Wednesday, November 09, 2005

Big Oil Really, Really, Doesn't Want To Talk About Those Big Profits

A while ago I mentioned ( here and here) that Big Oil didn't really want to explain the Big Profits, and that the amount of profit *increase* was phenomenal (in one case, the *increase* in profits over the prior year was 86%).

Many people were willing to cut ‘em a little slack, since Hurricane Katrina had waltzed through the Gulf, and put wells and refineries off line when the crews got evacuated. But then it was noted that the prices had started going up *before* the storm hit, and that the prices were being applied to gasoline stocks that were *already* in the pipelines, and on trucks, and in service station tanks.

The answer *then* was that the prices at the pump were “paying the higher price for the next delivery.”

Then the story was that the prices were so high because there was insufficient refining capacity, in general, and tried to say leave the impression that they didn’t build more refineries (or upgrade what they had) because of Big Bad Government Regulation and/or The Evil Environmentalists . This seemed a little, shall we say, disingenuous, as the industry itself had demonstrated that they had no desire to either add to, or upgrade, refining capacity, because the classic scarcity-of-product = high-profit (otherwise knows as “all the market will bear, and then some”). (It also had a somewhat familiar sound to those who remember that one of the reasons that energy companies in California, Washington State and Oregon gave for *their* record high prices was supposed government regulation and environmentalists blocking new power plant construction. And, of course, there was no proof to the rumors that plants were being shut down on purpose to short supplies or, or. Hmmm. Let me get back to you on that, I have a memo from Ken Lay explaining all that….)

Soon after, the prices at the pump hit highs (at least in the US) that I don’t recall seeing since the Great Oil Embargo (the highest I saw at one station here was $3.93/gal).

But this must be the Season of Harry Potter. because soon after the voters started complaining loudly about the high costs, and even though two more big storms swept through the Gulf, the prices at the pump, following laws of economics that that must be something taught in advanced classes at Hogwarts, the prices started to drop at the pumps. Even though those next deliveries were supposed to be so expensive.

The cynic here thinks it more mundane, along the lines of “look, I appreciate all the campaign contributions you give the party, but I’ve got all these pesky *voters* ringing my phone off the hook, and my e-mail box is choking, you really should know that some of these folks think you, (and I really don’t believe it for a minute) are taking advantage of people who don’t have a choice.

"Now, neither you nor I want to see that darn Windfall Profits tax back, now do we? So, why don’t you go and shake those spreadsheets, and see if you can find a “technical market correction” or something like that, OK?”

Well, even though the prices at the pump are starting to come down (see the AAA index here), it’s still a mystery if the prices for home heating oil, a major concern here in New England, will be affordable or a backbreaker.

However, “Big Oil” found itself in the public eye again this morning (Wednesday 11/09/05) as hearings are being held before Congress about the high profits the companies have been seeing. And, to keep things in a little perspective, bear in mind the numbers quoted below from an LA Times story, are *quarterly* profits, not annual.

In a move that, I think, is going to give as much fodder to Democratic advertising spots in the coming mid-term election cycle as one of Delay’s former aides calling the Christian base “whacko,” was the refusal of the Republicans to have the oil executives give testimony under oath....

More can be found Under The Fold

Some video from the hearings can be found at Crooks and Liars.

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