It's official: 2011 was a record-busting year in the oil industry, with the five largest companies -- BP, ExxonMobil, Chevron, ConocoPhillips, and Royal Dutch Shell -- reporting all-time-high profits of $137 billion. That's a 75 percent jump from the year before, even though the giants produced less oil than in 2010.
It's the multinational way to go in a slumping economy: Get paid more for doing less.
As this eye-opening analysis at the Center for American Progress makes clear, the hefty profits in spite of a 4 percent drop in production owes a great deal to charging high prices and benefiting from billions in subsidies.
If you take BP out of the equation -- the company lost $4 billion in 2010 as a result of the Deepwater Horizon disaster -- the Big Four's profit spike drops down to 36 percent. Still not bad in a business climate struggling with massive debt and unemployment, including the 11,200 U.S. employees the companies have dumped over the past five years.
Although ad campaigns by Shell and others give the impression that the companies are investing like mad in greener technology and exploration, a 2010 House Natural Resources Committee study found that less than 10 percent of Big Oil's profits get plowed back into such efforts. Last year a great deal more, 28 percent, was devoted to repurchasing the companies' thriving stocks.
And, while it's chicken feed in comparison, Big Oil is also spendingmillions on campaign contributions and lobbying. According to the Center for American Progress report, the companies get about $30 in tax breaks back for every buck spent in lobbying.
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Having a few friends in Congress also helps when you have disputes with federal regulators over tens of millions of dollars in royalties for drilling on federal lands and in offshore waters that somehow never got paid -- the subject of my recent feature, "Drilled, Baby, Drilled."
So why invest in jobs and increased production, when you can make more money by purchasing influence and speculating in stock? It's the paradox of the new global economy: Less is more. To be big, you've got to think small.
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