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From The Socialist newspaper, 5 October 2006

Big profits, big power, big problems...


IN A follow-up article to his centre-page feature in the socialist 456 on the geopolitics of oil, LYNN WALSH looks at the problems caused by the power of the ruthless oil giants in the economy.

THE INTERNATIONAL oil market is dominated by a handful of giant companies: ExxonMobil, BP, Royal Dutch Shell, Chevron, ConocoPhilips and Total, collectively known as Big Oil. As oil prices soared over the last two years, peaking at around $80 a barrel recently, their revenue and profits have soared, making them even bigger.

They wield enormous economic power, and have massive political clout in Washington, London and other capitals. However, most of these companies are facing a serious long-term problem.

Their production is outpacing their discovery of new reserves. National oil companies (NOCs), partly or wholly state-owned firms through which national governments (e.g. Saudi Arabia, Venezuela) retain profits from oil production, now control an estimated 90% of the world's oil and gas reserves. At the moment, however, Big Oil still dominates the international trading, transportation and refining of oil and petroleum products.

The price of crude oil rose 40% in 2005, pushing up Big Oil's revenues and profits. Five of the world's top ten corporations are now oil majors. Four more are carmakers, some like GM and Ford making huge losses, but still producing gas-guzzling vehicles. Profits for 2006 are likely to be even higher, as oil prices continued to soar (though they are currently falling again).

On the basis of 2005 results, ExxonMobil became the world's biggest company, both in terms of revenue and profits, relegating WalMart and Citicorp (the world's most profitable bank).

Exxon Mobil had sales of $340 billion - almost $1 billion a day. Its profits were up 42% over 2004, reaching $36 billion. ExxonMobil's revenues are greater than the GDP of countries like Sweden, Taiwan and Indonesia. Its annual profits are more than the economies of 125 of the 184 top countries ranked by the World Bank.

Europe's biggest oil company (the third-biggest internationally), Anglo-Dutch Shell, reported record profits of $22.9 billion (12.9bn) for 2005. Earlier this year, BP also reported record profits, up 25% over the previous year: $19.3 billion (11bn). Investors in London, however, expressed their 'disappointment' that BP's profits had not matched those of ExxonMobil or Anglo-Dutch Shell!

City investors also complained about 'excessive' bonuses promised to Lord Browne, BP's chief executive. His annual salary is around 1.5 million a year, and he has been promised bonuses before he retires in three years of around 7.5 times his annual salary, that is, an astronomical 11 million!

Fuel poverty

MEANWHILE, THE number of people in Britain suffering from 'fuel poverty' as a result of higher electricity and gas prices is estimated to be around 1.8 million households. Recent research by PricewaterhouseCoopers confirms that the general inflation caused by oil price rises has mainly affected the poorest third of the population. They spend a greater proportion of their income on energy and energy-sensitive items such as transport and food.

"The tendency for the lowest income deciles to have higher CPI [consumer price index] inflation rates has become more marked, with the poorest 20% of households facing an average inflation rate of around 2.8%, compared to the national average of 2.4% and the estimated rate of 2.1% for the richest 30% of households," says the PricewaterhouseCoopers chief economist.

The Office of National Statistics has produced figures showing the higher inflation rates faced by pensioners who are mainly dependent on benefits and spend a lot on utility bills. Single pensioners are facing an inflation rate of 4.1% while a pensioner couple are experiencing a 3.3% rate. (Guardian, 7 September)

So flush with bumper profits are the big oil companies that many of them in Britain and the US have been buying back shares from their shareholders (which pushes up the value of the remaining shares).

Over the last three years BP has handed back $40 billion to its shareholders, and in the next three years plans to buy back another $65 billion (37bn) of shares. This is a vast amount. At current stock market valuations, $65 billion would buy Scottish Power, ICI, Cadbury Schweppes, Reuters and Sainsbury's.

Tony Woodley, general secretary of the Transport and General Workers' Union, has called for some of this spare cash to be used to support the Finance Assistance Scheme, the pensions' lifeboat set up to (partially) compensate workers who have lost their pension through mismanagement of private pension schemes.

A Labour government that in any way represented working people would tax the obscene windfall profits of the oil companies to improve the pitiful rate of retirement pensions, income support, and other benefits.

It will come as no surprise to most people that Blair, Brown and company have rejected this idea. The BP bosses are hand in glove with the Blair government. The Financial Times commented that "BP's ties with the British government are still so close that rivals call it 'Blair Petroleum'... One Whitehall insider says there is a 'meeting of minds' between Tony Blair and [Lord] Browne, who is a regular visitor to Downing Street." (2 August 2002)

Perhaps Big Oil will consider spending some of its windfall profits on research and developing relating to alternative, renewal energy resources which could reduce carbon emissions and global warming?


It has recently been revealed, however, that ExxonMobil and other big oil companies (together with some of the big tobacco companies) hand out millions of dollars to various think-tanks and right-wing propaganda organisations devoted to discrediting evidence of global warming.

ExxonMobil alone subsidises 124 organisations that "take a consistent line of climate change: that the science is contradictory, the scientists are split, environmentalists are charlatans, liars or lunatics, and if governments took action to prevent global warming, they would be endangering the global economy for no good reason. The findings these organisations dislike are labelled 'junk science'." (George Monbiot, Guardian, 19 September)

Big Oil represents enormously concentrated economic power. They also exert a powerful influence over capitalist leaders. In the US between 1990 and 2002, oil and gas companies gave US political leaders $159 million, while the transport sector (mainly the big car and truck manufacturers) contributed even more, $256 million.

The aim of these corporations is to perpetuate the existing structure of the economy, with its overwhelming dependence on fossil fuels and vehicles powered by petrol and diesel engines.

Big Oil is closely connected with the Bush regime, originally based in the key oil state, Texas. The oil corporations are also a key element in the 'military-industrial complex'. Their profit-driven strategic objectives have played a decisive role in the Bush regime's aggressive, interventionist policy in Central Asia and the Middle East.

So long as the big oil corporations are privately owned and run there will never be planned development of natural resources, with the serious development of alternative, renewable energy sources, and planning for the future needs of a majority of the population of planet earth.

Needs of society

The giant oil companies are ruthless predators, recklessly pursuing the maximisation of profit regardless of the effects on the environment and society. Short-term profit trumps medium- and long-term consequences. They will never be curbed on the basis of the anarchic capitalist market.

They should be taken into public ownership and run under workers' control and management. Only then would natural resources be nurtured for future generations and the needs of a majority of society catered for.

Such a revolution could not be achieved on a national basis. Big Oil is already global. Solving the planet's energy problems requires economic planning on an international basis. It shows the need for socialist transformation internationally, and a global planned economy.

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In The Socialist 5 October 2006:

Socialist Party NHS campaign

Our NHS not for sale!

Marching to stop cuts and sell-offs

Action is the only answer to NHS cuts

Fighting the privateers

Health workers told - no money for study

"Our campaign saved our maternity hospital"

Socialist Party fights for:

Socialist Students

Fight for a socialist alternative to Blair's Britain

Students seek out socialist ideas

Age discrimination and the minimum wage

Socialist Party campaigns

Blair more hated than Thatcher

Come to Socialism 2006!

Bush's 'war on terror' fuels terrorism!

MoD hypocrisy on Taliban


Joe Higgins' speech "tore Taoiseach [PM] apart"

Tommy Sheridan - Murdoch's new offensive

Hamas clashes with striking workers


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