Give Exxon a break
When the economy is slumping and unemployment is climbing, companies that report healthy profits are typically cheered for delivering some scarce good news. But when Exxon Mobil announced an $11.7-billion profit Thursday -- the largest quarterly profit ever for a U.S. corporation -- the reaction wasn’t quite so cheerful. In fact, Exxon took hits both from consumer advocates, who grumbled about the pain caused by sky-high gasoline and energy costs, and from investors, who complained that the results didn’t live up to their prodigious expectations. Although crude oil is selling for almost twice as much a barrel as it did a year ago, the company’s profit was a mere 14% larger than last yearalmost twice as much a barrel. What’s worse, it produced 8% less oil and natural gas.
Poor, poor, pitiful Exxon. Critics blasted the company for investing more in elevating its share price ($8 billion went to stock buybacks) than in pumping up oil and gas ($7 billion on exploration and capital investments). The profits were too meager to satisfy investors, who drove the company’s share price down more than 4%, but were ample enough to spur calls around the globe for a windfall profits tax. And meanwhile, efforts by Exxon’s allies in Congress to open more coastal areas to drilling hit another partisan roadblock, postponing any action to September at the earliest.
We hate spending $60 on a fill-up as much as the next person, but we don’t think Exxon or its outsized profits should be the impetus for bad policy. As we’ve said before, it’s a bad idea to pile more taxes onto oil companies for supposedly excessive profits. Exxon already faces a stiff tax bill -- nearly 50% of its taxable income went to the government in the most recent quarter. Increasing the price of success could discourage the company from making high-risk, high-reward bets on new supplies and technologies, which is the opposite of what the country needs.
Ultimately, the source of Exxon’s profits is the high price of oil. That’s also the force driving down the demand for gasoline and aiding the development of alternative sources of energy -- the only real, long-term solution to America’s dependence on foreign oil. So in a way, we should be thankful for another banner quarter by the world’s largest publicly traded oil company. Even if it hurts.