How Big Oil Spent Part of Its $90 Billion in Profits So Far in 2012

Written by Daniel J. Weiss, Jackie Weidman

Lingering high oil and gasoline prices contributed to another quarter of huge profits for the big five oil companies: BP plc, Chevron Corp, ConocoPhillips, ExxonMobil Corp, and the Royal Dutch Shell Group. They earned a combined $28 billion in the third quarter of 2012, reaping more than $90 billion in profits through the first three quarters of the year. (see Table 1) As they did last year, the “big five” are on track to easily exceed $100 billion in profits this year.

What makes this figure all the more staggering is that these companies actually produced less oil in 2012 compared to 2011. The big five oil companies’ total oil production in the third quarter was 5 percent—or 400,000 barrels per day—lower than in the third quarter of 2011.

And despite such impressive profits, U.S. taxpayers are still subsidizing these companies. In 2012 the Congressional Joint Committee on Taxation estimated that these big five oil companies would receive $2.4 billion in special tax breaks. The three U.S. oil companies among this cohort—Chevron, ConocoPhillips, and ExxonMobil—also pay a relatively low effective federal tax rate. Reuters reports that in 2011 these three companies paid 19 percent, 18 percent, and 13 percent effective federal tax rate, respectively. These oil companies’ tax rates, Reuters concluded, are “a far cry from the 35 percent top corporate tax rate.”

So what benefits do these profits produce? Do they create new jobs, as those advocating for the tax breaks and lower corporate tax rates would lead us to believe? Not exactly. Between 2005 and 2010—the last year for which data is available—the “big five” reduced their workforce by 11,200 employees, according to a report by the Democratic staff of the House Natural Resources Committee. And the profits certainly haven’t been used as a buffer to lower gas prices, which are still hovering around $3.50, according to the American Automobile Association. Instead, the companies used these enormous profits on some other activities.

For starters, these companies continue to use massive profits to enrich their top executives and largest shareholders by repurchasing their own stock. The big five oil companies spent nearly one-quarter of their third-quarter profits buying back their own stock. These companies are also sitting on $70.7 billion in cash reserves—money not invested in searching for new sources of energy.

But the “big five” did spend lots of money on Capitol Hill in 2012, investing heavily to protect their special tax breaks. Since 2011 they have spent more than $100 million lobbying Congress to protect low tax rates and block pollution controls and safeguards for public health.

In addition to lobbying Congress, the big five oil companies have directly contributed $6.7 million to federal candidates and political parties with 78 percent going to Republicans and 22 percent to Democrats, according to the Center for Responsive Politics.

We also know that these companies have been funneling money into super PACs and political advocacy organizations to broadcast ads that oppose President Obama and his clean energy agenda and promote the companies’ tax breaks. Last month, for example, Chevron made the single-largest corporate donation since the Supreme Court opened the floodgates for corporate money in elections in its Citizens United v. Federal Election Commission decision. The company invested $2.5 million in the Congressional Leadership Fund, a super PAC for House Republicans.

This relatively modest investment in lobbying, elections, and politics by oil companies has paid off handsomely. In addition to maintaining their special tax breaks, the FY 2013 budget passed by the house would provide an additional new tax cut of more than $2 billion annually for these same companies in the fiscal year beginning this past October. Overall, the House of Representatives voted 109 times this Congress to enrich oil companies, according to a study by Reps. Henry Waxman (D-CA) and Ed Markey (D-MA). This is a return on investment that would make Donald Trump jealous.

If the story of huge profits, stock buybacks, cash reserves, lobbying, and campaign dollars by big oil companies sounds familiar, that’s because it is. The “big five” rake in billions of dollars due to high oil and gasoline prices, all while receiving special tax breaks and producing less oil. It’s a story that will be rebroadcast again and again until Congress begins to reform this industry, starting with ending their $2.4 billion in special tax breaks.

This post was originally published by the Center for American Progress.


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Photo: Rainforest Action Network/flickr


Kevin D.
Kevin D.1 years ago

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Code W.
Code W.4 years ago

if you think the millions in cash taxpayers dole out via the White House say so's are high, then you will be alarmed further to know what I do know. In 2010 I designed a device for a special purpose. Today, those same majors under the BGgroup use it for a whole lot more and with the direct blessings of an overt Obama law under the guise of safety to give each new well a min of $1bln in applied credit to that permitted well operation, whether that well produces or not. In the mean time, I am forced to fight for what is right and who owns those rights of an applied invented design. they will loose... I am assured... and in actions, they want to control the outcome to negotiate before a trial...

The truly sadest thing is that Boehner had been advised of this and seems to understand we're alking vast billions per year being ripped from the American taxpayers in amounts that for sure, could pay down the national debt in less than 10yrs... Instead, it would seem they want the bleeding to continue for Americas core capital to escape its people... my position, it belongs to the people and should have been used a long time ago to fund the conversions in energy that the world needs, not more carbon base energy... so who am I but only one man... stay tuned...

Lynn D.
Lynn D4 years ago

They should NOT be getting any tax breaks on anything and should be held responsible for ALL DAMAGE they do!!! Amazing, what they get away with, thanks for article!

Danuta Watola
Danuta W5 years ago

Thank you for the article

Betsy M.
Betsy M5 years ago

So let's make this the first "entitlement" on the list of those that need to be eliminated.

Robert W.
robert W5 years ago

Great deals for the Super rich! Subsidies , low tax rates , they are guaranteed high profits, AFTER biz expenses such as hundreds of millions for luxury jets and all the operating costs.
Me, never cleared $30k in a year after 30 years owning & operating a small auto repair biz. Of course INSURERS were allowed to set rates what I pay them and what they pay me, and guess who wins? Now if I sell my shop with attached apartment where I've lived for 30 years for say, $90k, I;m told I'll have to pay gov't about $31k in capital gains. Not much to buy another place to live even, and a much higher tax rate than Romney and the big oil companies for sure,
Just like the TARP program ,800billion $$ to the rich bankers to fix things, then cut any help to low income people to help pay the rich crooks, bankers & insurers.
Great system for the well off, the more you have , the more gov't will help or give.

Klaus Peters
Klaus Peters5 years ago

Insane, the less we use the more we pay to "big oil" and our governments. The day will come when the leaches have nothing, in hell. I always say, you cannot take your wealth with you, to hell. I am doing my part, last year I did around 10000 km. this year only 3000 km, sure no more weekend drives, just to shop for my food, no holidays for a pensioner after a lifetime of hard work. Do I vote, no, but I have to go to the polls and register, otherwise I get fined. So I do that and I vote for nobody of the corrupt politicions and make my vote invalid, usually putting zeroes on all candidates and then crossing out the ballot paper to make sure it is not valid, because pensioners do not excist in our country.

Pat B.
Pat B5 years ago

Big oil is attacked because they make billions, but also receive millions in federal money and tax breaks that favor them. If they're so successful at turning a profit then they don't need my tax money to do it.

Sarah Hill
Sarah Hill5 years ago

Why are the oil companies always attacked for their profits? Aren't they in business to make a profit? What about other companies? Why are they not attacked? It seems that in a country where anyone can be anything that we would admire success not attack it.

Katherine Wright
Katherine Wright5 years ago

I don't see anything about helping the environment or wildlife....hmmmm, not surprised.