DEM Rep. Ed Markey: Exxon's 40 billion profit "outlandish & at the expense of the driving public"!

[RiverStone]

Exxon's 'outlandish' earnings spark furor

SHAWN MCCARTHY
From Friday's Globe and Mail
2/2/07

OTTAWA — The world's largest publicly owned oil company announced yesterday the largest corporate profit ever, but news of its near $40-billion (U.S.) windfall in 2006 sparked an angry backlash, coming on the eve of a major report blaming the use of fossil fuels for wreaking devastation on the planet.

Exxon Mobil Corp. was accused yesterday of using some of those unprecedented profits to fund a campaign to create skepticism about the impact of climate change and opposition to policies that would reduce the use of gasoline and other oil products.

U.S. Democrats, who now control Congress, slammed the record profits as "outlandish," and vowed to raise taxes against Exxon and other oil companies in order to fund alternative fuels and technologies to increase energy efficiency.

The Irving, Tex.-base company, which sparked a similar row with a record profit the year before, was clearly prepared for the onslaught from its critics.

In a full-page ad that ran in The New York Times and other major U.S. newspapers yesterday, Exxon said that it reinvests its profits to supply growing energy demand, which it said will climb by 40 per cent by 2030.

Exxon wasn't alone in unprecedented oil earnings. Royal Dutch Shell PLC, an Anglo-Dutch company, and U.S.-run Marathon Oil and Valero Energy, also posted best-ever annual results yesterday. And ConocoPhillips Co., also American, last week posted its highest profits. Profits at the five companies together totalled $91.1-billion -- in a year when drivers paid record prices for gasoline.

Senator Hillary Clinton of New York, a leading candidate for the Democratic presidential nomination in 2008, took direct aim yesterday at the oil companies' gains.

"Instead of lining the pockets of big oil, we need a new direction in energy policy that rewards innovation, creates jobs and reduces our dependence on foreign oil," she said in a statement.

She called for the elimination of "oil company tax breaks," with the additional revenue going to fund biofuels and other clean-energy technologies.

Democratic Congressman Ed Markey, a member of the House of Representatives energy committee, called the record profits "outlandish," saying they came "at the expense of the driving public." He vowed to push for an end to tax incentives passed by the Bush administration aimed at encouraging companies to explore and produce more oil in the United States.

Both Democratic and Republican members of Congress have also urged Exxon to end its funding of organizations that deny the existence of -- or minimize the seriousness of -- human-made global warming.

Scientists yesterday accused the conservative American Enterprise Institute, which receives funding from Exxon, of offering scientists up to $10,000 for articles that undercut a report to be released today from the Intergovernmental Panel on Climate Change, a group of the world's leading scientists who say global warming is human-made and blame it largely on the burning of oil and other fossil fuels.

As a result, they predict more frequent heat waves, droughts and rain storms, as well as more violent typhoons and hurricanes.

The Enterprise Institute, which has received more than $1.6-million, sent letters to scientists, offering to pay for essays that "thoughtfully explore the limitations of climate model outputs," the Guardian news service reported.

Last month, the Union of Concerned Scientists, an environmental lobby group, said that Exxon has spent $16-million over the past 10 years financing organizations that deny the seriousness of climate change.

Alden Meyer, a strategist with the group, compared Exxon's efforts to discredit the science of global warming to the tobacco companies' efforts to sow doubts about the link between smoking and lung cancer in order to protect their profits.

The oil giant has recently acknowledged that human-made global warming is a threat, but continues to resist government action that would impose limits or new costs on oil consumption.

The company defended its $39.5-billion profits yesterday, saying they fuel an expensive and global effort to provide for the world's energy needs.

Company spokesman Kevin Cohen said the earnings were not out of line, given the billions of dollars the company invests around the globe.

"Our revenues are large and they need to be to support the huge investments we make to produce the energy our country and the world needs," he said.

The company's profit margin -- or profit as a percentage of a company's revenue -- was a fairly modest 10 per cent last year, Mr. Cohen said.

"We keep a dime on every dollar of revenue." Last year, those dimes totalled $1,250 each second, $4.5-million each hour, or $108-million each day.

In its newspaper ads, the company says that between 1991 and 2005, it invested more than it had earned in profits in order to find, develop and refine crude oil and natural gas.

Over the past five years, it has invested $82-billion worldwide, nearly a third of it in North America.

In 2006, however, Exxon spent more on buying its own shares on the open market than it did on capital investment.

The company spent $25-billion on its share repurchase plan, which was designed to boost its stock price, while it allocated $19.9-billion for capital investment in 2006. Exxon shares have risen by about 20 per cent in the past year, and yesterday jumped $1 to $75.08 on the New York Stock Exchange as investors reacted to its financial results.

Despite its record results for 2006, the company had a slight downdraft at the end of the year, after concerns about a slowing economy and a warm, early winter drove down crude oil and natural gas prices.

Fadel Gheit, an analyst with Oppenheimer & Company in New York, said Exxon is simply a well-run company that is benefiting from high energy prices.

"It's a very well-managed, tightly controlled company," he said.

Link:

http://www.theglobeandmail.com/servlet/story/RTGAM.20070202.wxexxon02/BNStory/Business/home

[TexasLawyer]

1. Windfall profits tax NOW!