WEBCommentary Guest

Author: Alan Caruba
Date:  February 3, 2006

Topic category:  Other/General

Exxon Mobil Comes Clean!

I’m shocked! Shocked! Apparently, Exxon Mobil is making a profit on the sale of oil. Moreover, this energy company is telling anyone who’s interested all about it. In fact, on January 31, news of their profits was the big story of the day. I did notice, however, there was no mention of the billions federal and state governments received in tax revenue on gasoline.

I’m shocked! Shocked! Apparently, Exxon Mobil is making a profit on the sale of oil. Moreover, this energy company is telling anyone who’s interested all about it. In fact, on January 31, news of their profits was the big story of the day. I did notice, however, there was no mention of the billions federal and state governments received in tax revenue on gasoline.

The Tax Foundation studied this profit-versus-taxes situation and concluded that, over the last 27 years, gasoline taxes took $1.34 trillion out of the pockets of consumers, noting that this is more than twice the total profits of all oil companies during the same period.

Recently, ExxonMobil published a “backgrounder on oil company earnings and prices.” They sent it to the media in what was probably a vain attempt to insert some reality into the reporting.

I received the backgrounder because I write about energy topics. According to the report, “The oil and gas industry earned 8.2 cents for each dollar of sales in the third quarter of 2005, which is slightly more than the average of 6.8 cents per dollar for U.S. industry. ExxonMobil earned nearly 10 cents per dollar.”

The nerve of these people, earning 10 cents per dollar! Oh, wait. It turns out that pharmaceutical companies earned 18.5 cents per dollar of revenue; banks earned 18.0 cents on the dollar, and household and personal products earned 11.4 cents.

What’s wrong with this picture? I thought ExxonMobil and all the rest of the “Big Oil” companies were supposed to be gauging John Q. Consumer and making great pots of money.

It turns out that it costs a lot of money to get that oil from a big hole in the ground or deep under the ocean to your car’s gas tank. “The cost of crude oil makes up about half the cost of every gallon of gasoline,” notes the backgrounder, adding, “That money goes to those who supply it; mainly governments of oil producing countries.”

That’s true, but left unsaid is the fact that ExxonMobil and other oil companies must deal with some of the world’s most infamous dictators, starting with the Saudi Royal Family. Most places where oil is to be found also come complete with some of the nastiest people on planet Earth. There’s Muammar al-Qaddafi in Libya, Omar al-Bashir in the Sudan, Hugo Chavez in Venezuela, and who-knows-who in Nigeria. Let’s not forget Seyed Ali Khamane’I, the ayatollah running Iran and the Russians aren’t exactly choirboys either.

Frankly, I don’t give much thought to these people when I pull into my local gas station and grandly say, “fill’er up!” Today in the U.S., there are some 165,000 service stations and ExxonMobil owns and operates less than 1,000 of them. Even if it wanted to, it could not control the market price of gasoline.

Before ExxonMobil gets to total up its profits, it must first pay state and federal taxes that account for 46 cents per gallon. To put it another way, as of January 2006, governments took 20% of the current price. Then there’s the 20-30% ExxonMobil must spend for refining, transportation, and marketing.

ExxonMobil isn’t the only oil company grappling with what is currently seen as a point at which most of the world’s oil reserves have been tapped and any new ones are going to be more costly to extract. Royal Dutch Shell also just announced record profits. On January 25, Jeroen Van der Veer, its chief executive, was published in London’s Financial Times asking, “But where are we going to find this energy? My view is that ‘easy’ oil has probably passed its peak. In unconventional oil and gas—resources that are harder to tap—there are plenty of reserves.” Hey! That’s good news, isn’t it?

Well, yes and no. According to Edward G. Galente, an ExxonMobil senior vice president,  “Today, world energy use from all fuel sources is the equivalent of 230 million barrels of oil every day. “ Of that, ExxonMobil’s share “is only about 4 million equivalent barrels.” That’s still a lot of oil, but “it represents just about 1.8 percent” of the world’s appetite.

Oil is going to cost more in the years ahead. It doesn’t matter who you buy it from. Hurricane Katrina and Rita drove up the price briefly when it knocked refineries in Texas and Louisiana offline and impacted oil rigs in the Gulf of Mexico. It’s called supply and demand.

If you have a really good crystal ball, consider scenarios that lead to a Middle Eastern conflict with, oh say, Iran? Then there’s that fellow, Hugo Chavez, the president of Venezuela who hates the United States. And, well, just a whole lot of problems everywhere can drive up the price.

There’s the real world and then there’s the Hollywood version or even the mainstream news media version. Oil companies are always the villains in the latter versions. These are the “progressive” folks who need villains to blame for the ills of the world, but they rarely give that much thought when they fill up their gas tank, heat their homes and offices, and benefit from the work of energy company people who make it happen.

The world is not running out of oil. It is running out of oil that is easy to access and extract. The U.S. uses a huge amount of energy, but it is not taking the steps necessary to grant access to oil reserves in Alaska and offshore. The shale oil deposits we have are going to cost a lot of money to access and refine. You better hope that ExxonMobil and all the others in the energy business make enough money to do that.

Alan Caruba
National Anxiety Center

Biography - Alan Caruba

Alan Caruba passed on June 15, 2015. His keen wit, intellect, and desire to see that "right" be done will be missed by all who his life touched. His archives will remain available online at this site.

Alan Caruba was the founder of The National Anxiety Center, a clearinghouse for information about media-driven scare campaigns designed to influence public opinion and policy. A veteran public relations counselor and professional writer, Caruba emerged as a conservative voice through his weekly column, "Warning Signs", posted on the Center's Internet site (www.anxietycenter.com) and widely excerpted on leading sites including this one.

A member of the Society of Professional Journalists, the American Society of Journalists and Authors, and a charter member of the National Book Critics Circle, Caruba applied a wide-ranging knowledge of business, science, history and other topics to his examination of issues that included protecting our national sovereignty, environment and immigration, education and international affairs.

Caruba resided in New Jersey and had served in the US Army, had been an advisor to corporations, trade associations, universities, and others who used his public relations skills for many years. He maintained a business site at www.caruba.com.

Caruba performed many reviews of both fiction and non-fiction at Bookviews.Com, a popular site for news about books of merit that do not necessarily make it to the mainstream bestseller lists.

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