How Big Oil Spent Part of Its $90 Billion in Profits So Far in 2012
Lingering high oil and gasoline prices contributed to another quarter of huge profits for the big five oil companies: BP plc, Chevron Corp, ConocoPhillips, ExxonMobil Corp and the Royal Dutch Shell Group. They earned a combined $28 billion in the third quarter of 2012, reaping more than $90 billion in profits through the first three quarters of the year (see Table 1). As they did last year, the “big five” are on track to easily exceed $100 billion in profits this year.
What makes this figure all the more staggering is that these companies actually produced less oil in 2012 compared to 2011. The big five oil companies’ total oil production in the third quarter was 5 percent—or 400,000 barrels per day—lower than in the third quarter of 2011.
And despite such impressive profits, U.S. taxpayers are still subsidizing these companies. In 2012 the Congressional Joint Committee on Taxation estimated that these big five oil companies would receive $2.4 billion in special tax breaks. The three U.S. oil companies among this cohort—Chevron, ConocoPhillips and ExxonMobil—also pay a relatively low effective federal tax rate. Reuters reports that in 2011 these three companies paid 19 percent, 18 percent and 13 percent effective federal tax rate, respectively. These oil companies’ tax rates, Reuters concluded, are “a far cry from the 35 percent top corporate tax rate.”
So what benefits do these profits produce? Do they create new jobs, as those advocating for the tax breaks and lower corporate tax rates would lead us to believe? Not exactly. Between 2005 and 2010—the last year for which data is available—the “big five” reduced their workforce by 11,200 employees, according to a report by the Democratic staff of the House Natural Resources Committee. And the profits certainly haven’t been used as a buffer to lower gas prices, which are still hovering around $3.50, according to the American Automobile Association. Instead, the companies used these enormous profits on some other activities.
For starters, these companies continue to use massive profits to enrich their top executives and largest shareholders by repurchasing their own stock. The big five oil companies spent nearly one-quarter of their third-quarter profits buying back their own stock. These companies are also sitting on $70.7 billion in cash reserves—money not invested in searching for new sources of energy.
But the “big five” did spend lots of money on Capitol Hill in 2012, investing heavily to protect their special tax breaks. Since 2011 they have spent more than $100 million lobbying Congress to protect low tax rates and block pollution controls and safeguards for public health.
In addition to lobbying Congress, the big five oil companies have directly contributed $6.7 million to federal candidates and political parties with 78 percent going to Republicans and 22 percent to Democrats, according to the Center for Responsive Politics.
We also know that these companies have been funneling money into super PACs and political advocacy organizations to broadcast ads that oppose President Obama and his clean energy agenda and promote the companies’ tax breaks. Last month, for example, Chevron made the single-largest corporate donation since the Supreme Court opened the floodgates for corporate money in elections in its Citizens United v. Federal Election Commission decision. The company invested $2.5 million in the Congressional Leadership Fund, a super PAC for House Republicans.
This relatively modest investment in lobbying, elections and politics by oil companies has paid off handsomely. In addition to maintaining their special tax breaks, the FY 2013 budget passed by the house would provide an additional new tax cut of more than $2 billion annually for these same companies in the fiscal year beginning this past October. Overall, the House of Representatives voted 109 times this Congress to enrich oil companies, according to a study by Reps. Henry Waxman (D-CA) and Ed Markey (D-MA). This is a return on investment that would make Donald Trump jealous.
If the story of huge profits, stock buybacks, cash reserves, lobbying, and campaign dollars by big oil companies sounds familiar, that’s because it is. The “big five” rake in billions of dollars due to high oil and gasoline prices, all while receiving special tax breaks and producing less oil. It’s a story that will be rebroadcast again and again until Congress begins to reform this industry, starting with ending their $2.4 billion in special tax breaks.
Download full data on Big Oil’s profits and activities in the third quarter of 2012.
Visit EcoWatch’s ENERGY page for more related news on this topic.
Daniel J. Weiss is a senior fellow and director of Climate Strategy at the Center for American Progress. Jackie Weidman is a special assistant for Energy Opportunity at the Center.
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Colette Pichon Battle gave a December 2019 TEDWomen Talk on the stark realities of climate change displacement, and people took notice. The video racked up a million views in about two weeks. The attorney, founder, and executive director of the Gulf Coast Center for Law & Policy (GCCLP) advocates for climate justice in communities of color. Confronted with evidence showing how her own South Louisiana coastal home of Bayou Liberty will be lost to flooding in coming years, the 2019 Obama Fellow dedicates herself to helping others still reeling from the impacts of Katrina face the heavy toll that climate change has taken—and will take—on their lives and homelands. Her work focuses on strengthening multiracial coalitions, advocating for federal, state, and local disaster mitigation measures, and redirecting resources toward Black communities across the Gulf South.
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"These are not just wildfires, they are climate fires," Jay Inslee, Governor of Washington State, said as he stood amid the charred remains of the town of Malden west of Seattle earlier this month. "This is not an act of God," he added. "This has happened because we have changed the climate of the state of Washington in dramatic ways."
'These Aren't Wildfires'<p>Sam Ricketts, who led climate policy and strategy for Governor Jay Inslee's 2020 presidential campaign, tweeted on September 11 that "These aren't wildfires. These are #climatefires, driven by fossil fuel pollution."</p><p>"The rate and the strength and the devastation wrought by these disasters are fueled by climate change," Ricketts told DW of fires that have burnt well over 5 million acres across California, Oregon, Washington State, and into neighboring Idaho. </p><p>In a two-day period in early September, Ricketts notes that more of Washington State burned than in almost any entire fire season until now, apart from 2015. </p><p>California, meanwhile, was a tinderbox after its hottest summer on record, with temperatures in Death Valley reaching nearly 130 degrees Fahrenheit, according to the U.S. National Weather Service. It has been reported as the hottest temperature ever measured on Earth.</p>
<div id="29ad9" class="rm-shortcode" data-rm-shortcode-id="8346fe7350e1371d400097cd48bf45a2"><blockquote class="twitter-tweet twitter-custom-tweet" data-twitter-tweet-id="1306969603180879872" data-partner="rebelmouse"><div style="margin:1em 0">Drought-parched wetlands in South America have been burning for weeks. https://t.co/pjAKdFcKPg #Pantanal https://t.co/ImN2C5vwcp</div> — NASA Earth (@NASA Earth)<a href="https://twitter.com/NASAEarth/statuses/1306969603180879872">1600440810.0</a></blockquote></div><p>As evidenced by Australia's apocalyptic Black Summer of 2019-2020, fires are burning bigger and for longer, with new records set year-on-year. Right now, Brazil's vast and highly biodiverse Pantanal wetlands are suffering from catastrophic fires.</p>
#climatefires Started in Australia<p>Governor Inslee this month invoked the phrase climate fires for arguably the first time in the U.S., according to Ricketts.</p><p>But the term was also used as fires burnt out of control in Australia in late 2019. In the face of a 2000km (more than 1,200 miles) fire front, and government officials and media who <a href="https://www.dw.com/en/trump-climate-change-denial-emissions-environment-germany-fake-heartland-seibt/a-52688933" target="_blank">played down the link to climate change</a>, Greens Party Senator Sarah Hanson-Young and a friend decided that reference to bushfires was inadequate. </p><p>"We both just said, we've got to start calling them climate fires, that's what they are," the Australian Senator told DW.</p><p>Hanson-Young says scientists have been warning for decades that these would be the effects of global heating. "We've been told these kinds of extreme weather events and destruction is what climate change would look like, and it's right here on our doorstep," she said from her home state of South Australia — where by early September fire warnings had already been issued.</p><p>"Calling them climate fires was making it absolutely crystal clear. It is essential that there's no ambiguity," she said </p><p>Having deliberately invoked the term, Hanson-Young soon started to push it on social media via a #climatefires hashtag. </p>
How to Talk About the Urgency of Global Heating<p>The need to use more explicit language when talking about extreme weather events linked to climate change is part of a broader push to express the urgency of global heating. In 2019, activist Greta Thunberg tweeted that the term "climate change" did not reflect the seriousness of the situation. </p><p>"Can we all now please stop saying 'climate change' and instead call it what it is: climate breakdown, climate crisis, climate emergency, ecological breakdown, ecological crisis and ecological emergency?" she wrote. </p><p>"Climate change has for a long time been talked about as something that is a danger in the future," said Hansen-Young. "But the consequences are already here. When people hear the word crisis, they understand that something has to happen, that action has to be taken."</p><p><span></span>Some terms are now used in public policy, with state and national governments, and indeed the EU Parliament, declaring an official climate emergency in the last year. </p>
Words That Reflect the Science<p>But while the West Coast governors all fervently link the fires to an unfolding climate crisis, U.S. President Donald Trump continues to avoid any reference to climate. In a briefing about the fires, he responded to overtures by Wade Crowfoot, California's Natural Resources Secretary, to work with the states on the climate crisis by stating: "It'll start getting cooler. You just watch." Crowfoot replied by saying that scientists disagreed. Trump rejoined with "I don't think science knows, actually." </p><p>It was reminiscent of the anti-science approach to the coronavirus pandemic within the Trump administration, <a href="https://www.dw.com/en/donald-trump-admits-playing-down-coronavirus-risks/a-54874350" target="_blank" rel="noopener noreferrer">at least publicly</a>. Fossil fuel companies are also benefiting from his disavowal of climate science, with the Trump administration having <a href="https://www.dw.com/en/opinion-trumps-paris-climate-accord-exit-isnt-really-a-problem/a-51124958" target="_blank" rel="noopener noreferrer">pulled out of the Paris Agreement</a> and reopened fossil fuel infrastructure like the Keystone XL pipeline. </p><p>But the science community has responded, with Scientific American magazine endorsing Trump's Democratic presidential challenger Joe Biden, the first presidential endorsement in its 175-year history. </p><p>Hanson-Young says the use of explicit language like climate fires has also been important in Australia due to the climate denialism of politicians and the press, especially in publications owned by Rupert Murdoch. As fires burnt out much of Australia's southeast coast, they were commonly blamed on arson — a tactic also recently used in the U.S.</p>
Climate Rhetoric Could Help Decide Election<p>The language of climate has begun to influence the U.S. presidential election campaign, with Democratic nominee Joe Biden labelling President Trump a "climate arsonist."</p><p>Biden is touting a robust climate plan that includes a 2050 zero emissions target and a return to the Paris Agreement. Though lacking the ambition of The New Green Deal, it has been front and center of his policy platform in recent days, at a time when five hurricanes are battering the U.S. Gulf Coast while smoke blanketing the West Coast spreads all the way to the East. </p><p>People are experiencing the climate crisis in a visceral way and almost universally relate to the language of an emergency, says Ricketts. "They know something is wrong."</p>
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