Energy Prices That Deepened Recession Drive Exxon, Chevron to Yearly Profit Records, Says Watchdog
Oil Giants Cling to Cash Hoards and Trim Output, Setting Trigger for Next Price Spike
Santa Monica, CA — Consumers left deeper in debt by 2008’s record
price gyrations for gasoline and heating oil now find that their money
landed in the pockets of Exxon and Chevron, said Consumer Watchdog.
Both oil giants reported record annual profits today, despite a dip in
quarterly profits for Exxon.
Exxon’s annual profit jumped 11%, or $5.2 billion, to $45.2 billion.
Chevron was also up more than $5 billion for the year, to $23.9
billion. A substantial portion of Chevron’s increase came in a
fourth-quarter jump in its profits for refining and marketing of
gasoline and other fuels, mostly outside the U.S.
“The profits of both companies are the result of a Wild West
speculative orgy in energy markets,” said Judy Dugan, research director
for the nonprofit, nonpartisan Consumer Watchdog. “Congress and
President Obama need to put credible regulation into these markets
swiftly, before the next price spike kills economic recovery.”
Chevron, in describing its unusual profit increased for the 4th
quarter, credited “gains on commodity derivative instruments.” That
means speculative gambling in energy markets, rather than traditional
hedging of its physical sales and purchases.
While Chevron has spent heavily on a P.R. and advertising blitz
touting the company’s commitment to going green, its balance sheet is
all about oil, all the time, said Consumer Watchdog. Each of the
companies spent $8 billion buying back its own stock in 2008; Exxon’s
stash of repurchased stock is now well over $100 billion. (Even
ConocoPhillips, which reported a $31-billion dollar paper loss for
2008, first bought back $8 billion of its stock.)
“Chevron’s advertising greenwash cloaks a company whose business
model is all about oil and petrochemicals, and Exxon doesn’t even
bother with the greenwash” said Dugan. “They have fillied their piggy
banks rather than developing oil alternatives, yet taxpayers are still
paying them billions in subsidies and so-called royalty relief, which
should cease immediately.”
Lower oil prices are not a reason to leave royalty payments in place,
said Consumer Watchdog, since the oil companies have shown that they
would rather buy back their own stock than invest in a greener energy
future. Chevron and Exxon also cut production of crude oil and refined
products in 2008; industrywide reductions in 2009 will leave a
recovering economy exposed to another energy-price roller coaster
unless regulators step in.
Unlike ConocoPhillips and Shell, which booked largely paper losses
and slashed capital spending, Chevron and Exxon both said they would
continue their capital investments at current levels. But Chevron
indicated that its capital spending in the U.S. would drop by $2.1
billion, a substantial loss of job-creating spending.
Consumer Watchdog backs regulatory changes including:
- Greater oversight and regulation of all energy trading markets, as
well as trading limits, complete reporting of trades, and higher
trading costs for speculators who are not selling or buying physical
petroleum products. These limits should apply to the speculative
trading arms of the oil companies.
- Transparent reporting of refinery operating costs separate from
profits, and requirements that the industry keep on hand an adequate
supply of gasoline to prevent sharp price spikes.
(For historical data on oil profits, see OilWatchdog’s “Oil Profits
Monster” database, a free resource on detailed profit figures since
2000, at www.OilWatchdog.org. The annotated Excel database takes into account all mergers since 2000. Color charts are also available.)
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