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Everyone Hates Big Oil

By Johns Wu on Nov 02, 2005

oil_rig.jpgIt seems like everyone is mad that big oil companies like XOM, BP, and CVX have been reaping record profits this quarter because of high crude prices, but I don't think it makes sense to blame the oil companies.

"Big oil behemoths are making out like bandits, while the average American family is getting killed by high gas prices, and soon-to-be record heating oil prices," Sen. Chuck Schumer, D-N.Y., said in a statement."

So… just because this company is making a ton of money, you expect them give free handouts to help subsidize energy costs for low-income families? That would be nice, but it really doesn't make sense. Did Exxon beg for free handouts 3 years ago when crude was $30/barrel? If Exxon were a state-run oil company like China's CNOOC, then yeah, I would expect them to give back to the people, but this obviously isn't the case. Exxon is NOT guilty of anything!

Of course, I hate high oil prices too… It costs me $40 to fill up my tank, and it's slowing down the economy, but it would make more sense to increase funding for alternative energy research than to whine about a successful company.

However, a reasonable point made against XOM is that they have been holding off on building refineries in order to artificially decrease supply.

Court said oil companies have strategically refrained from building new domestic gasoline refineries so that tight supplies would push up prices. "Now Exxon needs to invest that money in making more gasoline," he said. "Neither Exxon nor the industry has opened a new refinery since 1976 because the companies know keeping refined supply low is a recipe for huge profits."

Assuming this argument is valid, there still isn't much you can say. Exxon is a business, and the purpose of a business is to make money, not to make people happy.

Like it or not, that's capitalism.

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This entry was posted on Wednesday, November 2nd, 2005 at 12:36 pm and is filed under Market Editorials. You can skip to the end and leave a response. Pinging is currently not allowed.


5 Responses to “Everyone Hates Big Oil”


By Anonymous on November 1st, 2005 at 7:08 pm

go communism!

By a on November 1st, 2005 at 10:23 pm

I just don’t understand targeting the oil companies.

If you want windfall profits, just about every other commodity-related field should get a punch to the gut. And why stop there?

For the record, Intel makes entirely too much in the way of gross margins on those semiconductors! Marking up CPUs so that hard working, middle class American families have to struggle in order to obtain their constitutional right to newer and better computing is pure evil–like playing Celine Dion music to an unsuspecting public over a loud speaker.

Resistance: Do your part to end the ballads.

By Anonymous on November 2nd, 2005 at 4:53 pm

xom, et al may not have built any refineries in the last 30+ years but they have continuosly increased the capacity of the refineries still operating.

30 years ago there was a huge glut in refining capacity vs. demand. Refineries closed, demand grew, and existing refineries increased their capacity. Simply cheaper to expand existing facilities than to build from scratch.

In the last couple of years refining capacity grew back to where it was almost 30 years ago BUT demand also finally caught up to the capacity.

Also refining ROI has been (on average) terrible for the last 30 years. While build something that on average won’t make enough $’s to even pasy the interest on the bonds that built it?

By JWU on November 2nd, 2005 at 5:40 pm

good pt about the refineries

By Ron R. Gat on November 3rd, 2005 at 7:37 am

Although we are dealing with a supply & demand issue where the demand seems to be outstripping the supply available, the bottomline is still related to a question of refinery capacity which until increased by virtue of new refineries or increased production will not curb the profit making of the large oil producers.

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