Saturday, February 02, 2008


Record profits, record prices, the déjà vu edition

Capitalism and anniversaries have both been topics in this week’s entries. So it seems fitting to put them together and to note that I posted two years ago almost to the day about Exxon Mobil, saying that they “reported profits from 2005 of over USD 36 billion, the largest annual profit ever reported by a US company.”

Well, plus ça change, plus c’est la même chose, and I could be posting the same text today with just a bit of alteration to the numbers (upward, of course). From yesterday’s New York Times:

By any measure, Exxon Mobil’s performance last year was a blowout.

The company reported Friday that it beat its own record for the highest profits ever recorded by any company, with net income rising 3 percent to $40.6 billion, thanks to surging oil prices. The company’s sales, more than $404 billion, exceeded the gross domestic product of 120 countries.

Two years ago, gasoline prices had barely hit $3/gallon before settling back down 20 or 30 cents lower than that. Today they’re up around $3.50/gallon in New York, crude oil prices are at a level no one ever expected, and I’m paying nearly four figures for a delivery of heating oil for my house.

Too bad I don’t work for one of the oil companies, though:

Oil companies have all reported strong profits in recent days. Chevron, the second-largest American oil company, said Friday that its profits rose 9 percent to $18.7 billion last year; Royal Dutch Shell on Thursday reported net income for 2007 of $31 billion, up 23 percent and the largest figure ever for a British company.

Of course, I’m not the only one complaining about this. “But,” you say, “what can we do about it? It’s a free market, after all, and we can’t stop them from making profits.” And if you say that, maybe you’re not aware of how much support they’re getting from the government:

One advocacy group, the Foundation for Taxpayer and Consumer Rights, called the profits “unjustifiable.” Some politicians said Congress should rescind the tax breaks awarded two years ago to encourage oil companies to boost their investments in the United States and increase domestic production.
You can bet that if an industry is raking in record profits like this, quarter after quarter, year after year... there’s a tax break behind it somewhere, yes, indeed.

There’s also some point at which we have to balance our objection to price regulation against a need to provide necessary goods at a fair price. Gasoline and heating oil aren’t luxuries; people can’t just refuse to buy them when the prices go up. In some areas we can rely more on public transportation, and we can do other things to reduce our consumption, but on the whole, the supply-and-demand thing doesn’t work the same here as it does for other sorts of consumer goods.

It just doesn’t make sense to accept continued increases in prices in the face of these continued increases in company profits.

1 comment:

The Ridger, FCD said...

How much profit does a company need to make, anyway? At some point, a halt needs to be called, especially on things like heating oil.