Big Oil's Dilemma
For those of you scratching your heads at the gas pump, wondering why prices have shot through the roof with little relief in sight, David Sirota has unearthed an interesting story from Fortune magazine.
It turns out that while the oil companies complain of supply shortages and limited refinery capacity, they are making so much money from price gouging that they're not sure what to do with their new-found riches:
Exxon's "soon-to-retire CEO suddenly has a new anxiety: how to spend the windfall wrought by $55-a-barrel oil. By the end of April, Exxon will have a cash hoard of more than $ 25 billion. And if crude prices stay where they are, this geometrically growing bonanza could soon give Exxon more cash on hand than any other U.S. company...the cash is building at a remarkable rate. Each dollar jump in the price of a barrel of oil adds another half billion in earnings. Based on current prices, Exxon is accumulating more than $1 billion a month - even after allocating for dividends, share repurchases, and capital spending. If oil simply stays where it is now, Exxon's cash could approach $40 billion in 12 months. By then [Exxon's CEO] is expected to have handed off the top job--and the headache of what to do with all that cash."
No word yet on the administration's plans to rein in energy industry profiteering.
Chris Kromm is executive director of the Institute for Southern Studies and publisher of the Institute's online magazine, Facing South.