The media have made a habit of reporting record oil company profits with disdain rather than perspective; bitterness rather than accuracy.
That’s just how the July 31 “NBC Nightly News” anchor Brian Williams suggested July 31 that ExxonMobil’s record $11.68 billion quarterly profit might be “out of line.”
CNBC correspondent and co-host of CNBC’s “The Call” Trish Regan called it “another kick in the gas tank” and interviewed drivers who wondered why they have to suffer while oil companies make “so much money.”
“It’s a record,” Regan said. “Exxon’s profits are exploding. The company earned nearly $12 billion in the last three months. Exxon earns nearly $90,000 a minute – that’s almost $1,500 every second. The reason profits have gone up so much: the price of oil has exploded on the world market, up 61 percent in the last year.”
On “Today” August 1, host Meredith Vieira said Exxon is “laughing all the way to the bank” while Americans pay an average of $3.90 per gallon for gasoline. She said Americans are “drowning in debt, so many people, while the oil companies seem to be rolling dough.”
But CNBC’s Jim Cramer predicted that the decline in oil prices – closing at $124.08 July 31, down from the July 11 record high of $147.27 – would result in lower profits for Exxon. “Exxon’s profits have probably peaked this quarter,” he told Vieira.
Both reports did mention that the company invests heavily in exploration -- $7 billion, a 38-percent increase – but neither mentioned that oil earnings are driven largely by volume, not profit margins.
As a report posted on API’s Web site on July 25 explains, Exxon’s profits are a reflection of the size of the company and its industry and aren’t necessarily a good reflection of financial performance – in terms of what they are and aren’t charging at the pump. In other words, the profits are high because of volume, not profit margins.
“It may seem surprising that oil and natural gas earnings are typically in line with the average of other major
Regan’s report included John Felmy of the American Petroleum Institute (API) to defend Exxon’s profits, but also included rhetoric from Democratic presidential hopeful Sen. Barack Obama – who blasted the government energy policy that “works for the oil companies.”
“So where’s all this money going?” Regan said. “Two places – exploration and shareholders’ pockets. Exxon did spend $7 billion for exploration and the production of new energy sources – 38 percent more than it spent a year ago, but the company gave even more money – more than $10 billion – back to its shareholders through dividends and stock buybacks.”
She didn’t mention that Exxon’s stock actually fell the day it reported record profits, off 4.68 percent because the company posted a lower-than-expected second quarter earnings of only $2.27 per share. The company’s stock price -- $80.43 per share – is way off its $96.12 52-week high.
She also failed to note the huge amount of taxes paid by ExxonMobil and other oil companies. While it made $11.7 billion in profits, the company paid more than $32 billion in income, sales and other taxes.