Regulators, Lawmakers Must Step In to Halt Price Gouging, Says Group
Santa Monica, CA — ExxonMobil proved to the world today that it can make more profit on less revenue by picking the pockets of its customers, said the Foundation for Taxpayer and Consumer Rights. The company reported a new record first-quarter profit of $9.3 billion dollars, up 10% from 2006, even as its overall revenue declined by $1.7 billion.
The profit boost came almost entirely from refining profits worldwide: up 25% in the U.S., and almost double the previous first quarter outside the U.S., even as crude oil profits and prices fell. See chart on increases in Exxon Mobil refining profits, prepared by independent oil analyst Tim Hamilton for FTCR.
“When refining profits are driving world-record profits, that means motorists are being gouged,” said Judy Dugan, research director of FTCR’s OilWatchdog.org project. “Prices at the pump are out of sync with the price of raw materials. The real-world translation of ExxonMobil’s numbers is that motorists worldwide are paying a profit tax to ExxonMobil every time they fill up. Congress and would-be regulators, instead of sitting on their hands, should be demanding an end to profiteering by ExxonMobil and its Big Oil brethren.”
The U.S. average price for regular today is $2.877, with most of the West above $3.00 and California at $3.35, according to AAA.
ExxonMobil and other oil companies have, through lack of any competitive market for gasoline, boosted retail prices unnaturally higher than the price of crude oil, said FTCR. It damages not just drivers, but the whole U.S. economy by driving inflation.
California gasoline prices are only three cents a gallon below last year’s all-time record of $3.38 per gallon, even as crude oil prices languish about $10 a barrel below last year’s high, noted FTCR.
“While oil industry spokesmen say it’s all a matter of supply and demand because of refinery maintenance and accidents, the larger issue is that the same companies have deliberately restricted refining capacity, particularly in the West, over the last 25 years,” said Dugan. “Over the same period, oil company mergers have brought the number of major oil companies down to five — too few to offer competitive retail markets for gasoline and other refined fuels.”
FTCR and OilWatchdog have called for, among other remedies, greatly increased development of renewable fuel alternatives to reduce Big Oil’s grip on fuel markets. Yet ExxonMobil, which lumps support for renewables in a catchall “other” category in its profit reports, reduced such spending by 75%, to $3 million from $12 million in the first quarter of 2006. Even that minuscule amount carries a taint, said FTCR. Most of ExxonMobil’s spending on renewables goes to a strings-attached research project at Stanford University that has given the school the nickname “Big Oil U.” See FTCR’s news release on Stanford’s recent ethanol report.
ExxonMobil remains awash in cash on hand, $34.6 billion dollars, even after spending $8 billion in the quarter to buy back its stock — nearly double its capital and exploration spending.
“A comparison of ExxonMobil’s cash in hand with its spending on any alternative to petroleum shows that the company has no intention of cutting into its core oil business,” said Dugan. “While Exxon has started talking green, it obviously only cares about one kind of green.”
– 30 –