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Friday, May 09, 2008

Big old cuddly Big Oil
Posted by Jill | 6:19 AM
Yes, my friends (/McCain), despite the huge profits made by oil companies in the first quarter, the fact that you're paying almost four bucks a gallon for gasoline isn't at all they're fault. No sirree, they are victims just as much as you are:

The American Petroleum Institute, the industry's main lobby, has embarked on a multiyear, multimedia, multimillion-dollar campaign, which includes advertising in the nation's largest newspapers, news conferences in many state capitals and trips for bloggers out to drilling platforms at sea.

The intended audience is elected officials and the public, with an emphasis on the latter. The industry is trying to convince voters -- who, in turn, will make the case to their members of Congress -- that rising energy prices are not the producers' fault and that government efforts to punish the industry, especially with higher taxes, would only make pricing problems worse.

"We decided that if we didn't do something to help people understand the basics of our industry, we'd be on the losing end as far as the eye could see," said Red Cavaney, the institute's president.

Despite the efforts, Democratic congressional leaders this week again proposed an energy plan that would strip oil companies of billions of dollars of tax breaks and impose a tax on windfall profits. Also, the Democratic presidential candidates routinely pronounce "big oil" as if it were a one-word epithet, said former Oklahoma senator Don Nickles, an energy lobbyist.

Still, the oil lobby thinks it has made significant progress with consumers and will make even more as it continues to spend heavily on public relations. Allied industry groups such as coal and natural gas are also increasing their efforts to curry favor with the public, hoping to improve citizens' sometimes poor opinion of them.



Oil company profits have soared lately, bolstered by record crude oil prices. This month, Exxon Mobil reported a first-quarter profit of $10.89 billion, up 17 percent from a year ago, which provoked new congressional complaints. Shell and BP also posted sharp quarterly profit increases. Gasoline prices, meanwhile, have risen to a national record of nearly $3.65 a gallon, and crude oil has hit a new peak of nearly $124 a barrel.

Cavaney will not disclose how much his institute is spending on its campaign, except to say that it is less than $100 million a year, which was roughly the size of the "Got Milk?" ad blitz that featured famous people with milk mustaches.

The price tag for issue-oriented campaigns that lobbies routinely sponsor is huge, said Bill Replogle, an advertising executive at Qorvis Communications.

"A typical issues ad-spend in D.C. might be $2 million to $3 million for a significant campaign," he said. "This dwarfs that, and many national ad buys."

The oil and gas industry has long been considered a powerhouse in Washington, thanks to its big spending inside the Beltway and quietly extensive ties to influential lawmakers from the oil patch. The industry is the third-largest campaign contributor among major industry groups and the fourth-largest buyer of lobbying services, according to the nonpartisan CQ MoneyLine.



If in fact the oil lobby has made "significant progress" with consumers, then Americans really are idiots, and it's no wonder we're in this mess. Note that the article doesn't say that oil company REVENUES have soared, it's PROFITS. But no, they are hapless victims of forces beyond their control.

If we're going to do anything about the energy crisis (and despite the fact that we aren't waiting in line for gasoline, we ARE in a crisis) during the very small window that remains, we're going to have to realize that NO ONE is a hapless victim here. Petroleum companies and the speculators who drive up the price even more quickly than supplies would indicate are obvious villains, but everyone who has spent the last ten years driving a gas-guzzler, every developer who built sprawling developments of air-conditioned houses in blisteringly hot sections of the country, a government that has stripped away most incentives for alternative energy (starting with Ronald Reagan), the United States Supreme Court for naming an oil man to the White House instead of the global warming-aware actual winner of the 2000 election -- are all to blame.

And if we as a country are going to fall for the claims the oil companies are making in their advertising, then we deserve the bleak world we're facing when the taps dry up.

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Blogger Jayhawk said...
If I pay $10 for raw materials and sell it for $11, I am making a 10% profit and making a living.

If my material costs go up to $100 amd I raise my price accordingly to $110, I am still making 10% profit, but now I am making outrageous revenues and outrageous profits and am an outrageous thief.

This whole thing is oversimplified and there is no easy way to evaluate it. But most of the oil that comes out of the ground is controlled by states, not companies, and the price of that oil is controlled by commodity exchanges.

So the oil companies are the easy scapegoats and, while they are not free of any taint, they are not at all the bad actors the media is painting them to be.
5/9/08, 1:56 PM  
Anonymous Anonymous said...
I don't see why we need to have tax breaks for oil companies. The price of oil has risen more than 50fold since US onshore production peaked in 1971 (and no that number is NOT a misprint). That's plenty of incentive to explore for new oil without digging into the taxpayers' pockets.

Ideally more taxes on oil would be directed into a "lockbox" trustfund that could only be used for research and development of the renewable energy resources we need to keep our economy functioning as our oil supply continues to dwindle, as well as for projects like mass transit systems that could reduce our ongoing energy expenditures. A "postpartisan" way to look at things would be to understand that our oil can only be burnt once and we had better start preparing for the time when it is gone, rather than attacking the oil companies as being "bad." It is all about national economic survival, not about who does or does not "deserve" to make money, a debate that the liberals will have difficulty winning while the "free market" ideology remains ascendant.
5/9/08, 9:51 PM  
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