10News Investigation Breaks Down Oil Company Profits

Report Shows Where Companies' Profits Are Going

Frances Rodriguez was filling up her gas tank when 10News asked her why she thinks gas prices are so high.

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"I think the oil people just want to make more money," she said.

While oil companies get a lot of the blame for gas prices, they don't actually set the prices at the pump. However, they do see a jump in their bottom lines when those prices spike.

"Every time gas goes up by a penny, these companies usually pocket another $200 million in quarterly profits," said President Barack Obama in March. (Click here to learn more about this statistic.)

The big five oil companies -- ExxonMobil, Royal Dutch Shell, Chevron, BP and ConocoPhillips -- make a lot of money by producing crude oil, which is the main ingredient in gasoline. When the market pushes the cost of crude oil up, the price of gas also rises -- and so do big oil profits.

"In 2011, the five largest oil companies made a combined total profit of $137 billion, which is a new record," said Daniel Weiss, senior fellow with the Center for American Progress.

Weiss analyzed big oil profits and criticized the companies for making money on the backs of consumers in a report this year titled "Big Oil's Banner Year." (To read the report co-authored by Weiss, click here.)

10News brought Weiss' biggest complaints to Catherine Reheis-Boyd, who represents the oil industry as president of the Western States Petroleum Association.

When asked how those profits can be justified to consumers who are paying $4 for a gallon of gas, Reheis-Boyd said, "The reason those numbers are large is because you're talking about global companies who sell a lot of gasoline and diesel. That net income ... goes to only two places. They go to reinvest to produce more oil, put more people back to work. And they go to dividends which contribute to the retirement of millions of Americans."

As for increasing production, Weiss argued that big oil's global production actually went down last year, not up.

"In 2011, the big five oil companies were able to make more money than the previous year while producing less oil," said Weiss. "Why were they able to do that? Because oil and gasoline prices were higher than the year before."

10News checked the oil companies' annual reports and found their energy production ("oil-equivalent production" in industry terms) in 2010 at 16.1 million barrels per day. In 2011, that production fell to 15.5 million barrels per day.


Weiss also accused the big oil companies of helping themselves, instead of consumers, by spending $38 billion last year on stock repurchases.

"Big oil companies are using their record profits to buy back their own stock, which enriches their board members and their top executives," he said.

Reheis-Boyd said it's not just executives who benefit.

"And who owns the dividends? Millions of American households who have pension plans, 401(k) plans, IRAs," she said. "The dollars that are paid back in dividends go to those that have invested in the company's business, which are millions of Americans."

Weiss said big oil benefited at the expense of American taxpayers when they invested money in lobbying lawmakers to uphold tax breaks for oil companies.

"Last year, the big five oil companies spent $65 million lobbying to keep their $2.5 billion in tax breaks," he said.

Both the U.S. House of Representatives and Senate had votes in 2011 and 2012 to reduce those tax breaks, but none passed.

In the meantime, consumers like Frances Rodriguez keep paying.

"Guess what? We're all buying gas because we have to get to work," said Rodriguez.

Find out where you can find the cheapest gas prices in San Diego County by visiting our special section www.10news.com/san-diego-gas-prices.

For the U.S. Department of Energy's 2012 list of most and least fuel-efficient vehicles, click here.

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