Daily Telegraph: Activists tap into growing reserves of anger: "There is big money at stake. Royal Dutch Shell, BP, Conoco Phillips and Exxon have all reported such a large increase in profits this year that collectively they are expected to have made $100billion by the end of this year.": Friday 28 October 2005

(Filed: 28/10/2005)

Exxon is the latest oil giant forced on the defensive as profits are linked to soaring prices, says David Litterick

For any other company, a quarterly profit of $10billion and revenues of more than $100billion would be seen as a good thing. Good for investors, good for tax revenues and good for the economy.

Yet you won't hear Lee Raymond boasting too loudly.

The chairman of Exxon was almost apologetic yesterday, aware that his profit figure, the largest in US corporate history, would spark outbursts of vitriol.

Even before the company announced its results, critics claimed without obvious hyperbole, that "if we don't fight big oil, this country's going down".

These are not the rantings of a militant eco-warrior. This was Hillary Clinton, junior Democratic senator for New York and a good bet for the next president of the United States.

"You just cannot convince me that they are not manipulating this market," she said. "We're not going to have the standard of living and the quality of life, and we're not going to be able to control our future."

Mrs Clinton was preaching to the converted. Her comments came in a speech to a group of clean energy investors and other environmental activists. But they are symptomatic of a new feeling of anger towards the large oil companies, not just within the Washington Beltway but in small towns across America.

The laws of supply and demand had pushed oil prices to $60 a barrel even before the winds of Hurricane Katrina shut down production in the Gulf of Mexico and disrupted petrol supplies across the whole country.

But the subsequent leap in the price consumers were paying at the pump led to the inevitable allegations of price gouging and growing calls for a windfall tax on the oil majors' profits.

There is big money at stake. Royal Dutch Shell, BP, Conoco Phillips and Exxon have all reported such a large increase in profits this year that collectively they are expected to have made $100billion by the end of this year.

Some, like Mrs Clinton, want a slice of that money to go towards a $20billion clean energy fund to help finance new projects in solar and wind power. Others want price caps on petrol and heating oil, which is expected to soar in price this winter.

Lord Browne of Madingley, chairman of BP, attempted to play down the issue this week, insisting he was "not under any pressure at all" over his company's profits. He said a few months of high oil prices did not mean the world had moved to a high oil price environment and that the laws of supply and demand would move the price down to around $40 a barrel in the medium term.

Nevertheless, politicians with points to score and votes to attract tend to focus on nearer horizons.

Exxon yesterday confessed that the industry had in part fostered the unrest by failing to communicate its message Usually tight-lipped about their retail margins, BP admitted this week that it made no money at its petrol stations, while Exxon followed suit yesterday, claiming its retail business operated on "negative margins".

Both companies have also spent enormous sums on fresh campaigns to alter the public's perception. The result is a series of swish adverts which paint the oil majors as guardians of the environment. If the aim was to get consumers back on side, it appears to have failed. A recent poll showed nine out of 10 Americans feel they are getting gouged by big oil companies, while four out of five support a tax on the windfall profits of oil companies if the resulting revenues are devoted to alternative energy research.

Fortunately, the chances of getting legislation through the Republican controlled Congress are slim.

President Bush is clamouring for more refineries to correct the supposed dearth of capacity. Exxon reckons to have added the refining capacity equivalent to three medium sized refineries over the past few years through investments in technology, enabling them to process an extra 400,000 barrels of oil a day. It was equally quick to point out just how much it was reinvesting - $4.4billion on capital and exploration projects in the third quarter alone.

Whether that will be enough to fend off the growing calls for the oil majors to be slapped with extra taxes remains to be seen.

$100 billion facts

Exxon's third-quarter revenues were $100billion. That is:

• The cost of keeping the US armed forces in Iraq and Afghanistan this year.

• More than the cost of acquiring aircraft makers Boeing and Lockheed Martin ($78billion).

• Google's market valuation ($99billion).

• The value of the food thrown away in the US each year.

• More than the size of Singapore's economy ($91billion).