Exxon Rakes in Record $11.6 Billion Quarterly Earnings While Cheering OPEC's Readiness to Cut Production

Virtually the same day that Exxon announced their gangbuster record earnings of $11.66 billion the New York Times ("Exxon sets profit record..." 2/2/08) reported that the Organization of Petroleum Exporting Countries (OPEC), having held production levels fast this month, signaled it would be ready to cut production when it meets next month to make up for a seasonal slowdown. "OPEC's actions mean the cartel is determined to keep prices from falling below $80."

Clearly OPEC is Exxon's greatest ally. It has been OPEC's collusionary cuts in oil production that permitted the price of oil to skyrocket. According to a newly awakened New York Times "from a low of around $50 barrel in early 2007 to near $100 barrel by the end of the year -- the biggest jump in oil prices in any one year" (in case you are counting, that $50/bbl difference annualized represents a transfer of wealth from American consumer pocketbooks to oil interests of some $350 billion, or the combined annual budgets for the Army, Air Force, Navy and Marine Corps). The Times finally and for the first time, is laying out the full dimension of the OPEC orchestrated increases, calling it the way it is as this post has done since inception.

Without the OPEC cartel rigging the market Exxon's windfall would not have been possible. President Bush and our Energy Secretary Bodman during their recent visit to Saudi Arabia, the putative leader of the OPEC cartel, pleaded with the Saudis to have their cabal increase production levels. Their pleadings were humiliatingly dismissed out of hand. Certainly Exxon must be cheering in the wings and lobbying to have the president continue his inane threat to veto any legislation that would remove the national sovereignty exemption that makes it impossible to sue OPEC and its national oil companies, such as the Saudi oil entity Aramco, in American courts for restraint of trade and collusion among oil producers. It is the kind of legal action that would be forcefully pursued by our Justice Department against any commercial entity/entities that acted in a manner comparable to that of OPEC and its national oil companies. But that's a long and disheartening story (Please see "Oil: A Defining Moment for Our Political Class and the Press," 07/09/07)

The Exxon earnings are not only obscene they are an outrage in that these are not profits that are earned in a competitive marketplace but simply by tailgating OPEC's manipulation. Exxon barely lifted a finger to earn its additional billions other than go along with prices that were the result of collusion by a cartel, and hardly a reflection of a free and unfettered international marketplace. The oil industry apologists are already lining up. To quote one of the spokesmen for the chief peak oil prankster, and cheerleader for ever higher oil prices, Matt Simmons, "A lot of these larger companies are challenged to grow production. That's one of the reasons that oil prices aren't necessarily expensive at $90 a barrel..." Much like Willy Sutton saying he has to hold up another bank because he needs a new getaway car.

At least one candidate was moved to opine on Exxon's earnings. Barack Obama said Exxon's profits were a sign that the U.S. economy is "out of balance". With that observation he will have in all probability kissed the moneyed oil lobbying kitty goodbye.

With distortions such as these lifted from the pocketbooks of all Americans, where are the tough questions and answers asked of the candidates as to how we as a nation are truly going to come to grips with this issue before we transfer all our wealth to the oil companies and our good friends in Saudi Arabia? (For some questions that might be considered please see "In 2008: A Few Questions On Energy For The Candidate," 12.31.07).

Comments

[bullseye]

When will we get our belly full of this bs. If Obama has the will power and is realy willing to stand up to these powerful oil gluttens, then we should back him. Its aweful how they have taken over this country, Bush, Cheney, Hell A Burton Exxon and the rest. We need to fight back and make a stand. It doesn't do any good to mumble to ourselves as we are filling our vehicle and paying these rediculious prices that are also responsible for contributing to the recession.

[BBackSoon]

Are we still filling the Strategic Petroleum Reserve? Are we not paying Market Price for this oil? Isn’t that a major influence in current price? Maybe not the only influence but if you know that there will be so many thousand gallons of crude pumped into the ground for later it takes that much off of the Open Market. (You have to know how hard that was for me to type.)

[doodlefarbe]

In case anyone cares; to address several points of confusion seen in various posts.

- CITGO and OPEC. Purchasing gasoline from CITGO will not avoid OPEC. Venezuela is a charter member of OPEC (along with Iran, Iraq, Kuwait and Saudi Arabia).

- No, the United States is not a member of OPEC. There are a several other member states, coming to mind are the UAE, Ecuador, Nigeria, Indonesia; but not the U.S.

- Those complaining that E-M should share some of its record profits by paying taxes should be aware that taxes are pre-profit. And yes, E-M pays taxes. In SEC filings, it reports an income tax rate of around 40%.

(E-M's profit margin, by the way, it around 10%. Much worse than, say, Krogers (grocery chain) or Procter & Gamble, which report profit margins around 15-20%. But for an oil company, 10% is indeed a high profit margin).

[wcfar]

That's an interesting point about CITCO (CITGO), I did not know that. I'll use them whenever I can. Thank you for the post. Just one other note for thought. Why, when I drive by most of the stations in my area are they all parroting each other on price? If one station has $2.88 the others do too. How do they stay up with each other? A gas war would be nice I think but somehow they all seem to be on the same channel. On priciple I think I'll try CITCO (CITGO) as I said and I'm going to watch more closely what they do with their prices. The idea of oil from another source other than one that involves the Saudis is quite attractive though.

[ajax2]

If you don't understand that Bush, Exxon, Shell, Chevron, et al are OPEC than you could be confused.

[wrabbitt]

The sad part is that oil lobbyists have much more money to pass around to make sure things don't change. And the record profits don't change the fact that our government has helped the oil companys rape and plunder the american taxpayer. We are being held hostage by our greedy politicians and big oil ,big drug, and health insurance carriers, And our government encourages this, by taking bribe money from lobbyists. and calling it campaign donations. Until this practice ends be prepared to get 5$ a gallon gas.

[KarenZipdrive]

I stopped using Exxon/Mobil gasoline and products years ago.
If you really want to make a dent in OPEC-based gas stations, gas up at CITGO. All their petroleum comes from Venezuela.

[ptarantino]

What's Exxon's stock symbol:

Oink Oink Oink

[ReasonIsMyReligion]

RJL,

Thanks for yet another excellent post. I don't say so often enough.

Best,

[RJAP]

Exxon/Mobil will forever be the whipping boy of the media. I see nothing wrong with their profits. In case u have forgotten, companies are in business to make a profit and the size of the profit, should never be TOO MUCH, as long as they pay their share of taxes.

[kingcityguru]

Great news! The more profit in drilling and producing oil the more of it will occur.

Increase taxes and regulation oil production and you will get less of it resulting in higher prices. How's Venezuela's production been going since they increased taxes and took over private operations -- down, down, down.

[LeRoyHolt]

NATIONALIZE THE OIL INDUSTRY..­..

If this industry will not suppliant their greed in a time of war .. for the good of the nation... then the custodians of our NATIONAL resource should be removed from the position of TRUST.

They should be leading the way out of recession instead of gouging their way to infamy... The cost of every consumer product has risen, driven by the price of oil.... As a group... DICK cheney first, they should be tarred and feathered.­.. and rode to the border on a rail.... expelled from the country...­..