A Gusher or a gouger? Exxon Mobil should should be made to give some back.
It’s nearly impossible for the average citizen to grasp the scale of ExxonMobil Corp.’s huge profits. In the quarter ended Dec. 31, the giant company made $10.7 billion, the equivalent of more than $115 million for every one of its 92 days, nearly $5 million each hour, more than $80,000 every minute, nearly $1,350 each second. ExxonMobil’s overall 2005 revenues of $371 billion amounted to more than $1 billion a day! The total was larger than the entire economies of all but 16 of the 184 countries ranked by the World Bank. It was 40 percent greater than the gross national product of Indonesia, a member of the Organization of Petroleum Exporting Countries with a population of 242 million.
A few months ago, when I was paying $2.95 per gallon, I was trying to fugure out how (and more importantly, why) oil companies could be making record profits. Of course, I was a history major, not an economics major, so to my economically untrained mind, this seems like…oh, I don’t know…what’s the word I’m looking for?…ah, yes- price gouging. Yes, that seems an adequate description, and I would imagine that I’m not the only American wondering why it is that oil companies can continue to squeeze us so that they can continue to make record profits.
Part of the problem here is that gasoline is not an elective commodity. We all need gasoline to fuel our increasingly mobile existence. We all have to get to work, go to the grocery store, or pick up the kids from soccer proctice. With most other products, if the price reaches an uncomfortable level, we can simply cut back, find an alternative, or do without altogether. That’s not an option with gasoline. Frankly, if I can be allowed to use a crude analogy, oil companies have us by the short hairs. They can charge whatever they choose, and we are stuck- but it’s not just us as individuals that are impacted by unreasonable increases in gasoline prices. The effects ripple throughout all corners of the national economy, because virtually every commercial enterprise is dependent, whether directly or indirectly, on the price of energy.
Given this reality, shouldn’t oil companies be held to a different standard? I’m not certain that a windfall tax is necessarily the answer, but you have to wonder when these companies are making their record profits on the backs of Americans struggling to pay the going price for a gallon of gasoline. How much profit is fair? How much is simple greed and extortion? And can (or should) windfall profits be taxed to prevent oil companies from fleecing the American public?
First, the Iraq war helped add billions to ExxonMobil’s windfall gains by raising the price of crude oil, gasoline and natural gas. Then Hurricanes Katrina and Rita disrupted domestic production and refining, pushing prices even higher.
All of us pay for the huge profits, but poor Americans living in colder regions and working people who must commute long distances are the ones whose contribution to ExxonMobil’s profits are the most painful.
I drive 40 miles one way to work five days a week. That’s 400 miles a week just to get to work and back; d’ya think I’m not fixated on the price of gas? It could be worse, though, I could be living in Minnesota and having to pay what must feel like extortion-level prices for heating oil. And when the weather is below freezing, you can only turn the thermostat down so far before you put your own health and safety at risk.
The U.S. Energy Information Administration estimates that home heating oil prices this year will be 23 percent higher than last year; throughout the northern states, this means not only discomfort but real hardship, even death for some of the elderly.
How many people are going to have to freeze to death before government pulls it’s anterior out of it’s posterior? Or is this federal government so strongly “free market” that it would rather rely on Hugo Chavez to supply low-cost heating oil to the needy?
As to people who must drive to work: A 2005 CNN poll found 58 percent of drivers experiencing severe or moderate hardship when gasoline was at $2.22 a gallon. Now the government is predicting $2.41 a gallon for this year.
Of course, I realize that in terms of real dollars, gasoline is, relatively speaking, not all that much more expensive than it was in the 80s and 90s. Nonetheless, the emotional impact of paying prices approaching $3/gallon cannot and should not be under-estimated.
Some experts believe the gigantic profits result not from chance but from limited refining capacity ‚Äö√Ñ√Æ possibly deliberate ‚Äö√Ñ√Æ reducing supply and boosting prices. Although demand has grown dramatically in recent decades, Jamie McCourt, president of the Foundation for Taxpayer and Consumer Rights, observes: “We haven’t had a refinery built since 1976.”
In the best of all possible worlds, ExxonMobil might recognize the sources of its good fortune and give something of reasonable scale back to the American people (beyond the relatively modest amount it donates to the arts, education and other causes).
It might, for instance, help make heating oil available to low-income citizens, as Venezuela is doing in Massachusetts, New York and Maine.
Or it could simply contribute money to help offset the pain: Appropriations for the Low Income Housing Energy Assistance Program for this fiscal year are $2.1 billion, nearly $3 billion short of what Congress authorized.
Beyond this, ExxonMobil could make a major contribution to helping rebuild New Orleans, where it has an important refinery. Private citizens have donated about $3.2 billion so far to the rebuilding effort. The $13 million contribution ExxonMobil touts on its Web site is a mere one-eighth of 1 percent of the increase in its 2005 profits.
Actually, given its New Orleans refinery, ExxonMobil might do very well by doing good: It could protect its investment by getting serious about helping the city build strong Category 5 levees and restoring hurricane-slowing wetlands. The estimated total cost is $31 billion ‚Äö√Ñ√Æ $5 billion less than ExxonMobil’s 2005 huge profit flows.
Yeah, right; and this will happen about the time I am elected Queen of England. A business doesn’t become successful by giving money away, right? Even money that it obtained by holding the American public economic hostage? No CEO wants to explain to his or her shareholders why he’s giving money away.
Unfortunately, we do not live in a world where significant, voluntary “give-backs” to American society are common.
The obvious alternative is some form of taxation, something we have done many times in the past when chance and misfortune have combined to produce unwarranted gains.
Last fall, the Republican-controlled Senate approved a one-year tax increase of $5 billion for the nation’s largest oil companies.
Another Senate-approved measure would effectively remove the foreign tax credit that the nation’s three largest oil companies receive for taxes paid in other countries. At the moment, however, even these tiny steps are unlikely to pass the House of Representatives.
It will take an aroused citizenry to demand what should be given freely. Sen. Byron L. Dorgan, D-N.D., and six other senators have introduced windfall-profits tax legislation. This direction would inevitably have to be at the center of a serious agenda for change as the pain continues to increase.
While a windfall profits tax would be a politically popular and profitable solution, this is something that needs to be examined carefully and not simply enacted in a knee-jerk fashion. Americans who rely on gasoline, and that would be ALL of us, deserve to know that they are not going to be continually squeezed by oil companies who recognize that we have no alternative but to pay whatever price it is they’re asking.
When you consider how dependent that the American (and the world) economy is upon affordable and reliable energy supplies, this is something that cannot and should not be left to the whims of “market forces”. Though this subjects gets little press attention, the price of gasoline is inextricably woven into the fabric of life. Is it time to protect Americans from the greed and avarice of oil companies? From where I sit, the answer is a resounding “yes”. I’m not going to sit here and say that I have the answer to this dilemma; I’ll have to leave that to intellects more nimble than my own. Nonetheless. oil companies cannot and should not be allowed to sacrifice the economic well-being of Americans on the altar of flat-out greed.
