By
R. Warren Anderson
October 27, 2005 - 2:00pm
Katie Couric said that one mans pain is another mans pleasure, and the report that followed accused oil companies of subjecting consumers to pain at the gas pump while enjoying their own profit pleasure. Anne Thompson stated that while American consumers have suffered through months of record high gas prices, the oil companies have hit a gusher. She later said news of these gargantuan numbers is sure to ignite the debate over how much is too much in a time of crisis.
Companies profits vary greatly from one quarter to the next; it is part of the business cycle. Americas free market allows businesses to prosper as well as they are able, without the government or any other body dictating when a company has made too much. And not all profits remain with the company for example, Exxon Mobil Corp. shares profits with more than 2.5 million individual shareholders, in addition to institutional shareholders. According to Exxon Mobils web site [1], in 2004 Exxon returned nearly $15 billion to shareholders in dividends and share buybacks. Thats quite a different picture than the one Thompson painted of a centralized corporation hoarding profits.
Thompson also didnt mention that an increase of profits will increase supply, which will in turn decrease prices. As of October 27, the price of gasoline had fallen every business day since October 6, dropping 37 cents per gallon in that time span to 3 cents lower than when Hurricane Katrina struck.
To strengthen her sentiments, Thompson interviewed Jamie Court from the Foundation for Taxpayer and Consumer Rights, who accused oil companies of manipulating the oil supply to make money. She identified Court as a consumer advocate, without detailing the anti-industry position of his organization. The Foundations Web site, which calls for a government-mandated freeze on gas prices, claims that Neither ExxonMobil nor the industry has opened a new refinery since 1976 because the companies know keeping refined supply low is a recipe for huge profits. If the White House and Congress don't act to force ExxonMobil to invest in refining capacity after Katrina's lessons, the public might as well clean out that tank and refill it with new blood.
Court repeated that accusation on Today, saying that an industry like the oil industry knows that if it just has bare minimum to meet demand, that any shock to the system will drive their prices and their profits up. Today did not mention anything about the group or what exactly they advocate and Thompson didnt allow an oil company spokesman to answer the charge.
Following Courts views, Thompson failed to explain why oil companies have not built new refineries recently. She said only that the plants that turn oil into gasoline and heating fuel have a huge public relations problem. Oil companies cant expand readily and build more refineries due to governmental restraints that add to construction costs. The industry has spent more than $47 billion to comply with environmental regulations over the past 10 years.
Ted Robbins of National Public Radio could have filled in some background for Thompson. He did a story in June [2]on Arizona Clean Fuels, the company trying to build the first refinery in the United States since 1976. The CEO, Glenn McGinnis, stated that its pollution will be less than half of the best refinery in the world today on a per barrel basis. Despite that fact, Arizona Clean Fuels had to wait five years to get air quality permits [3]. Robbins also interviewed Larry Goldstein of the Petroleum Industry Research Foundation. Robbins quoted Goldstein as stating that theres not much oil money left to invest, thats because intense competition and slim profit margins have forced a lot of small refiners out of business. And the remaining larger refiners have a lot of debt.
Thompson didnt mention any of those issues facing refineries, although she interviewed Gary Ross, the CEO of PIRA Energy Group, a global energy consulting firm. He said that nobody wants a refinery in their backyard.