To twist a line from the Gipper, "There they go again."
Once more, Americans are being treated to the spectacle of seeing oil executives hauled onto Capitol Hill for some low-grade abuse by our lawmakers. "How dare you earn profits?" seems to be the order of the day, at least if you judge by the sound bites leaking out of the Senate Judiciary Commitee and the coverage in the mainstream press.
"Company X earned X billion in 2005," comes the refrain.
"Scandalous!" replies Joe Sixpack, exactly as he's expected to. Never mind that "profit" figures are misleading, since they don't include the very real costs of capital spending. Never mind that we live in a system where we agree that profits are good, because they attract the capital that provides for our economic growth.
In the hot seat were execs from BP
There were the usual insinuations about price gouging, and a bill from Arlen Specter designed to let the government stop oil and gas mergers if it believes these would somehow reduce available energy supplies. While there's plenty of suspicion and blame to go around, none of the stories I read bothered to mention the incredible sums that the companies invest to keep the juice flowing.
Allow me to fill them in. ExxonMobil spent $14 billion on capital expenditures last year. Chevron spent $9 billion. BP spent $12 billion. Valero spent $2 billion. ConocoPhillips rolled $11.6 billion, or more than 85% of its net profits, back into the business.
Let's make that clear. This real spending is unaccounted for in those scary-looking "profit" figures that the soak-the-rich crowd is using to try to rouse the rabble. For our lawmakers and the press to ignore such basic facts is inexcusable. But there's a popular story to tell.
Nothing I read mentioned, except inadvertently, that the real reason gas costs so much is that there's absolutely no incentive for Americans to moderate their use of it. Governments continue to encourage gas gluttony by building miles of cheap roads (on borrowed funds) while alternative transport withers. At the same time, they refuse to lift a finger to demand higher gas mileage from automakers.
Can't mess with free enterprise there, because that wouldn't play well back at the ranch, and elections are coming up. Just you try to tell the voters that they're to blame for gas prices -- that if they didn't all drive the 4-ton Canyonero, and heat the 4,000 square-foot house, there'd be more gas to go around, and prices wouldn't shoot up the way they have been. Nope, you try that and they'll ride you out of town on a rail. It remains, as always, much easier to produce a dog-and-pony show designed to look like you care, and stick the blame on those big, evil corporations.
Too bad those big, evil corporations are in fact owned by small, 95%-less-evil entities called shareholders. That's right; we all own them in our mutual funds, our pension plans, and our 401(k)s. If people realized that the government's oil-industry shakedown was actually aimed at pulling profits out of their own retirement accounts, I imagine there would be a lot less enthusiasm. But don't count on hearing that on Capitol Hill or in the sound-bite news coverage. The real story's far too complex to be popular.
Seth Jayson would love it if people took responsibility for their own gas-guzzling. At the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here. Fool rules are here.