Ethics and the Oil Industry

Does anybody Care?

As the US Economy continues to dive, unemployment persists at a level not seen since the Great Depression, and the US Federal Government sees fit to continually bailout big business, it escapes logic why the cost of oil once again, is on the rise.

The US oil companies would have us believe it has to do with the Middle East oil producing nations cutting back on production, therefore raising the price. The energy traders at the New York Stock Exchange shrug it off to supply and demand. Many theorize that America has billions of surplus barrels of oil. I believe it is pure greed from these entities. With so many Americans struggling to survive and just keep food on the table, would it not be ethical to enact a type of moratorium on fuel prices?

With the Freedom of Information Act working in full force, it is simple to find information on the World Wide Web that most industries would rather not have located. Take for example, the oil industry. As the price of gas at the pump changes daily, US oil companies continue to rake in huge profits.

Even in the wake of the recent oil spill which has had a global affect, BP Oil, “the London-based company earned $1.79 billion from July through September, compared with $5.3 billion a year earlier. But the fact that BP returned to profits at all, coming after a loss of $17.2 billion in the second quarter, indicated the company's operations remain solid despite the spill” (Wardell, 2010).

This company set aside $40 Billion for the pending lawsuits and cleanup and helping to restore the affected economies. I do not know, how about dropping the price at the pump if the company really wants to effectively help out? It is speculated this spill will be felt for years to come. I wonder how many remember the Exxon Valdez spill caused by a drunken ship captain…

As congressional leaders begun having many meetings to discuss this issue, the oil company CEOs continue to lay claim a huge percentage of the profits (of course no dollar figure was given), is for creating new energy sources, really? Where are the charts and PowerPoint diagrams that consumers can review to ease our minds while we are again, paying between $3.00 and $4.00 for a gallon of gas? I find it interesting that when asked, not one executive was forthcoming with information related to the quarterly dividend payments to the stockholders. I am always flabbergasted by the laundry list of excuses these executives dribble out of their mouths.

Two of my personal favorites are, 1: Twice a year, each oil company shuts off part of their refinery distribution for routine maintenance. Sure enough, for two to four weeks the price of a gallon of gas will jump 10 to 20 cents. What I find interesting is when the price starts to drop again; why does the price not drop the entire amount of the increase? I have personally watched several of these inquisitions on the C-Span channel.

I wonder why during the Senate/oil company meetings, this question is never asked. 2: The oil producing countries are cutting production to inflate prices. I think the United States Government believes the American public is clueless as to what is really going on.

The congressional leaders raise their voice and appear to grill the oil execs with questions and when the meeting is over, it is a slap-on-the-wrist and “stop doing that!”, and life continues as it does. The Senate meeting appears to have been nothing more than a “dog and pony” show for the American public. Society needs to remember that congressional leaders do not have to pay for their own fuel. It continues to beg the question, who is watching out for the rest of us that do have to pay at the pump? It certainly will not be the futures traders at the New York Stock Exchange.

For those who do not understand futures, this is when traders speculate on the price of specific commodities such as Gold, Orange Juice and oil. Traders buy or sell based on what they believe will be the price by a certain date. Based on this type of fabricated speculation, the value of the dollar and supposed turmoil around the world, this can have a serious effect on the price of oil, or so we are lead to believe.

“In California, over a 21 month period, October 2006 to June 2008, a gallon of gas rose from $2.29 to $4.59 a gallon” (Herszenhorn, 2008). On a network-news website in Tallahassee, Florida, the lead article said, “Congress is poised to investigate what role speculators are playing in rising gas prices.” It went on to say, “The prices keep climbing. The price at this Tallahassee station was 10 cents cheaper just six days ago. Panama City stations are even worse where the price of gas Monday jumped 10 cents a gallon just Monday afternoon.” (Ray, May 2008).

In April of 2008, Governors from several states called on the White House, the Energy and Justice Departments to begin an investigation into insider trading, illegal price fixing and speculator manipulation. This included collusion within the oil companies. Amazingly, by November 24, 2008, a gallon of gas was $1.71 a gallon. Everyone was so relieved of the incredible price drop, no one bothered to ask the oil companies how it was possible that gas could drop $2.87 a gallon in five months when it took 21 months to increase $2.30. I suppose we will never know. I suppose I would not fret if I was one who had a lot of stock in any oil company.

For all the posturing the US Congress seems to have perfected to an art form, there are still many unanswered questions when the discussion surrounding energy and oil surface. In a New York Times article, the overall point was once again, no concise ideas of how to deal with the price of oil situation. Of course, the article talked about a lot of finger pointing towards OPEC (Organization of the Petroleum Exporting Countries).

The article stated, “High on the list of Congressional Democrats own proposals is an eight-year old bill first introduced by Senator Herb Kohl of Wisconsin in 2000, that would classify the Organization of the Petroleum Exporting Countries as an illegal monopoly in violation of the Sherman Antitrust Act” (Herszenhorn, May 2008).

It went on to say, “The Republicans, meanwhile, recycled some of their old proposals to increase domestic production, with bills that would allow drilling in the Arctic, as well as in the Atlantic and Pacific, and would mandate increased production of fuel derived from coal” (Herszenhorn, May 2008). All we hear is more rhetoric and no ideas how to help the consumer.

This is not only an ethical issue; it points the arrow of social responsibility to the Government that should have the American public’s best interests at heart. As of this month, November 2010, “The number of unemployed persons, at 14.8 million, was little changed in October. The unemployment rate remained at 9.6 percent and has been essentially unchanged since May” (BLS, November 2010). And yet, fuel prices still continue to rise.

In Addition, the environment will continue to suffer as talks continue about drilling in North America to distance ourselves from foreign oil. Unable to locate the article, my father told me about a news article he read several years ago that came from the oil industry. The premise was if the US no longer needed foreign oil or were to even be able to cut usage by one third, the global economy would fall apart. It sure is hard to believe that every time I pull up to the pump to fill the tank…

It would seem from not just a national perspective but also a global perspective, we as consumers are in a situation that will never change. As consumers look to the Federal Government to reign in the oil companies, the price at the pump continues to rise. It is difficult to know who is lying and telling the truth as it relates to oil. In addition, what becomes the cutoff point when I am deciding what price I am willing to pay at the pump?

It seems clear that our government will not be helping to curb oil price increases. OPEC will continue to do as they see fit and the US oil companies will raise prices as every holiday approaches and/or for whatever reason they see fit. Does it really matter? When it comes to the price of oil, the consumer cannot get the straight truth out of anyone. As we continue to read in the news about the push for alternative energy sources, the discussion continues among my friends that getting away from oil will probably never happen, in our lifetime.

References

Herszenhorn, R. (2008) As Gasoline Prices Soar, Politicians Fall Back on Familiar Solutions. The New York Times. Retrieved November 6, 2010 from http://www.nytimes.com/2008 05/03washington/03cong.html

Ray, W. (2008) Gas Price Investigation. Channel 7 WJHG.com. Retrieved November 8, 2010 from http://wjhg.com/news/headlines/ 18902929.html

United States Department of Labor (2010) Bureau of Labor Statistics. Employment Situation Summary. Retrieved from November 7, 2010 from: http://www.bls.gov/news.release/empsit.nr0.htm

Wardell, J. (2010) BP Oil Spill Cost Hits $40 Billion, Company Returns to Profit. Retrieved November 8, 2010 from http://www.huffingtonpost.com/2010/11/02/bp-oil-spill-costs-hit-40_n_777521.html