An Analysis of Oil Industry Profits and Behavior

If one thing was made very clear by the actions of big oil in the summer and fall of 2005, it was that they have succeeded in making themselves alot of money.�¯�¿�½ Billions of dollars.�¯�¿�½ Exxon Mobil by itself made almost 10 billion in the third quarter, the most by any corporation in any industry in all of history.�¯�¿�½ The other major oil companies were not far behind.�¯�¿�½�¯�¿�½

Why then?Ã?¯Ã?¿Ã?½ WhyÃ?¯Ã?¿Ã?½were profits so huge in the third quarter?Ã?¯Ã?¿Ã?½ Was it because there was suddenly a leap forward in the production process that meant it cost less toÃ?¯Ã?¿Ã?½produce it?Ã?¯Ã?¿Ã?½ Was it because they sold alot more of it?Ã?¯Ã?¿Ã?½ Or was it because they took advantage of short term shortages caused by supply disruption to ramrod the prices as high as they could?Ã?¯Ã?¿Ã?½ IÃ?¯Ã?¿Ã?½am leaning toward the latter.Ã?¯Ã?¿Ã?½ They saw an opportunity to makeÃ?¯Ã?¿Ã?½truckloads of money with little chance of repercussions.Ã?¯Ã?¿Ã?½ “What the market will bear”Ã?¯Ã?¿Ã?½ as they say.Ã?¯Ã?¿Ã?½Ã?¯Ã?¿Ã?½Ã?¯Ã?¿Ã?½

Why did they do this?�¯�¿�½ Because they could.�¯�¿�½ Oil industry CEOs are no different than tobacco or drug company or retail CEOs.�¯�¿�½ They will jump on an opportunity to up profits, no matter who it hurts.�¯�¿�½ The only concern that moderates them is the fear of public backlash that might cause a loss of market share.�¯�¿�½ So big tobacco tells us how to quit smoking, drug companies tell us how they are saving the world, and oil companies tell us how they are making the planet more green.�¯�¿�½ Marketing, marketing, marketing.�¯�¿�½ Oil has carefully made the petrol world what it is, so profits could be maximized.�¯�¿�½ They decry the refinery situation, saying there are not enough to keep up with demand, so prices must go up.�¯�¿�½ Yet they have closed or reduced refineries.�¯�¿�½ They say that their enormous profits are required in order to be able to invest in the future.�¯�¿�½ So put it into research, not CEO take home pay.�¯�¿�½ They have successfully built a distribution system that keeps supplies tight.�¯�¿�½ They know that oil is a declining commodity, so they want to make as much as they can on each drop.�¯�¿�½ In the past they have been more discreet, keeping profits high, but not high enough to send out alarms or cause radical changes in the marketplace.�¯�¿�½�¯�¿�½
They may have over reached that threshold in the third quarter.�¯�¿�½ People may finally realize that we need to change our energy paradigm now.�¯�¿�½�¯�¿�½

We need to start thinking about other ways to get around, and to heat our homes.�¯�¿�½ The road will not be easy, but not taking it would be disastrous.�¯�¿�½ Alternative energy now needs to be our goal.�¯�¿�½ And we need to regulate the oil industry more.�¯�¿�½ The entire industry should be regulated in much the same way as utilities currently are.�¯�¿�½ Price increases would have to be approved, and profit margins not allowed to become outrageous.�¯�¿�½ It is an important commodity for National Security and should be regulated as such.�¯�¿�½ After all, if we are willing to go to war to protect our supplies, we should be willing to take steps at home to make sure there is no price gouging.�¯�¿�½�¯�¿�½

President Bush told us we need to be concerned about the “Axis of Evil.”Ã?¯Ã?¿Ã?½ He was talking about Iraq, Iran, and North Korea.Ã?¯Ã?¿Ã?½ At the risk of making an over-simplified comparison, perhaps we should also be concerned with Exxon, Chevron, and Shell (and the others too).