price at the pump is going directly to oil companies as pure profit.
Something needs to change, and something needs to change soon. I look at how hard She Who Endures My Myriad Eccentricities and I work, and how much of our hard-earned money goes into our gas tanks…and we make good money. What must it be like for a family scraping by on the salary of an associate at WalMart? Or a single mother having to choose between food for her children or putting gas into her ‘88 Pontiac Grand Am so that she can get to work? I can’t even begin to imagine what that must be like, and for that I’m grateful. Nonetheless, something needs to change- and soon.
Then again, as long as Our Glorious Leader, the bestest friend an oil company ever had, is in the industry’s pocket and safely ensconced at 1600 Pennsylvania Avenue, nothing is likely to change.
WE DESERVE BETTER.