Up $10.9 Billion, Exxon Worries About New Tax
Friday, May 2, 2008
Bolstered by winter's record crude oil prices, Exxon Mobil yesterday reported huge first-quarter profit and provoked new congressional vows to come up with legislation that would tax windfall profits or demonstrate concern about high gasoline prices.
The oil giant earned $10.89 billion, up 17 percent from the previous year. The amount was short of the all-time record Exxon set in the previous quarter but high enough to put the company on the defensive in the face of consumer ire and congressional indignation.
"Crude prices are at historic highs, and we recognize that they are having a significant impact on many in our society through higher gasoline prices and higher energy costs in other sectors," said Exxon's vice president for public affairs, Kenneth P. Cohen. He warned, however, that "high prices also have the potential to result in bad public policy, such as windfall profits tax, that will hurt consumers in the long run."
But Sen. Charles E. Schumer (D-N.Y.), who has proposed such a tax on oil companies, issued a statement saying: "Once again, consumers' pain is Exxon's gain. Oil companies are racking up obscene profits left and right while American families are stretched to the limit by skyrocketing gas prices. It's high time for Big Oil to pay its fair share."
Separately, the Federal Trade Commission said that it would take the first step in considering how to use new powers to prohibit market manipulation in the petroleum industry. "We understand that consumers are being hurt by high gas prices, and the commission remains vigilant in using its full authority to prevent unlawful behavior that affects gas prices," FTC Chairman William E. Kovacic said.
Despite Exxon's colossal profit, the company's stock fell yesterday as oil prices dropped, as investors appeared to shift gears, pull some of their money out of commodities and turn to stocks.
The price of oil and other commodities -- including copper, gold, natural gas, lumber and wheat -- fell broadly while the stock market surged. The Dow Jones Industrial average climbed 189.87 points, or 1.48 percent, closing over 13,000 for the first time since Jan. 3; the Nasdaq jumped 67.91 points. Crude oil, by contrast, slid for a third straight day, dropping 94 cents a barrel to $112.52. Exxon Mobil stock fell $3.37 a share to $89.70.
The dip in oil prices was partly due to lessened anxiety about supplies from Nigeria, Africa's largest oil producer. Exxon's vice president of investor relations, Henry Hubble, said yesterday that the union representing striking workers at Exxon's operations in Nigeria had directed its members to return to work as negotiations continue.
The week-long strike had shut down production at Exxon facilities, he said. When combined with attacks on Royal Dutch Shell pipelines by militants in the Niger River delta, the strike had reduced Nigeria's output by about half.
The dollar also strengthened against the euro, easing pressure on dollar-denominated oil prices.
But crude oil prices are still near record highs, and an enormous amount of money is flowing out of the United States as oil flows in. So far this year the nation has been paying nearly $1 billion a day for oil imports.
High crude oil prices have also swelled profit at Exxon. During the first quarter , the company produced 2.47 million barrels a day, about the same as Kuwait. After expenses and taxes, Exxon earned $23.34 a barrel, up 54 percent from the first quarter of 2007, according to a report by the investment firm Oppenheimer & Co. Exxon also earned substantially more from its natural gas production, which was equivalent to another 1.71 million barrels a day of oil.