by John M. Curtis
(310) 204-8700

Copyright April 2, 2008
All Rights Reserved.

estifying before the House Select Committee on Energy Independence and Global Warming, executives from Exxon Mobil, Chevron Corp., ConocoPhilips and Royal Dutch Shell, pled poverty, begging Congress to keep $18 billion in tax breaks, after posting $123 billion in 2007 profits. Exxon Mobil's Q-4 profits were the biggest in U.S. history, while transportation companies watched profits fizzle. While truckers around the country contemplate a national strike to protest spiraling diesel fuel prices, the oil industry has enjoyed unprecedented profits. High gas and diesel prices have fueled inflation and damaged the economy, dragging gross domestic product to a virtual standstill. Committee chairman Rep. Ed Markey (D-Mass.) asked oil executives under oath to explain record profits at the expense of cash-strapped businesses and consumers, reeling from inflated prices.

      Industry executives gave pat answers how profits soared while pump prices went through the roof. All excuse record profits as cyclical, citing lean years while the industry struggled to make ends meet. It's been a blue moon since oil industry profits were not breaking records. “The American people deserve answers and it is time for Big Oil to go on the record about these record prices,” said Markey, asking industry executives to explain record profits. Oil executives blamed the spiraling price of oil for the run-up in pump-prices, bringing the national average of unleaded regular to $3.29 a gallon. Refined petroleum products don't seem closely tied to the price of oil, a commodity more prone to price-fixing by major refineries. Oil executives like to blame runaway fuel prices on the ever-changing price of crude. In reality, it's arbitrary, based on the market.

      Big oil holds a monopoly on refined oil products, including gasoline, diesel fuel heating oil and jet fuel. Whether the price of crude droops or not, it doesn't affect fuel prices more tied to price-fixing. At past hearings, executives have told elected officials that high prices and big profit margins were designed to improve conservation, discouraging consumers from buying gasoline. Oil executive remember the lean years and have no problem justifying today's record profits, even where it damages the economy. “Given the largest contributor to the cost of gasoline is crude oil, this has translated into record-high gasoline prices,” said Chevron CEO Peter Robertson, blaming record pump prices on the price of oil. Robertson knows that the main factor driving up pump prices are the monopolistic practices of oil companies, arbitrarily hiking prices of diesel and gasoline.

      Robertson, who heads the nation's No. 2 oil company, insists that crude oil accounts for 70% of the price of gasoline. Yet most oil analysts see crude oil as only one factor affecting pump prices. When refiners know consumers and industry will pay inflated prices, they continue to gouge. When recession begins to lower demand building up larger gasoline industries, the industry slashes prices to stimulate more demand. That process has little to do with what happens on the New York Mercantile Exchange. Crude oil has been the industry's latest excuse to gouge business and consumers, consumed by their appetites for gasoline. With more ethanol and hydrogen fuel cell-powered vehicles coming on the market, the oil industry will no doubt cut pump prices, regardless of the price of crude oil. Oil industry executives have one single, overriding motive: To maximize profit margins.

      Oil executives show no compunction about gouging business and consumers and ultimately hurting the economy. As long as oil trades as a commodity, the goal is to push prices to record levels. Industry officials hide behind rising crude oil prices, when the real culprit causing high pump prices involves price-fixing. “Imposing punitive taxes on American energy companies . . . will discourage sustained investments needed to continue safeguarding U.S. energy security,” said Exxon Mobil vice president Stephan Simon, warning Congress to avoid more regulation. Executives warn Congress not to take away tax loopholes or face higher pump prices. Oil executive won't back down from their entitlement to obscene profits at the expense of business, consumers and the U.S. economy. There's no one in the White House to lecture Big Oil about civic responsibility.

      Gouging business and consumers is the stock-and-trade of the oil industry, raking in record profits at the expense of the economy. Truckers around the country are poised to strike, highlighting the hardship caused by inflated diesel prices. While Markey wants the oil industry to commit 10% of profits to developing alternative fuels, the industry knows its monopoly and days of record profits are numbered. When hydrogen fuel cells hit the market, the fossil fuel industry will slowly lose its grip on market. Instead of acting responsibly, the industry has burnt its bridges with consumers, fed up with placing greed over the good of the economy. There's no excuse for Big Oil to not to take lower profits and work with the transportation industry to help the economy. Exploiting business and consumers ultimately backfires by discouraging consumption, lowering GDP and harming the economy.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

©1999-2005 Discobolos Consulting Services, Inc.
(310) 204-8300
All Rights Reserved.