In June, I had an opinion piece in the Charleston City Paper on high gas prices: “Blame Big Oil, now laughing all the way to the bank.”
In that piece, I pointed out all of the misplaced blame for the record gas prices.
The public was being told that President Joe Biden and the majority party in Congress were to blame. Politicians were pointing the finger at past energy policies saying that we needed to drill for more oil and build oil pipelines faster.
Of course, those proposed policies, if enacted today, would not add one drop of oil for years. This was all politics and no real solution to gas prices today.
There were real reasons, I suggested, for the cost of gas at the pump. Our boycott of Russian oil that has bipartisan support. Refinery capacity was down due to issues unrelated to government policy. And consumer demand for gas was up. Washington wasn’t to blame for that either.
However, what was a more important reason for the situation was the role of oil companies in setting gas prices. This was being completely ignored by the media and many politicians.
One only needed to look at Big Oil’s first quarter profits this year to see why the industry was largely culpable for high gas prices. I wrote:
“Oil industry profits were up nearly 300% in the first quarter of this year compared to the same period last year! We are talking about profit after taking into consideration their expenses and write downs due to exiting their business in Russia.”
Did these obscene profits lead to ramping up of production, as President Biden requested, or the oil companies simply lower their profit by charging less for their gas, which would have immediately helped the consumer?
Big Oil did neither.
Which brings us to oil company profits in the second quarter this year.
They were again record-breaking. Profits were up 235% from the same time last year for all the major oil companies: Chevron, Equinor, ExxonMobil, Hess Corp, Phillips 66, Shell and TechnipFMC.
The April-June profits are huge: $17.9 BILLION for ExxonMobil and $11.6 BILLION for Chevron.
And again, Big Oil did nothing to help consumers.
Instead, they did what all big corporations always do with windfalls from profits or the federal government cutting their taxes, like the 40% rate cut in December 2017. They buy back their own stocks to drive up the price of each share thus increasing the wealth of their shareholders and corporate execs.
“While you were feeling pain at the pump, Shell, Exxon and Chevron raked in $46 billion in profits over the last three months and said they would spend up to $47 billion on stock buybacks after spending $18.8 billion so far this year,” said Public Citizen.
Yes, gas prices have now come down a good deal, even though we still do not buy Russian oil, refineries still are not running at full capacity and consumer demand is still high.
What then is the reason for the gas price decline?
Big corporations hate bad press. So, they voluntarily make slight changes to reduce the political and public pressure.
We’ll have to wait for the third quarter financial reports to come out to see how the drop in the price of gas is impacting Big Oil’s profits.
But right now, the oil companies are still laughing all the way to the bank.
Frank Knapp of Columbia is president and CEO of the S.C. Small Business Chamber of Commerce.