Nobody Loves Big Oil Companies, Except Their Shareholders.
Ronald Bailey | April 2, 2008, 3:17pm
The big five oil companies were grilled at a Congressional hearing about their record profits yesterday. Their apparent crime? Making too much money.
Congressional Democrats do not think that oil companies, especially the world's biggest private oil company Exxon Mobil, are investing enough money in renewable fuels. So Rep. Ed Markey (D-Mass.), chairman of the Select Committee on Energy Independence and Global Warming, urged the oil companies to spend ten percent of their profits on developing renewable energy supplies.
As the Houston Chronicle notes:
House Democrats had telegraphed the kind of reception the executives could anticipate with the hearing's title — "Drilling for Answers: Oil Company Profits, Runaway Prices and the Pursuit of Alternatives."
And the hearing lived up to expectations in what proved to be an often-testy exchange.
Markey quickly went after Exxon Mobil, asking why a company that earned more than $40 billion last year — the most ever earned by a U.S. company — has plans to invest only $100 million over 10 years in renewables and alternative energy programs.
Simon said company officials examined a range of alternative energy sources a number of years ago and were unsatisfied with their potential.
Instead, Simon said, company officials want to focus on leapfrogging current technologies and find a breakthrough for the world's energy concerns.
"The current technology does not have any appreciable impact on this challenge," Simon said.
Democrats pointed to the commitments BP and Shell have been making in alternative energy sources.
Markey wants them to do more, though, and invest at least 10 percent of their profits in renewables and alternative energy sources.
But early Tuesday, at Washington's Center for Strategic and International Studies, Jeroen van der Veer, chief executive officer of Netherlands-based Royal Dutch Shell, warned against sinking too much cash on alternatives such as biofuels if they cannot be competitive in the marketplace.
"There is no point to spend billions of dollars on a technology that is too expensive for consumers," van der Veer said.
The Congressional panel also wants the oil companies to give up $18 billion in "subsidies." Of course, there shouldn't be any corporate welfare, period. But as the Wall Street Journal points out:
Mr. Markey also used the occasion to threaten special tax increases, grilling the executives about $18 billion in "subsidies," which are actually a tax deduction that Congress itself extended to all manufacturers, including Big Oil
Interestingly, the Journal also notes that higher gasoline prices is exactly what would happen if Congress enacts proposed global warming policies.
Finally, if Congress wants to blame someone for high oil prices, blame the benighted oil producing countries that have underinvested in oil production for at least a decade. But Congressional grandstanders can't haul the likes of Venezuela's Chavez, Russia's Putin, and Iran's Ahmadinejad to their hearing rooms.
The whole Houston Chronicle article here.
Disclosure: Yes, I'm in thrall to Big Oil to the extent that I still own those 50 shares of Exxon Mobil. And I should also mention that I have this silly belief that the chief business of business is to make profits for shareholders by satisfying the legitimate needs of their customers, not bowing and scraping to the whims of Congresspeople
Harpua | April 2, 2008, 9:55pm | #
I'll never understand the drill in ANWR crowd. There's some oil there , but not a lot. It's much easier and cheaper to drill in many other places than there. And even we could extract all of it, it's not that much oil.
But where's the flaw in this logic?
Oil is a finite resource.
There are some reserves in the US, but not as much as in the rest of the world.
It's more expensive to extract our oil than it would be to import from other countries.
Why wouldn't we want to exhaust other's resources first and have the last barrels of oil?
Meanwhile, congress and the president have conspired to make ethanol, a fuel no American really wants, the hot commodity out there. Farmers are planting corn like it's going out of style because the price is now so high. It's filtering down into the rest of the food chain raising the cost of all food.
If that weren't enough, our panic over immigration is going to eventually lead to even higher prices when there's no one left to pick the fruit or slaughter the cows. The logical result of this will be the "outsourcing" of our food supply to other countries that have a ready supply of labor.
So Congress is working hard to raise the cost of energy (under the guise of global warming) while at the same time they bitch to oil companies the price of gas is too high. Meanwhile the policy they've instituted to increase "energy independence" will markedly increase the cost of food and may result in us importing food.
With friends like this, who needs enemies?
ece | April 3, 2008, 7:58pm | #
I'd like to add to this. I am a shareholder of XOM through an inheritance package, but Congress shouldn't be giving tax breaks and subsidies to the oil companies b/c it is wrong. If we had a free market, none of this would be necessary, and I would buy up other businesses and be more comfortable in the diversification of energy. I am also a stock holder of some American alternative energy companies who are put at a disadvantage b/c they are not able to compete they do not receive such large subsidies, if any! I'd like to buy more, but the scales are tipped! The oil companies receive these subsidies from the gov't so they can keep prices down! Anyone see anything wrong with this? Subsidies are not tax breaks they are your taxes and my taxes! You are paying taxes to keep the price of gasoline/diesel down, and now you are paying really high in gasoline to boot! This is not fair!
Congress shouldn't blame the oil companies for making more money. Congress should blame themselves for approving of subsidies, loans, and tax breaks for these companies and not for others. The American people should blame themselves for not pushing alternative energy sooner, and for resisting badly needed environmental and economic changes!
In Europe everywhere you go you see biodiesel plants, solar power, sustainable nuclear plants, more public transportation and more communities centered around where people work, shop, go to school, and live. Here we have made no progress in any of those arenas!
Here's news: biodiesel is less expensive than petroleum diesel, and they don't get subsidies! Only soybean farmers receive those, and many producers don't use soybeans anymore! It is competitive on the marketplace, if it is released to the marketplace at all!
The oil companies are taking advantage of every taxpayer and system right now, and profiting from it, making no effort to plan for the future, when there will come a day where no oil will be available, and the massive energy costs required to drill a hole in the ocean, ship the oil, and refine the oil only 20% yields gasoline and the rest plastics, kerosene, etc? That is not good economy. Ask yourselves how and why that is still less expensive than alternatives. It doesn't add up.
