October 28, 2005

In face of soaring gas prices, Oil giants post record profits

By most familiar comparisons, the $9.92 billion profit earned by Exxon Mobil Corp. in just three months is almost unimaginable. It would cover all Social Security benefit payments for three months. It would pay for an Ivy League education for about 60,000 kids. It would pay the average list price for more than 160 Boeing 737s. It would fund the military operations in Iraq and Afghanistan for more than two months.

Yet oil industry representatives and Exxon Mobil yesterday made a game effort to cast the record profit, earned during a quarter in which the Gulf Coast was shattered by hurricanes and gas prices rose well above $3 a gallon, as middling at best.
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On Tuesday, ExxonMobil, the world's largest publicly-traded oil company, announced net income of $9.9 billion for the most recent quarter, eclipsing analyst expectations and dwarfing the $5.68 billion reported for the same quarter a year ago. It was the largest quarterly profit ever for a U.S. company.

ExxonMobil wasn't alone. Royal Dutch Shell said today that profits grew 68 percent, to $9.03 billion, last quarter. Earlier in the week, BP announced profits at 34 percent above last year's levels, and ConocoPhillips saw revenue jump 43 percent.

The reason? High gas prices.

"The recent hurricanes in the U.S. have impacted our results. However, underlying performance is strong, amplified by high but volatile prices of oil, gas and products," BP Chief Executive Lord Browne said in a statement announcing the company's performance.

Despite temporary interruptions to refinery and delivery operations after Hurricanes Katrina and Rita ravaged the Gulf Coast, an accompanying surge in prices at the pump allowed oil companies to bolster their earnings.

"What might have been lost in terms of production and refining capacity was more than made up for by the hurricanes driving oil prices up a couple dollars a barrel," said John Parry, an analyst with John S. Herold.

The oil giants' windfall is a stark contrast to the ugly scenes around U.S. gas stations in September — hours-long lines of drivers desperate to fill up, despite prices that often topped $3 per gallon. Some politicians are questioning why oil companies profited so much while consumers struggled to fill their tanks.

Isn't the free market beautiful? It couldn't be clearer. Gas prices go up, you fork over more hard earned dollars, it goes directly from your pocket to the oil company's bottom line. No shortage of refinery capacity, or any of the other justifications put forth for the huge jump in gas prices. Just pure unadulterated price-gouging.    

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