Exxon profit hits record $39.5 billion
In charting the oil market, profits are up but outrage is flat.
Exxon Mobil Corp. on Thursday posted 2006 profit of $39.5 billion -- the largest ever recorded by a public company. Oil giant Royal Dutch Shell and U.S. refining heavyweight Valero Energy Corp. also registered record-high profits for the year, part of a string of superlative results that is expected to continue when Chevron Corp. releases its earnings today.
The hefty profits got a predictable rise out of U.S. politicians and the industry’s most-devoted critics. But lower gasoline prices seem to have sapped the anger that kept lawmakers and consumers worked up for much of the last two years.
“If you get hit over and over again with a two-by-four, after a while you get numb to it and then you only feel the four-by-fours,” said Michael Shames, executive director of Utility Consumers’ Action Network in San Diego.
“The $3-plus gasoline prices really got under drivers’ skin,” Shames said, “but the current $2.50 levels are not generating the same ire, so we’ve received fewer complaints about oil-company gouging.”
Albert Garcia, filling up Thursday at an Exxon station on Olympic Boulevard in Los Angeles, shrugged when he heard about the latest run of oil company profits.
“Do I care? Yeah,” said Garcia, 53, a railroad electrician who grimaced as his fuel tab tipped the $50 mark.
“But is there anything I can do about it? No. Oil companies want to make money, and if you let them, they can.”
Knowing that the earnings would spark a fresh round of criticism, Exxon spokesman Ken Cohen urged reporters to keep things in perspective.
“There’s a lot of focus on earnings,” he said. “Yes, our profits are huge. But our investments are huge, and we have to weather the cyclical environment” that in the past left oil companies fending off losses amid $10-a-barrel oil.
On Thursday, crude closed at $57.30 a barrel, a decline of 6% since the end of 2006 and 14% from a year ago. Gasoline prices have been ebbing in the wake of oil’s slide.
Consumer advocates stressed that although motorists appeared to be protesting with less vigor, they weren’t indifferent to today’s prices, which remain well above recent norms.
Tyson Slocum, director of the energy program at Public Citizen, characterized drivers’ disposition as “continued general discontent” without the road rage brought by last summer’s price surge.
A little more than a year ago, after hurricane-related disruptions sent gasoline prices soaring above $3 a gallon for the first time, the public outcry culminated in a series of congressional hearings, including a November session in which the chief executives of Exxon and its brethren were grilled under oath about what legislators saw as a connection between high pump prices and record profits.
There are no plans for a similar hearing in the new Congress. But Thursday, Rep. Edward J. Markey (D-Mass.) lashed out at Exxon, calling the company’s profit “outlandish” and vowing to promote legislation that would “put helping American consumers ahead of further lining Big Oil’s pockets.”
Already, federal lawmakers have advanced bills that would roll back recent oil industry tax breaks and close a loophole that allowed oil companies to pay the government unusually low royalties on some offshore leases.
The lofty cost of oil and fuel boosted the fortunes of Exxon and other oil companies in the first nine months of 2006, and those profits were strong enough to offset a fourth-quarter dip when prices reversed course.
Irving, Texas-based Exxon’s net income for the fourth quarter fell to $10.25 billion, or $1.76 a share, down 4% from profit of $10.7 billion, or $1.71, in the year-ago quarter.
During the final three months of the year, income fell nearly 12% at Exxon’s flagship business of exploring for and selling oil and natural gas, and earnings dropped 18% at the company’s refining and marketing operations.
Revenue for the three months that ended Dec. 31 totaled $90 billion, down more than 9%. The company’s full-year profit of $39.5 billion easily surpassed Exxon’s 2005 net income of $36.1 billion, a record at the time. Sales rose nearly 2% to a record $377.6 billion in 2006. Total production for the year increased 4%.
At Royal Dutch Shell, fourth-quarter earnings rose 21% to $5.28 billion, up from $4.37 billion. The company’s full-year net income of $25.4 billion set a record for a British-listed firm.
Refiner Valero of San Antonio, which operates two plants in California, collected profit of $1.1 billion, or $1.80 a share, in the final quarter of 2006, down from net income of $1.3 billion, or $2.06 a share, in the year-earlier quarter. For the year, Valero posted profit totaling $5.5 billion, or $8.64 a share, versus $3.6 billion, or $6.10, in 2005.
Michelle Yoo, a homemaker from La Crescenta, just shook her head at the size of the profits.
“It makes me angry,” said Yoo, who was pumping Exxon gasoline Thursday into her Honda Odyssey van. “They are rich enough, and they’ve made a lot of money -- again.”
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The top 10
Largest annual profits on record
*--* (In billions) Exxon Mobil, ’06 $39.5 Exxon Mobil, ’05 $36.1 Royal Dutch Shell, ’06 $25.4 Exxon Mobil, ’04 $25.3 Royal Dutch Shell, ’05 $25.3 Citigroup, ’05 $24.6 Ford, ’98 $22.1 Citigroup, ’06 $21.5 Exxon Mobil, ’03 $21.5 Bank of America, 06 $21.1
Source: Standard & Poor’s, Associated Press