A company that I own stock in announced record profits Friday that could signal the most prosperous stretch in its 125-year history.
And that really ticks me off.
Don’t get me wrong – I have no problem that ChevronTexaco, of which I own 100 shares, is making money. The company recently bumped its dividend and announced a 2-for-1 stock split.
Those are good things.
What angers me is how they’re doing it and what I believe is a lack of honesty about the whole thing.
Let me be clear on this. I think the oil companies are ripping us off. Not in the legal, criminal sense, but in the sense that they’re grabbing as much money out of our pockets as they can while the grabbing is good.
This isn’t a unique thought. I’m guessing most people feel this way.
Every time there’s an especially delicate political situation in the Middle East, gas prices go crazy and oil company profits shoot way up. Typically, there’s a congressional hearing on the matter. And typically, the oil companies say something similar to what the American Petroleum Institute told Congress in July.
What it said is that there is increasing world demand for oil, pushing crude prices to record levels. That is coupled with the fact that there are not enough refineries in the United States to handle domestic demand.
Things are further complicated, the institute said, by federal and state environmental regulations that require cleaner-burning fuels, which are even harder to find.
“Instead of engaging in a fruitless search for quick-fix ‘solutions,’ or even worse, taking action that could be harmful, we urge Congress, the administration and the motoring public to exercise continued patience with the free-market system,” the institute stated in its written testimony to Congress. “The nation’s refiners are working hard to meet rising demand while complying with extensive regulatory controls that affect both our facilities and the products we manufacture.”
I don’t doubt that these reasons are accurate. I’m just tired of hearing about them year after year after year. The industry has been saying for a long time that there just isn’t enough refining capacity to meet demand, creating shortages and higher prices.
Instead of building more refineries, the industry is shutting down capacity. Right now, there are 149 refineries in 33 states handling about 16.8 million barrels a day. More than 20 years ago, there were 325 refineries in the United States, handling 18.6 million barrels a day.
So we’ve cut down on the gasoline we can produce, while the amount we need has increased dramatically.
This creates a scenario where oil companies make record profits whenever they have a good excuse to raise prices. Those big profits in turn provide very little incentive to boost refining capacity. In fact, the opposite is true.
I don’t mean to single out ChevronTexaco, but I mention it because I own shares of the company’s stock and if I’m going to comment on gasoline prices, it’s only fair for me to tell you that.
The company announced Friday that its second-quarter profits more than doubled this year over last, meaning it earned $4.13 billion during the last three months, its largest profit since it was formed in 1879.
“I am very pleased with our performance,” ChevronTexaco Chairman Dave O’Reilly said.
ExxonMobil Corp., the world’s largest publicly traded oil company, posted record second-quarter profits of $5.79 billion. And the Royal Dutch/Shell Group of companies saw its earnings rise 54 percent, thanks to higher prices for oil and natural gas.
In a story on these earnings, the Associated Press quoted Fadel Gheit, an analyst for Oppenheimer &Co. “They are clicking on all cylinders,” Gheit said “Refining (profit) margins are the best in almost 15 years, oil prices are at record highs, and gas prices are near records. It doesn’t get any better than this.”
Mike the shareholder agrees with Gheit, but Mike the consumer doesn’t like this one bit.
My suggestion to ChevronTexaco’s O’Reilly is this: Dave, take a small hunk of that $4.13 billion and build a few refineries. The excuse that prices are skyrocketing because we just can’t meet the insatiable demand is getting pretty lame, especially since nobody appears to be doing anything about it.
Mike Benbow: 425-339-3459; benbow@heraldnet.com.
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