Photo: Steve Snodgrass via Flickr/CC BY
The 'Big Five' oil companies -- the ones we all know and love; Exxon, Shell, BP, ConocoPhillips, and Chevron -- have all released their first quarter profit reports. And wouldn't you know it, they all did pretty well. Averaged out, their profits were up 42% from last year. Exxon lead the pack -- as it tends to do -- with a rather astonishing $10.7 billion in quarterly earnings. But let's not take away their multi-billion dollar annual subsidies -- that would surely ruin them:Yes, the oil companies, and the politicians who love them, are balking at even slashing a modest $4 billion of their yearly subsidies. Speaker of the House John Boehner even admitted in an off-the-cuff remark to a CBS interviewer that some of the subsidies didn't make sense -- but he quickly walked back the comment.
So, to put into perspective the massive scale of these profits, we turn to Dan Froomkin, who notes that between the Big Five, $34 billion in profits were counted:
That's about $110 for every man, woman, and child in the United States -- in just three months.Exxon alone cleared a cool $10.7 billion profit from January through March, up 69 percent from 2010. That's $82,175 a minute. Why the staggering increase in earnings? Precisely because you're paying $4 a gallon for gas.So what's the deal with the massive gap? Besides being a glaring reminder that oil is still one of the most profitable industries on the planet, prices have risen due to a number of factors: Unrest in the Middle East, and fears that there won't be a stable supply of oil have helped ratchet up prices. But so too has speculation -- traders who realize that prices are likely to continue to rise are betting on the commodity, and causing, yes, prices to rise further. In some cases, this over-inflates the price.
Gas prices shoot up when oil prices shoot up, and when oil prices shoot up for reasons that have nothing to do with how much it costs to bring it out of the ground, it's a windfall for the folks who produce it. The average cost to produce a barrel of oil, including exploration, development, extraction and taxes, is about $30, according to a U.S. Energy Information Administration survey. The going rate to buy one is about $113.
Either way, it's high times for the oil industry -- but it makes life miserable for the low income and middle class families that drive to work every day. And if you look at this picture -- oil companies making $80 profit per barrel of oil they sell (and the US consumes 21,000,000 barrels per day) -- it's hard, no, impossible, to argue that the only reason we pay too much at the pump is that Obama isn't allowing enough offshore drilling. The notion that drilling for oil would lower gas prices has been thoroughly debunked, but this is another way of looking at it.
To anyone intent on blowing the bullhorn for more drilling, I'd say this: take a long hard look at the bottom line of some of the most profitable industries in the world.
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