Honest Injun... We Aren't Gouging At The Pump

Exxon and Shell Report Record Profits for 2006 and Praying at the Pump

Last year the federal government, under the auspices of the DOJ and the GOP-dominated congress, reported several times that there was no evidence of price gouging at the pump. Of course, anyone with a brain and a car needing to be filled up could tell without a federal investigation that there was indeed gouging taking place. All anyone had to do is look at a few of facts: 1) the prices of gas at the pump; 2) the fact that prices always seem to jump up faster than they come down; 3) despite having bought millions of barrels at lower prices, as soon as anything disturbing was reported the price at the pump jumped dramatically, even if it had no real effect on the cost of oil (i.e. when Katrina hit, prices in Chicago and Detroit rose quickly and significantly, even though the oil supply for both cities came from Canada and was not effected by Katrina); and 4) for the last three years the oil companies have posted RECORD-BREAKING profits.

Somebody in congress and at the DOJ obviously isn't too bright... or is it that they were paid off? Or is it that they owe so much allegiance to the Saudis and other OPEC nations that they don't mind screwing the consumers? You decide for yourself, but I have been reading a lot of material on congress, politicians, and their ties to the Saudis, OPEC, and the oil companies... I know what I think.

Exxon and Shell Report Record Profits for 2006

Oil prices have fallen, but Exxon Mobil and Royal Dutch Shell left their smaller competitors in the dust and reported record annual profits Thursday.

By making $180 million a day between them, the two largest publicly traded oil companies displayed their ability to ramp up production worldwide over the year, even in unstable places like Chad and Nigeria. Growth may be slowing and is likely to continue to do so in the future, but these two companies showed they could navigate the year’s volatile energy prices that caused smaller companies to stumble in their fourth-quarter profits.

The expanding profits at Exxon Mobil and Shell, however, may also make them big targets for the Democratic Congress whose leaders want oil companies to pay higher taxes and work to curb global warming.

Analysts said that with oil prices rebounding again with more frigid weather, the entire industry is almost assured of seeing strong profits again this year.

Production in Mexico and Venezuela is declining because of politics, poor management, investment shortfalls and aging fields. And in Russia, production is slowing because of tensions between the government and foreign oil and gas companies over big investments. With worldwide crude inventories full, Saudi Arabia is keeping production in check to maintain its influence over pricing.

Energy consumption in China and India, meanwhile, continues to soar.

Just a few weeks ago, many traders were predicting that oil would fall below $50 a barrel. But now the consensus of traders is that $50 is more likely a floor, so that big profits should continue in an industry that is swimming in cash.

“Only a few months ago, I thought oil prices could go down to $40 and natural gas prices to $5,” laughed Fadel Gheit, senior energy analyst at Oppenheimer & Company, who has since tossed out those expectations.

Praying at the Pump

ONCE again, the price of oil is making Americans nervous. After falling by more than one-third since peaking above $75 per barrel last summer, the price has rebounded to $58 with the re-emergence of cold weather and news of a production cut by OPEC. As Congress and President Bush face off over energy policy, we should reaffirm a few basic principles. A very important one is that our most critical goal in enhancing our energy security is to maintain a stable price for oil.

When we talk about energy “dependence” or “security,” we really mean oil. We do not import coal or wind or the sun or geothermal steam, and we import only a tiny percentage of the natural gas we consume from anywhere other than Canada. Thus there is virtually no geopolitical risk in using any of these sources.

This is why energy policy statements frequently begin with the goal of “eliminating the import of Middle East oil.” Such aims presume that our insecurity derives from oil imports, and reflect our distaste of being beholden to autocratic regimes in the Middle East and elsewhere that we perceive as sharing neither our interests nor our values. This presumption, however, is wrong.

Simply put, our oil addiction undermines our well-being because the volatility of oil prices threatens our economy. Because we spend so much on oil and there are no short-term substitutes, price spikes wreck household, business and government budgets alike. Our sense of insecurity is magnified because volatility is both unpredictable and generally beyond our control.

If we could predict future oil prices, we could plan for them. But few people can adjust their lifestyles to reduce their oil consumption significantly in response to price spikes. Likewise, businesses may be reluctant to invest in efficiency or alternative fuels because the higher oil prices that make such investments cost-effective could collapse virtually overnight.

It is important to remember that our insecurity is related to price volatility and not to the source of the oil. If OPEC members suspended exports but the price of oil mysteriously did not rise, we would not care about the interruption. It is only because a supply interruption always affects price that we care about oil’s uninterrupted flow.

Yes, the oil market does care where oil comes from, because the political and economic stability of the supplier informs the market about its reliability as a producer. And because there is a world market for oil, supply interruptions anywhere affect the price of oil everywhere. Even if we imported oil only from the most stable countries (or eliminated imports altogether), so long as unstable countries and regions supply the world market, we would be exposed to the risks of a volatile market. It is precisely the economic risk posed by price fluctuations that forces us to spend diplomatic and military capital in oil-producing regions.