Consumers boil over oil profits

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Ventura County Star (California)

For years, oil companies have been cast as villains. That perception didn’t change Friday when the two largest U.S. oil companies reported record profits — again.

Last year, ExxonMobil reaped more money than any U.S. corporation has ever made, while consumers were sliding into a recession, said Judy Dugan, research director for the Foundation for Taxpayer and Consumer Rights in Santa Monica. At the same time, oil companies have lobbied against any control of the market that has pushed crude oil to $90 and up, she said.

“Their product is so important to our economy that energy costs alone are driving inflation and raising consumer debt,” Dugan said.

The record $40.6 billion annual profit reported Friday by Exxon Mobil Corp., the largest publicly traded oil company in the world, was a byproduct of crude oil prices reaching historic levels last quarter. The previous largest annual
profit among U.S. companies was $39.5 billion by Exxon Mobil in 2006. Chevron Corp., No. 2 behind Exxon among U.S. oil companies, also had its best year ever in 2007, with a profit of $18.7 billion.

The companies’ profits, which typically draw the ire of legislators, were reported as consumers grapple with a shaky economy that has been rocked by a housing downturn, volatile markets, rising food and energy costs, and increasing unemployment.

In Ventura County, the average price for regular unleaded gasoline has remained higher than $3 since October. On Friday, the average was $3.07, an 8-cent decline from Jan. 25. Some stations are selling regular gas for less than $3.

Dennis Clancy of Thousand Oaks has been unhappy with oil companies. “I’ve always had a problem with gas prices over $3,” he said while filling up at a Shell station in Camarillo. “It shouldn’t cost over $50 to fill up a mid-size

He wants to see more proof about how the oil companies’ profits are utilized, as well as less dependency on foreign oil.

Oil companies blame energy markets for high crude prices, but they profit immensely from these markets and oppose controlling them, Dugan said.

“The government has to get some control over these unregulated electronic energy trading markets,” she said.

Oil companies are spending billions of dollars buying back their own stock instead of investing in renewable energy or their own refineries, which, Dugan says, is the very definition of greed without regard for corporate responsibility.

“I’m still almost speechless at the amount of profit they made,” Dugan said. “Americans should be furious.”

For years, consumers and business owners have bristled as oil companies have elevated their prices and cut into their bottom line.

Sue Tomkovicz of Simi Valley said she doesn’t use an Exxon Mobil station near her home because the prices are higher than at other stations. “They’re gouging customers,” she said.

Desmond Sandlin, owner of Road Runner Shuttle in Camarillo, said he believes in a capitalist system, but said oil companies should lower their gas prices.

“I hope everyone makes a lot of money, but when they’re making profits like that, I think it’s disgusting,” he said. “How can they even show their faces when things are as rough as they are?”

Every time gas prices drop a few pennies, it helps his business. When gas prices soar, it eats into profits.

“They (oil companies) keep saying they put their money back into finding new sources,” Sandlin said. “I don’t believe that.”

The oil companies have always been “the bad guy,” but perhaps they don’t deserve the label, said Jack Kyser, chief economist of the Los Angeles County Economic Development Corp. “People don’t understand the world has changed for oil companies,” he said.

It’s becoming more expensive and difficult to find oil fields, and oil companies are trying to explore in nations where real danger or politics are involved, Kyser said. Consumers feel the pain at the pump and don’t think about the kind of infrastructure that oil companies have to build to access the oil, or the political risks.

“In a way, they’re becoming a declining industry,” Kyser said, adding that seems contrary to the companies’ financial growth. But, he said, he believes that their position as the world’s major players has changed.

“It’s a whole different ball game. They don’t have the clout they used to have,” Kyser said. “They can’t go into a country and sign contracts and expect stability anymore.”

While oil companies have been accused of price gouging, Kyser said, he believes they’re simply trying to protect themselves for tough times ahead.

“Everyone acts like it’s blue skies for them, but if you look over the history of the industry, they’ve had some very lean times,” he said.

Consumer Watchdog
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