Column: Black gold

By Jeff Myczek

A few days ago, oil giant Exxon Mobil Corporation issued its revenue report for the year 2005 – something very few people were able to read about in business interviews with company leaders. Rather than follow standard business practice and trumpet good financial news, usually an indicator of efficient business policies and a growing company, Exxon Mobil did the exact opposite. Company executives did their best to not only avoid talking about the profit margin of Exxon Mobil, but when they had to, they attempted to couch it in terms of justification.

Such an action might raise some eyebrows, and a look at Exxon Mobil’s numbers more than explains the company’s relative silence on the matter.

According to the New York Times, Exxon Mobil posted revenue of over $371 billion in the year 2005. That amount is more than the revenue of the country of Indonesia, a nation of some 252 million people. That amount does not reflect the total revenue for all U.S. oil companies, but only of one.

The profit Exxon Mobil posted for the same period was roughly $36 billion, which according to the International Herald Tribune makes the finances of the company larger than the economies of 125 of the 184 countries listed by the World Bank. That figure also represents the largest single yearly profit for any company in U.S. history, beating the old 2004 record of roughly $24 billion, also set by Exxon Mobil.

While one must recognize that in business it is the duty of a company to post the best profit possible for shareholders, a responsible corporate citizen must also be accountable to the public. To post a profit of $36 billion, more money than the government of Luxembourg brings in yearly, would normally be commendable. Given the circumstances of the U.S. economy and the average taxpayer, however, Exxon Mobil should as corporate citizens be ashamed, and the relative silence of company executives indicates that they understand that as well.

In a time when U.S. citizens are paying record prices for energy and the U.S. economy is growing at the slowest pace in several years due in part to higher energy costs, the current pricing policies of the oil companies is unacceptable. While company executives argue that the higher costs are due to the fact that they are struggling with limited supply and refining capacity and environmental regulations, record profits indicate that they are in fact not “struggling” as much as they say, and they clearly have some leverage with the prices of fuel they are passing on to the consumer. Company leaders also cannot say that it is production growth fueling their profits, as total oil production by Exxon Mobil fell last year.

If oil companies continue to avoid a re-evaluation of their policies and keep making record profits at the expense of the U.S. economy and U.S. taxpayers, it is imperative that the government deal with and attempt to put an end to the situation. Such an action would not be unprecedented, as a windfall tax on oil company profits was enacted in 1980. A similar idea being proposed, which calls for a $5 billion tax on U.S. oil companies’ profits next year, passed through the Senate Finance Committee on Tuesday. Companies should normally be commended for performing well, but not when they squeeze consumers to make record profits.

While many factors affect the price of gasoline and energy, most are beyond the control of oil companies like crude prices and government taxes. Nonetheless, oil companies must do a better job of explaining themselves to the public and must do more to help consumers squeezed with soaring energy costs. If not, the government should act to investigate and address the situation. Successful business practices should be commended in a capitalist society, but making record profits when people are struggling to simply pay the bill is a tough business practice to justify – and the oil companies know it.

Jeff Myczek is a junior in LAS. His column appears on Thursdays. He can be reached at [email protected]