Bush, Congress Avoid Real Solutions; Stance Is Inexcusable as Pump Price Soars, Says Consumer Group

Santa Monica, CA — Record first-quarter profits, up a staggering 17 percent to $10.89 billion reported today by ExxonMobil, the world’s largest oil company, came as the result of crude oil profits driven by unregulated speculative trading, said Consumer Watchdog.  Soaring gasoline and diesel prices have devastated the U.S. economy and helped push consumers deeper into debt, yet President Bush and Congress have engaged in mindless finger-pointing and failed to take obvious steps to ease the pain.

“With gasoline prices topping $4 a gallon in some cities and averaging $3.60 nationwide, nobody is surprised to see the latest string of outrageous profits posted by Big Oil,”  said John M. Simpson, consumer advocate with Consumer Watchdog (formerly the Foundation for Taxpayer and Consumer Rights). “But what people cannot understand — and will not forget — is that their elected representatives are shirking their responsibility to take obvious steps that will ease the crisis.”

“People are driving less, but for every trip they cancel, rising prices at the pump more than wipe out their savings,” said Simpson. “They pay a second time as inflation at the grocery store is driven by fuel surcharges on every truck delivery.”

The nonprofit, nonpartisan Consumer Watchdog and its Oilwatchdog.org project have called for action to quell market speculation and cut back taxpayer subsidies to oil companies (see below), but the most obvious immediate action is for the White House to stop buying market-priced oil for the federal Strategic Petroleum Reserve, which is at record high levels above 700 million barrels, and start selling a fraction of the reserve back into the market.

At a Rose Garden News Conference this week Bush refused to stop purchases for the reserve.  He also blamed Congress for not allowing oil drilling in the Arctic National Wildlife Refuge (ANWR) even though it would take a decade before oil could be obtained if drilling were allowed today.
 
“Purchases for the reserve, at these record oil prices, come straight from the pockets of taxpayers, and by taking oil off the market they fuel continued speculation,” said Judy Dugan, Consumer Watchdog research director. “Yet President Bush has turned a deaf ear on pleas by Congress and consumer advocates to take the small, painless and beneficial step of curbing this excess. There is no strategic benefit more important than using the oil reserve to aid consumers and offset energy inflation.” (See Consumer Watchdog’s letter to President Bush here.)

Exxon’s profits were a record for a first quarter and were the second highest ever for any U.S. corporation.  Exxon’s 2007 fourth quarter earnings of $11.66 billion are the all time record. During the first quarter of 2008 the oil giant piled up profits at the rate of $5.08 million an hour or $84,000 every minute. (See more historical data at Consumer Watchdog’s “Oil Profits Monster” database. Quarterly data and charts for Shell and BP will be updated by 11 am PDT.)

With the announcement of record profits, Exxon also said it had bought back $8 billion in its own shares.

“This is money that could have been used to lower prices for consumers and invested in alternative energy research,” said Simpson. “Instead the company is taking a short-term, profit-maximizing approach that has even upset some of its most important shareholders.”

On Wednesday descendents of John D. Rockefeller, who founded Standard Oil, ExxonMobil’s precursor, called a news conference in New York to say the oil giant is overlooking its effect on the environment and the future of alternative energy. They also backed a resolution that would split the roles of chief executive officer and chairman, now held jointly by Rex Tillerson.

“When America’s first family of oil speaks, ExxonMobil should pay attention,” said Simpson.

Exxon’s refining profits did not match the increases from oil sales, but that was in part because the oil giant is selling its own petroleum at inflated prices to their own refineries, said Consumer Watchdog. The current upward spike in pump prices is unlikely to stop even if crude oil prices abate, because refiners are now working to boost profits on their end of the business.
 
“When one uses the spreadsheet to compare the price at the pump with the quarterly company profit reports, it is clear the companies have inflated bottom lines by raising pump prices far in excess of any actual increased cost incurring from the highly publicized increase in the commodity price of crude,” said Tim Hamilton, independent oil analyst. “Since the average pump price for regular unleaded was back at $3.11 during the first quarter, next quarter profit reports can be expected to reflect prices approaching $4 at the pump and set yet another new record.”

 
Consumer Watchdog has called for:
 
– Action by President Bush to stop adding to federal Strategic Petroleum Reserve and sell from the reserve to stabilize and drive down oil futures price.  Link to CW letter to White House.
 
– Closure of the “Enron Loophole” in commodity trading regulation. A regulatory measure in the federal farm bill (S.2058 by Sens. Dianne Feinstein and Carl Levin) would regulate trading markets to help stop speculative oil pricing. (See more on Enron Loophole and farm bill amendment.) Regulators should also increase the amount of margin funds that traders must put up in energy markets to help suppress speculation.
 
– Senate approval of an alternative fuels bill (HR 5351) funded by withdrawing $1.8 billion a year in unjustified taxpayer subsidies to oil companies. This measure, passed by the House, has not been taken up in the Senate, where opponents are using a filibuster tactic to block passage. A similar House measure was removed from the federal energy bill by the Senate last year under pressure from the oil lobby.
 
– Oversight of refinery operations, including regulation of national gasoline supplies. In the last decade, the average on-hand supply of gasoline has dropped from 30 days’ worth to about 22 days. This makes prices increasingly sensitive to any cuts in gasoline production.
 
Consumer Watchdog (formerly The Foundation for Taxpayer and Consumer Rights) is a leading nonprofit, nonpartisan consumer advocacy organization.
 
For more information, see www.consumerwatchdog.org or www.oilwatchdog.org  
 
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