Four years ago, gasoline was $1.36 a gallon on average. This past January, gasoline prices were 72 cents lower than they are today at over $3.00 per gallon. Production and refining costs since those time periods have not increased by much. Who’s raking it in?
The oil-producing nations, for one, and the ExxonMobils of the world the giant multinational oil companies. This Niagra of daily profits ExxonMobil is making well over $1250 a second and over $110 million a day does not prompt any action by our oil-marinated Congress and White House.
ExxonMobil just reported a quarterly $10.4 billion profit, up 86 percent from last year’s second quarter. A few in Congress urge an excess profits tax. It is a one-day wire service squib. Others say they want a law on price gouging. It disappears by sunset.
The Senate Judiciary Committee passed a bill a few months ago to authorize prosecution of the oil-producing countries under the antitrust laws. Imagine, Bush suing the countries whose oil powers our cars and economy. The hapless Senate Committee, however, did not propose explicit authority to break up the oil company giants in this country under the antitrust laws.
Look what ExxonMobil is doing with its huge profits and margins. Well it sure isn’t giving its gas station owners any break. Or the poor, as Republican Senator Charles Grassley (Iowa) has urged in vain. The company isn’t putting real money into alternative energy. Last year it assigned three-hundredths of 1 percent of its profits $10 million to renewable energy. It isn’t expanding refinery capacity. A major way the oil companies keep prices spiraling and profits flowing is to maintain tight refinery output.
Where are the excess profits going? One flow is into the huge executive salaries and retirement packages. ExxonMobil’s retired CEO, Lee Raymond, got his rubber-stamp board to give him one man a $400 million going away package. But the big use of Exxon’s profits is buying back its own stock. Check these brazen figures. In the first quarter of this year, Exxon reported spending $5 billion buying back its own shares. This is more than the $4.1 billion it said it would spend on exploration and production.
There’s more. The oil giant said it would spend $18 billion repurchasing its own shares in the next three quarters of 2006. This is great news for Exxon executives with stock options. Greed at its highest, to heck with the energy needs of the country and stopping the gouging of American motorists.
Let’s break down the figure of one year’s stock buyback by ExxonMobil totaling $23 billion which obviously the company does not need for its regular business of finding, refining and marketing gasoline and heating oil. That sum of money alone would reduce the price of gasoline by about 15 cents per gallon if spread nationwide.
Moreover, ExxonMobil, unlike some other oil companies, is even fighting the proposed reduction of the subsidies that Congress gave to the companies’ operations in the Gulf of Mexico when oil was around $40 a barrel. Now at around $75 a barrel, ExxonMobil still wants your taxpayer subsidies.
Back in the Sixties, here is what Congress would probably have done in a similar situation: Impose an excess profits tax and investigate and subpoena oil company records to determine the kinds of parallel prices, restricted refinery outputs (the industry has closed scores of refineries in the past 40 years) and mergers that warrant tough antitrust prosecution. Never would the Congress of those years have tolerated the merger of the number one and number two giants in the oil industry Exxon and Mobil companies.
In the Seventies there was a big fight in Congress over a 10% or so increase in the regulated price of natural gas. Now the industry is free of regulation and the price of natural gas has spiked from ten to fifteen times what it was in the Seventies, adjusted for inflation. There were even calls for a new federal oil company to be a yardstick like U.S. Naval shipyards were for private shipbuilders. Some Senators were ready to turn the oil industry into a public utility “cost plus” regulation.
What to do now, given that the corporate environment in Washington is bent on leaving consumers defenseless? The Foundation for Taxpayer and Consumer Rights (see www.consumerwatchdog.org) out of Santa Monica, California makes three proposals:
First, they want California voters to enact Proposition 87 in November. Called the Clean Energy Initiative, it would levy a profit-based “extraction tax,” which could not be passed on to motorists. The money would be used for development of alternative fuels and more efficient transport vehicles.
Second, pass a tough price-gouging law as proposed by California Attorney General Bill Lockyer and Assembly Speaker Fabian Nunez.
Third, pass Proposition 89, the Clean Elections Initiative on the November ballot in California. This would provide public funding and place limitations on lobbies passing out money in campaign contributions to lawmakers.
Here’s my suggestion. With all the websites and blogs, why can’t a million energy consumers band together to start one big energy reform rumble that will be heard by both Washington and the oil giants? Don’t even need money for stamps, when you’ve got the Internet. What about it bloggers and all you e-advocates? Or is it all about MySpace?