Santa Monica, CA — BP's 29% drop in net quarterly profits to $4.41 billion obscures the fact that, despite years of acknowledged mismanagement, the company made nearly the same absolute profit as during comparable periods of 2004 and 2005, said the Foundation for Taxpayer and Consumer Rights.
A drop from record levels must not be an excuse for the troubled company to cut safety and environmental protections, added the nonprofit, nonpartisan FTCR.
On a "replacement cost" basis, which disregards inventory gains and losses, BP's third-quarter profit of $3.87 billion was above that of 2005 ($3.79 billion) and close to that of 2006 ($4.41 billion). (Figures from BP's historical summary quarterly statements 2002-2006, available on www.BP.com.)
"The oil industry has spent five years reaping nearly continuous record profits, at the expense of motorists who have been gouged at the pump," said Judy Dugan, research director of the Foundation for Taxpayer and Consumer Rights. "Even with serious pipeline and refinery accidents, BP was at the same profit trough through those years. What's happening now is only a nudge toward what 'normal' oil profits should look like."
"Led by the U.S. West, American consumers reacted to 2nd quarter pump prices in excess of $3/gallon by cutting back on driving." said independent oil analyst Tim Hamilton. "While the reduction of consumption was less than 3%, it helped lead to major declines in pump prices and refining profits, which are reflected in the 'Refining Margin Indicator' in BP's report."
FTCR also cited intense pressure by Congress on oil companies, following record pump prices in the spring, for encouraging the gasoline price reductions.
As companies have reduced the supply left over from summer, pump prices are rising rapidly. The corresponding increase in profits for the major oil companies can be expected to surface in the 4th quarter, said FTCR. Other major oil companies are expected to report far less dramatic drops from last year.
FTCR cautioned that BP's announced shift away from its pseudo-green "Beyond Petroleum" image and back to concentration on the oil business must not erode the company's safety promises. An investigation of BP's refinery operations after the 2005 Texas City explosion that killed 15 people found that all of BP's refineries lacked a "culture of safety." BP's Alaska pipeline leaks and a 2006 shutdown were attributed to sheer lack of maintenance, despite record profits.
"BP pretended to be the greenest of oil companies even as it cut corners on environmental safety in Alaska and worker safety across the the board," said Dugan. "Now, in the name of increasing profit, it has announced workforce cuts. Unprofitable safety and environmental programs are are often juicy targets for managers with profit quotas to meet. BP can't be allowed to repeat that history."
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