Conoco’s Loss: Consumer Group Sees Trend of Major Oil Companies Waiting Out Recession, Not Investing for Recovery

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Corporate Cutbacks Now Likely to Generate Price Spikes Later As Economy Tries to Recover

Santa Monica, CA — Conoco Phillips’ CEO today deflected questions on the company’s layoff plans, investment cutbacks and refineries, saying the company was hunkering down for a “significant multiyear recession.” If other oil companies follow suit, they will not meet demand as the economy recovers and prices will be back on a damaging roller-coaster, said Consumer Watchdog.
The nonprofit group also noted that much of the near $32 billion in write-offs reported by Conoco could have been booked in whole or in part at any time over the last few years, but would provide a bigger tax advantage now, coming off of an otherwise astoundingly profitable year.
“How many Americans can say ‘Because of the spike in the price of gasoline in 2008, the value of my SUV plummeted, and I’m going to write down $15,000 of its value on my tax form,’ ” said Judy Dugan, research director of Consumer Watchdog.
If Conoco’s paper write-downs are disregarded, the company’s quarterly profit comes to $1.9 billion and the yearly profit is $16.4 billion.
Conoco’s cash reserves fell to under $1 billion, but before the company stopped buying back its own shares in October, its buybacks came to over $8 billion in 2008 alone, said Consumer Watchdog. That is essentially a separate piggy bank, filled from the pockets of consumers who were paying over $4 a gallon for gasoline at the pump. But CEO Jim Mulva said Conoco was halting planned refinery upgrades and much of its exploration. That could mean supply shortages later as the global economy recovers, and another round of price spikes. Deferred upgrades also keep refineries going at higher pollution levels.
“We’ll get a clearer picture as the rest of Big Oil reports its profits over the week, but appears that the proceeds of five years of record and near-record profits won’t be going to increasing oil exploration or development of cleaner and cheaper energy sources,” said Dugan. “They won’t be investing at all in ways that could aid economic recovery.”
Independent oil industry analyst Tim Hamilton said that small businesses couldn’t get away with with taking Conoco-like write-offs, and now it’ll be small businesses also trying to restart the economy. “The big businesses with cash are sitting on it and the small businesses hurt by high energy prices are asked to carry the load for America.”
Conoco CEO James Mulva, in a conference call with analysts, also declined to pinpoint the source of a $537 reduction in book value at two unidentified refineries, calling it a competitive issue. This information should be public, said Consumer Watchdog. Infrastructure or production problems at major refineries could cause large local disruptions in supply and pricing, an issue of economic security.
Consumer Watchdog has called for increased regulation and oversight of refineries, to make their operations more transparent and smooth out price spikes caused by production cuts.
(For historical data on oil profits, see OilWatchdog’s “Oil Profits Monster” database, a free resource on detailed profit figures since 2000, at: The database takes into account all mergers since 2000.)
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Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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