Exxon, Shell and Marathon Oil Slashed Q4 Refining Margins To Temporarily Lower Pump Prices, Group Says
Santa Monica, CA — Exxon set the record for the largest annual corporate profit of $39.5 billion last year even with a 4% decline in fourth-quarter profit resulting in part from an 18% drop in refining margins, according to the company’s profit report today. Shell, the world’s second largest oil company, set a company record earning $25.4 billion in 2006 but also announced a 23% decline in refining margins. Pump prices have increased dramatically in recent years following industrywide increases in refining margins.
The Foundation for Taxpayer and Consumer Rights (FTCR) said today’s earnings reports show that industry leaders cut domestic refining profits in the run-up to the November election in order to lower gasoline prices, very likely hoping to influence the mid-term election. The nonpartisan group is calling for Congressional investigations to determine whether Exxon and others manipulated the market to affect the election.
FTCR noted that, despite the temporary and limited relief of election season pump prices, the record annual profits of Exxon and Shell show once again that last summer motorists were the victims of one of the greatest rip-offs of all time when gasoline prices topped $3 per gallon. The industry has long claimed that gasoline pump prices are attributable to external factors such as the price of crude oil, but today’s profit data make it clear that high gasoline prices are directly tied to oil company decisions.
“The proof in Exxon‘s profit report is that oil companies are robbing Americans blind and that the companies can have tremendous influence over gasoline prices at any time they want simply by taking a little less in profits,” said FTCR President Jamie Court. “That’s a very different portrait than the industry paints of being captive to global economic forces. Congress needs to hold hearings and ask company executives under oath about whether Exxon‘s sudden profit drop in the fourth quarter was based on a political motivation and subpoena company documents to determine the root of the change.”
Similar Results Throughout Industry
Marathon oil, the fifth largest U.S. refiner announced today a 30% drop in refining margins and an overall 4th quarter decline in profit. Still, the company announced a 75% increase in profits over 2005. Last week ConocoPhillips announced a 16% drop in fourth quarter profits. Like Exxon and Shell, the decrease in profits and gasoline prices in October and November, were easily offset for these companies by the enormous refining margins and high pump prices of prior quarters.
Exxon Produced More Gasoline in 4th Quarter, Made Less Money
According to its earnings report, Exxon increased its refinery throughput (thus producing more, cheaper gasoline for motorists) in the fourth quarter by 10% over the fourth quarter of 2005 year, even though annual refinery throughput actually declined from 2005 to 2006. Although Exxon refined and sold substantially more gasoline in the fourth quarter than in prior quarters, the company’s quarterly income associated with refining and sales were $327 million dollars less than in the third quarter of 2006 and $409 million less than the second quarter, during the height of driving season and the 2006 price spike. This provides more evidence that the oil industry manipulated the available supply of gasoline in order to lower prices last autumn.
President’s Announcement on Strategic Petroleum Reserves Helped Industry
After President Bush promised in his State of the Union to double the size of the U.S. Strategic Petroleum Reserve, oil prices shot up faster than after Katrina. FTCR has questioned whether Bush was pumping up oil prices for companies that dropped gasoline prices in the runup to the Nov. election. See FTCR’s analysis after a similar profit report by Conoco Phillips.
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The Foundation for Taxpayer and Consumer Rights is a nonpartisan, nonprofit organization. More information is available on the web at http://www.consumerwatchdog.org.