Photo via Huffington Post
When the world's biggest oil company reports as massive a drop in profits as 66% in a single quarter, it's time to start paying attention. Exxon Mobil reported that its net profits fell from $11.68 billion (from the same quarter a year ago) to $3.95 billion. The main reason for the sharp decline? You guessed it--the recession has reduced the demand for oil. Remember not so long ago when this very same company reported record high profits at a time when demand was high and prices at the pump were through the roof? Remember when they sent out a fleet of PR personnel to invade the cable news networks, explaining how the record numbers weren't merely the result of increased demand and a higher-priced oil? That it was more due to the fact that Exxon "performed strongly across all divisions" and hence made more money in a single quarter in 2008 than any corporation in US history?
Now we're seeing bright and clear what happens to Exxon when the demand for oil falls--it loses billions of dollars. Here's the company's explanation, via the NY Times:
"Global economic conditions continue to impact the energy industry both in the volatility of commodity prices and reduced demand for products," the company's chairman and chief executive, Rex W. Tillerson, said in a statement.Indeed.
Last year when Exxon was reporting record those record gains, the company was vilified for making such a huge profit while everyone was struggling with the skyrocketing gas prices. This recent drop makes it more clear that we have no one to vilify but ourselves (okay, and Exxon). Here we have a clear example of how consumer behavior influences the oil companies' profit margins, even if that behavior is forced--the recession has people carpooling and taking public transit more, and stopping at the pumps less often.
People--Americans especially--tend to consider petrol as a right, a need (and let me point out that this is not necessarily our own fault: we often grow up in sprawling communities with poor public transit options where the only "realistic" way to get to work or to the deli is to drive). When prices go up, they're left to shake their heads and curse the oil companies or the powers that be, and fill up their tanks in agitated silence. But what this recession highlights--and the hit it's given oil giants like Exxon--is that there's still a consumer choice involved. To not buy gas. Or to not buy as much of it. If gas consumers were to somehow continue their current behavior after the recession ends, Exxon would find itself in a world of trouble. Here's to hoping we take note of our buying power from this example, and stop lending our (willful) support to the biggest oil company in the world.