TO BE PERFECTLY HUMBLE, THIS IS A MOST IMPORTANT POST…
Sorry it’s been a while since I posted. But today, there’s something going on that has really riled up my passion. I’m about fed up with the ease at which politicians (notice I don’t say anything about party) are playing the oil card today. Frankly, I am appalled. I’m normally a big fan of Senator Charles Grassley. I’ve met him a number of times – he seems very nice in an Iowa way – and most of his time in Congress have been marked by his extreme fairness. I have my minor issues with him – he voted against the first Gulf War in 1990; and the 50-million dollar Iowa Porkforest in Corallville is a burr in my saddle – but his “regular guy” appeal has always been enough for me to trust him. No more. He’s either lost it, or he has fooled me for all these years. It’s time for him to go. Washington got to him.
I’m trying to be very nice because I haven’t talked to him in a long time. He knows me, and I have counted his son among my best friends in the world for more than 10 years. I don’t want to lose that friendship because it has nothing to do with politics – but I’ve expressed my displeasure to him and he knows I wouldn’t bullshit him over something like this.
I’m going to be following this oil company “excessive profits” story for a while because I think it’s most important. No matter what you might think, I have no interest in any oil company – anymore than any other American who has a 401K, mutual fund, individual stocks or whatever. It’s a roundabout way of saying, “no one is paying me to say what I’m about to say.”
What is happening today in Washington is UN-American. I would expect it of some Democrats who normally do their best to undermine the ideals of our capitalistic society (notice I said some). It’s sad, really. I may just be a bunch of dopes hopped up on getting themselves some ink and cover to appear in advertising when they run for office again…or it could be worse – they could mean it this time.
Last week, Senator Grassley wrote to leading gas and oil trade associations urging them to contribute a portion of profits to programs that supplement the government's Low Income Home Energy Assistance Program. This, in light of their “excessive profits” reaped by the higher gasoline prices. He said, "It seems only logical for the companies to practice good corporate citizenship by helping low-income families and seniors," He chairs the tax-writing Finance Committee.
Senator Byron Dorgan (D-ND) has introduced “windfall profits tax” legislation that calls for a 50% extra tax on profits earned when the price of oil rises above $40 a barrel. His insanity is understandable…he’s a liberal. Liberals hate profits…especially in an industry like oil. Well…of course they don’t hate ALL profits, just someone else’s profits. More on that later..
The press isn’t helping, either. No one seems willing to actually want to educate the American people. Just for example, read the portions of a story from the Associated Press on today’s hearings:
there is a "growing suspicion that oil companies are taking unfair advantage," Sen. Pete Domenici, R-N.M., said, opening the hearing in a packed committee room. "The oil companies owe the American people an explanation," he declared.
Yes…but so do you idiots. Why don’t you take the opportunity to actually educate the American people on just what the problem is?
ExxonMobil, the worlds' largest privately owned oil company, earned nearly $10 billion in the third quarter. Raymond was joined at the witness table by the chief executives of Chevron, ConocoPhillips, BPAmerica and Shell Oil USA.
Together the companies earned more than $25 billion in profits in the July-September quarter as the price of crude oil hit $70 a barrel and gasoline surged to record levels after the disruptions of Hurricanes Katrina and Rita.
My God…25-billion in profits. HUGE amount, eh? But in the context of how much total revenue the company had – minus expenses (like getting more than 60 oil rigs back on line after the storms), it represents only a 10-PERCENT PROFIT…even in the context of the whole year. Don’t count on anyone to tell you that in this story, of course…but thanks to the internet, you can find this information easily: Try YAHOO Finance, for one. See also my handy list posted below.
Even President Bush’s spokesperson couldn’t resist to turn all “wobbly” and cower to the political element of the story.
Scott McClellan. "It's important that the private sector be good corporate citizens and invest in the energy infrastructure and support those who are in need."
It isn’t until the final few sections of the story that you even get a hint of what this 25-billion dollars in profit represents:
James Mulva, chairman of ConocoPhillips, said "we are ready open our records" to dispute allegations of price gouging. ConocoPhillips earned $3.8 billion in the third quarter, an 89 percent increase over a year earlier. But he said that represents only a 7.7 percent profit margin for every dollar of sales.
But, back to the misleading of the American people:
The oil industry's record third-quarter profits _ at a time when motorists were reeling from unprecedentedly high gasoline costs and warned of huge heating bills this winter _ have caught the attention of both Republicans and Democrats in Congress. Some analysts predict the 29 largest oil companies will earn $96 billion this year.
Yes, record profits. But in history? The last 5 years? 2 years? I mean, really…if I were to play baseball tomorrow and hit a home run, it would be a record for me. I hit a record number of home runs in 2005!! And the unprecedentedly (their word, not mine) high gasoline costs were nothing of the kind. Adjusted for inflation, the cost of gasoline was LOWER than it was in 1981. I mean REALLY…if the press can’t afford to look up a word in a dictionary, how much can we expect they’ll do a Yahoo search for company profit reports for 2005?
Of course, the oil companies have made a lot of profit lately, but so have many other businesses and industries. Although Exxon got big headlines for earning $9.92 billion in the third quarter, few analysts bothered to note that this only came to 9.8 cents per dollar of sales — well below that of many other companies.
As promised, here’s a list of some other sectors of the economy that profited in 2005. Remember when that was good news? We must be having a real good economy for Democrats to suddenly drop the “worst economy in 30-years” mantra – and complain about excessive profits. Pay particular attention to the final group of profiteers.
Company or Sector followed by a percentage of profit margin in 2005
Basic Materials Sector:
Oil & Gas Refining & Marketing 7.20
Chemicals - Major Diversified 8.40
Oil & Gas Equipment & Services 8.80
Major Integrated Oil & Gas 9.20
Industrial Metals & Minerals 12.20
Gold 13.10
Nonmetallic Mineral Mining 13.40
Independent Oil & Gas 13.90
Oil & Gas Drilling & Exploration 14.30
Steel & Iron 14.90
Copper 21.80
I’m sure the hard-workin’ blue collar unionized Steel and Iron companies aren’t going to be called up to testify in Congress anytime soon over their excess profits…
Neither will the companies that provide other everyday used products from the Consumer Goods sector who also profited excessively. Well, maybe the cigarette people…
Personal Products 8.00
Cigarettes 8.50
Tobacco Products, Other 8.50
Beverages - Soft Drinks 10.90
Beverages - Brewers 11.40
Confectioners 11.50
Cleaning Products 11.60
And why aren’t Senators warning us about another Technology Bubble Burst like the DOT-COM’s of the 90’s?
Technology Sector:
Communication Equipment 8.80
Multimedia & Graphics Software 9.20
Data Storage Devices 9.40
Business Software & Services 10.20
Telecom Services - Domestic 10.50
Semiconductor - Integrated Circuits 10.80
Semiconductor - Broad Line 12.80
Information & Delivery Services 13.70
Networking & Communication Devices 16.80
Security Software & Services 18.50
Application Software 20.70
Internet Information Providers 24.20
Defined by anything more than oil companies (10-percent profit)…that’s not even a small sample of the excessive profits list. It gets even worse if you look at individual companies like Citigroup and Microsoft – each made 33.2 percent profits. Among other major companies that each made at least twice as much as Exxon in percentage terms are Bank of America, Merck, Google, Eli Lilly, Coca Cola, Intel, and Yahoo.
But none did better over the last number of years than US Senators themselves. Read this story from the Business Report.
“…we find US senators who, when they are not doing their day job running the country, are rather talented at investing. Senators beat the stock market annually by 12 percent on average, the first comprehensive study of share trading by members of the US's upper house has found. That is an impressive performance, as fund managers are thought to have the Midas touch if they regularly outperform by about 3 percent, and even hedge funds - which charge steep fees for performance - are now on average only 6 percent better than the market. The academics who conducted the study looked at 6,000 stock transactions made by senators between 1993 and 1998. They noted that the senators did an especially good job of picking up stocks at just the right time - their buys were typically flat before they bought them, but beat the market by 30 percent, on average, in the year after.
I wonder when they’ll be taking an oath and testifying to themselves. It’s really sad…and dangerous, this Washington game. Shame on them…and shame on us for not paying attention.