Oil Companies Essay

“I need a gallon of gas please,” says the man to the gas attendant. “That’ll be five dollars please.” As we all know this price is outrageous, but is the price really that far off? Rising oil prices have been a major concern ever since the scare of an oil shortage in the 1970’s. In the past ten years, gas has doubled in price. Due to this doubling in price, many questions have been raised. Such as; why so high of a price, and who controls this continually rising price? The answer to both of these questions can be found in oil companies.

These colossus companies have been and continue to prey upon the public by attempting to squeeze every single last dollar that they can out of the U.S. public. “These major oil companies have hooked their hose up to the pocketbooks of American citizens and are sucking money from ordinary Americans,” said Senator Byron Dorgan (Rothschild 5) The oil industry, composed of these massive companies, will continue to take our money as long as we say nothing and do nothing about it. Their need to be additional regulations set for oil companies before they get completely out of control.

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Oil companies have become extremely efficient in price gouging. Price gouging by definition is simply overcharging. The average gas price at present time is $2.87, that’s a sixty-five cent increase over the previous year, and a forty-nine cent increase over the past two years. Matthew Rothschild stated “Accusing oil companies of price gouging is like accusing sharks of swimming. That’s what oil companies do.”(Rothschild 1) As terrible as this statement is time has shown that this quote appears to be extremely true. One of the reasons that oil companies have stated that they raise and lower the prices is due to the obvious supply and demand.

This means that when the demand for a certain product, in this case oil, is high in price, the company selling the object or the service raises the price of said product. When the product is not used as much, the price is lowered again. The idea behind this is by raising the price, the company will lessen the demand for it and thus keep a balance of the product. The problem with doing this in oil is that oil has become an everyday necessity in today’s world. Some say that oil companies are not forcing people to buy their product, just offering it to them. It is their choice to take it or not to take it. It may be true that they are not forcing society to buy the oil, but people almost cannot go through the day without using something that needs oil, such as a family car.

Cars have become an essential part of society’s transportation system; they get people to work and then back home again, as well as everywhere else in between; work, the mall, out to lunch, to school. Nearly every place a person goes in their every day activities. Whether you own your own car, you use a car pool, or you take a bus or even a cab, almost everyone uses some form of public transportation on a daily basis. Almost everyone, every company, functions because of oil. So by price gouging, oil companies make it harder and harder for society as a whole to function in a proper manner.

By increasing the price of oil, oil companies are ultimately raising the price of everything else in society. Just think about it, the cycle begins with oil companies raising the price of gasoline. Semi trucks run off of this gasoline, and semi companies are a major transporter of all kinds of goods throughout the United States. If the semi companies are forced to pay more to transport an item, then they are going to charge the people they are transporting the item for more. By charging more to transport goods, the companies who make the goods are going to charge more to buy the product in order to compensate for the extra cost to ship the item.

This brings extra charges to the consumer, which in return raises minimum wage and inflation sets in. All in all, the point made by this scenario, is that by raising the price of gasoline, a chain reaction occurs that affects not only the oil market, but also the market of everything else in our society. Now in real time, in the previous month of April, Americans had already spent more than forty billion on gasoline, equal to what was spent in all of 2002.(Halliday 1) A question always comes to my mind when seeing these figures, what would American’s spend on oil if gas prices were still only a dollar?

The profits that oil companies are making off of their product is staggering. Reports have shown that in 2005, the oil industry recorded revenues of $1.62 trillion, with profits totaling almost $140 billion. Nearly eighty-one percent of this oil was made by the leading five major oil companies: ExxonMobil, Royal Dutch/Shell, BP, Chevron, and Conoco Phillips. ExxonMobil accounted for over twenty-five percent of the total profits.(Congressional Digest 1) ExxonMobil has earned the largest quarterly profit in the history of our nation with making close to $10 billion in the third quarter and close to thirty-six billion for the year.

Congressman Bernie Sanders, on this topic, had this to say, “To put this price in perspective, this means that Exxon Mobil hauled in more profits in three months than corporate behemoths Coca-Cola Co., Intel Corp. and Time Warner inc, earn in an entire year.”(Sanders 1) This is just an overwhelming amount of profit, making a 42.6 percent increase over last year. All of the oil companies are experiencing reoccurring record breaking profits. Every year for the past five years they have been able to surpass the past year’s profit record, and set ever-increasing standards of profits made. This epitomizes what has become American society of late, greed consumed companies, always finding more ways to make more money.

On to the other common question when it comes to oil companies and their rising prices. “Who gets all of this money?” The answer comes back to the CEO’s of these mammoth companies. ExxonMobil has had a dramatic increase in media since their head CEO, Lee Raymond, retired. The Company gave him a $400 million retirement plan.(Buckley 1) This retirement plan included stock options, two years of home security, personal security, and a company jet for business purposes. Being able to give a one single man almost half a billion dollars is definitely testimony enough that these companies have become greedy and there is no need for the prices of their product being as high as they are.

Another example is the fact that before retiring, Mr. Raymond made $51.1 million in 2005. When calculated out, that comes out to almost $6,000 an hour. I don’t know about you, but I would be perfectly content making $6000 in a month, let alone in an hour. When asked why the company gave this extraordinarily large amount of money to Mr. Raymond, they simply stated “He has led our company to the top.” Now why hasn’t the government intervened in any of this? With so much money being in oil, oil companies have much more pull throughout the government than what there appears to be.

When it comes to oil companies and the War in Iraq, many people wonder if there was a connection between the two. Was the war necessary? In my opinion, the war was definitely necessary. Suddam Hussein was a ruthless man and dictator that needed to be taken out of power. Aside from Suddam Hussein, what were the other objectives and motives are government had to infiltrate the country? “Washington says it wants to eliminate any threat of interruption of the flow of oil to ensure that it will be accessible to U.S. oil companies,’ said British labor Party politician Alice Mohon, “A different and more compliant government in Iraq would make that possible.”(Crock 1) With people around the nation clamoring sayings such as “No U.S Blood for Oil” the presidency and oil companies are denying such claims. Though controlling the oil fields was probably not a primary objective, keeping the oil out of the hands of a psychotic dictator can easily be seen as one.

So why was there such a rush after the war to get to the Iraqi oil? Simple, Iraq is the second largest deposit of oil, just right under Saudi Arabia. By opening up the oil fields in Iraq, our government is not only benefiting oil companies worldwide, but also drilling companies who can finally get within the country. According to CFR-Baker only fifteen of its seventy-four discovered oil fields have been fully developed, and just 125 of the 526 known oil deposits have been drilled.(Crock 2) These statistics mean that there is lots of oil to claim and control. By controlling this oil, companies can have a better control over crude-oil prices and also keep the prices as high or as low as they want. Now do you still think the war in Iraq has nothing to do with oil and our oil prices?

So why hasn’t the media been eating this up and displaying the oil industry for what it really is? The answer is advertisement. Oil companies have become increasingly concerned with the public and the advertisement presented to them. “Oil Giant Shell launched a $35 million retail gasoline ad campaign themed “Passionate Experts” that features two male actors playing lab-coated engineers showing how the marketer’s gasoline prevents gunky engine build-up, with the tag: “Made to Move.”(Halliday 1) The companies completely dismiss raises in gas prices as just something that has and always will re-occur.

Steve Miller states that “Last year, Shell trotted out a giveaway that provided six lucky motorists with gas for life.”(Miller 1) BP is currently running an animated commercial from Ogilvy & Mather, New York, that shows children riding along in a car, singing with drivers filling up at a bright green and yellow BP station that has whistling gas pumps.(Halliday 1) Is this type of advertisement showing any of the issues that Americans want to have addressed? By putting more emphasis on the “quality” of their gas stations and the “experience” of what society receives by going there, these companies are able to avoid the real questions involved with gas prices and actually shift the focus of Americans attention off of these questions as well.

The United States government needs to limit these companies. Some such ideas are to price fix, or put a cap on the price that gasoline can get to. Another idea is to simply increase the taxes that oil companies must pay. What has been the reaction of our government? Nothing, in fact the Bush administration has given them billions of dollars in tax breaks, the opposite of what needs to be done. George Bush puts the subject so plainly in his April 25 speech. “What can the government do? One of the past responses by government, particularly from the party of which I am not a member, has been to have – to propose – price fixing, or increase the taxes.

Thos plans haven’t worked.”(Rothschild 2) This statement to me almost seems like the president of our country, our leader, is saying that there is nothing that can be done to stop these tyrants, that congress can do nothing. This is almost a testament to how the current administration has failed if they think that there is nothing that can be done. These ideas of limitations can work, because they have worked for different companies in the past. Many Politicians have even spoken out, such as Representative Dennis Kucinich saying “Congress must break the hold that the oil companies have on the politics of our country. Congress cannot stand by while the oil companies are stealing from the American people.”(Rothschild 5) These remarks seem to give off hope that our government will take action, that our political system is not entirely corrupted and consumed by greed.

For if there is nothing that our government can do against them, then we might as well start signing our paychecks over to the oil companies. The question is, that if and when our government decides to take action, will it be too late? The fault of the situation, however, lies at the feet of the consumer. As long as we sit idly by, paying the prices without protest. The oil companies have no reason to lower their prices. As long as people still drive cars that get 10 miles per gallon, nothing will be done. If society keeps wasting oil the way we do, then we deserve five dollar a gallon prices. To solve the problem of oil, we need to first make changes in our daily lives. We need to be proactive in our government and voice our opinions as a body of people. If no one says anything, nothing will be changed.

Works Cited

Miller, Steve. “$4 Per Gallon Gas? An Anxious Climate.” Brandweek 48.25 (2007): 53 Academic Search Premier EBSCO. Eastern IL U, Booth Lib. 1 Oct. 2007. <http://search.ebscohost.com>

Halliday, Jean. “Ignoring the Issue? Oil Giants Steer Clear of Price in Gas Ads.” Advertising Age 78.21 (2007): 4-53 Academic Search Premier EBSCO. Eastern IL U, Booth Lib. 1 Oct. 2007. <http://search.ebscohost.com>

Crock, Stan, et al. “It’s Not ‘All About Oil,’ But…” Business Week 10 Feb. 2003: 34-35. Academic Search Premier EBSCO. Eastern IL U, Booth Lib. 1 Oct. 2007. <http://search.ebscohost.com>

“Oil Company Profits.” Congressional Digest 86.4 (2007): 103-104 Academic Search Premier EBSCO. Eastern IL U, Booth Lib. 1 Oct. 2007. <http://search.ebscohost.com>

Sanders, Bernie. “Stop Oil Company Price Gouging.” 29 Oct. 2005. CommonDreams.org. 1 Oct. 2007 <http://www.commondreams.org/views05/1029-31.htm>

Buckley Jr., William. “Gas Gouge.” National Review 58.9 (2006): 63. Academic Search Premier EBSCO. Eastern IL U, Booth Lib. 1 Oct. 2007. <http://search.ebscohost.com>

Rothschild, Matthew. “A gouging market” The Progressive 70.6 (2006): 8 Expanded Academic ASAP gale. Eastern IL U, Booth Lib. 2 Oct. 2007 <http://find.galegroup.com>

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