Oil Firms Cast as Villains

Times Staff Writer

Oil company earnings have never been sweeter. Stock prices are up. Shareholders are pocketing ever-bigger dividends. By nearly every measure, the petroleum industry is in its heyday.

But in the realm of public opinion, things could hardly be worse.

Motorists paying up to $3.50 a gallon for gasoline castigate oil companies and their executives with a growing list of high-octane epithets: Greedy. Un-American. The new robber barons.

On Wednesday, Sen. John McCain (R-Ariz.) invoked the harshest image yet. “I think they have the least PR sensitivity of any group outside of satanic cults,” he said.


Responding to public outrage, the Senate Finance Committee on Wednesday asked the Internal Revenue Service to hand over the tax returns of the 15 largest oil and gas companies, saying they were concerned about excessive profit and outsize executive pay.

The news got even better -- or worse -- for the industry Wednesday with the news that Wall Street analysts expect the three largest oil and gas companies to report combined quarterly earnings of more than $16 billion, a 24% increase from last year.

Instead of celebrating their windfall, oil companies are battling demands for a tax on “windfall” profits, President Bush’s call for an investigation into allegations of price gouging and mounting consumer resentment.

Oil executives have launched their own offensive to win American hearts and minds. In full-page advertisements and media interviews, they argue that the millions of Americans who own shares in oil concerns are winners too. Exxon Mobil, the world’s biggest company with $1 billion a day in sales, insisted Wednesday that it was too small to influence the global oil market.

“As big as we are, we are only 3% of the crude oil production in the world,” said spokesman Mark Boudreaux.

Any public relations blitzkrieg may fail to appease angry motorists who continue to feel pain at the pump.


Ron Perkins, a Blythe, Calif., resident who drives more than 23 miles to his prison guard job, said he saw a station’s price jump 10 cents to $3.49 a gallon Wednesday. “It stinks ... and their profit margin is outlandish,” he said. “They’re kicking consumers when we’re down.”

Oil companies are flush because the price they get for each barrel of crude is rising much faster than the cost to extract it. In refining, profit margins are rising because the wholesale and retail prices for gasoline and diesel are far outpacing the additional costs of the resource they process.

In the end, the major oil companies can take solace in the fact that dozens of price-fixing investigations into the industry have come to naught and that public hatred does not amount to a criminal conviction.

Big Oil’s top executives have appeared before congressional committees twice since the summer -- once to explain the high prices that followed Hurricane Katrina and again in March to explain their record-setting 2005 earnings. Those included Exxon Mobil’s $36.1-billion profit, the biggest ever at a U.S. company.

Exxon Mobil further inflamed the furor by awarding longtime Chairman and Chief Executive Lee Raymond, who retired at the end of last year, a 2005 pay package worth more than $400 million.

Today, oil futures are hovering above $72 a barrel, and retail gasoline nationwide is approaching last year’s post-hurricane peak of more than $3 a gallon. On Wednesday, the average cost of self-serve regular in California set another record high of $3.15 a gallon, according to AAA.


Exxon Mobil, based in Irving, Texas, is expected to post first-quarter earnings topping $9 billion. Industry analysts expect the company’s full-year income to surpass the record set in 2005.

Analysts expect San Ramon, Calif.-based Chevron Corp., the nation’s second-largest oil company, to report first-quarter net income of $4.1 billion on Friday. No. 3 ConocoPhillips of Houston on Wednesday reported profit of $3.3 billion.

Michael Smith, a communications professor at La Salle University in Philadelphia, said the earnings could have “investors doing cartwheels.... For them, this is really good news,” he said. “For everybody else, and for consumers especially, it’s going to be another sign of greedy oil companies taking advantage of the little guys.”

Boudreaux, the Exxon Mobil spokesman, acknowledged that “there are a lot of questions out there about what we do with our earnings and how we invest them.”

He said the company hopes its current advertising and public relations efforts will help quell the outrage and “do a better job of helping people understand what goes behind providing the energy that they use.... This is a commodity business. It’s cyclical, and there are ups and there will be downs in the cycle. We have to look through the highs and lows.

“Obviously, some consumers are upset with energy companies ... because gasoline prices are high. We understand that,” he said. “We have a strong image with those people who understand our business and with investors.”


Exxon Mobil and its peers are banding together to defend their riches.

After last year’s hurricanes, the American Petroleum Institute, the primary public voice for oil companies, launched a campaign to improve the industry’s image.

Red Cavaney, the group’s president, said the Institute was spending millions of dollars -- he wouldn’t specify -- on advertising and to target opinion makers and state and federal officials to dissuade them from enacting legislation harmful to oil companies.

“We’d obviously like people to like us,” Cavaney said. “But it’s a matter of priority.... It doesn’t help to have a good image if you can’t get it done sufficiently to get enough votes to swing the policy.”

Tom Brown, senior consultant with Power Decisions Group Inc. of San Francisco, which helps companies polish their brands and images, said the oil majors could be fighting a losing battle.

Their message is a “stockholder message: ‘Hey, we’re good guys, and all this is good for you.’ ”

But that, he said, is evading the issue. Nothing the industry says can erase what people see at the pump: more than $3 a gallon and climbing.