ExxonMobil: Protecting themselves from the inevitable

This weekend, ExxonMobil is taking out full-page ads in major newspapers (read the full text here in PDF format). It looks like they're trying to protect themselves from accusations of price gouging (again):
As we did with Katrina, we will act responsibly as we reflect changes in the marketplace in our pricing to our branded dealers and distributors and company-operated service stations.
(New York Times, p. A32)

Also, aside from apologizing for the fact that they can't do much to protect their infrastructure from storms as powerful as Katrina and Rita, they also ask the consumer to act more wisely. Of course, they treat their request as something temporary, not as a move that would make for a smart lifestyle change:

During this difficult time, consumers across the nation can do their part by buying and using motor fuels wisely.
  • Save fuel by reducing trips.
  • Defer discretionary purchases to ease supply pressures.
In previous posts, we've tried to show (with varying degrees of success and agreement) that the oil companies themselves are not the most direct cause of high prices at the pump following events like Katrina and Rita. This Slate article (hat tip: Halfin) explains in detail what role the refiners play in driving up the prices. Yet, here ExxonMobil is trying to shield themselves from new cries of price gouging "by the oil companies" and new governmental investigations into why the prices are so high. Is it going to help? Are other companies going to follow suit with their own PR campaigns?

Fortunately, it seems like some people might be catching on. This editorial in the Fort Worth Star-Telegram (login: jjdoe221122@yahoo.com, pword: jjdoe221122) does a good job explaining that prices are high right now simply because demand was already tight, and got tighter after the hurricanes damaged energy infrastructure. Of course, the author, an economist at the University of North Texas, goes on to argue that we should provide economic incentives to increase refinery production in the US, and also to explore Alaska. Sigh. Well, our job now is to figure out the best ways to apply the lessons from Katrina and Rita to educate people about what the ramifications of Peak Oil will be.

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As long as every quarter is a new profit record the majors can claim anything they want, most of the public will not believe them.  Their paid-for members of Congress should have no trouble shielding them, though.
Here's an article from Slate on who to blame:
When gasoline prices spike, the public and politicians tend to vent their anger at the two most obvious sources: 1) local gas stations, where people have to pay $60 to fill up their SUVs, and 2) the companies and countries sitting on giant pools of crude oil, like ExxonMobil and Saudi Arabia.

But those who are making the biggest profits in the oil business post-Katrina aren't facing public wrath at all. In fact, they've been receiving sympathy and various forms of government aid, even though they're doing better than anyone. For the refiners, long the overlooked middle child of the oil business, good times just got better.

The article goes on to say that refineries have been making $10/barrel this year (i.e. the price for a barrel of gas minutes the price for a barrel of crude), which is already a historical high; but estimates are that post-Katrina this spread has increased to $40/barrel, leading to unprecedented high profits.

If it's any consolation to our "oil company insider", there are plenty of independent refiners, like Valero, whose stock is up 226 percent in the past year. Maybe we can agree to point fingers at the independent refineries without hurting the feelings of the "insider".

Thanks for that Slate link. You may not believe this, but I'm really trying to understand this as much as anyone else...
yes if you look at the Crack Spread post Katrina, it has been rising.  Crack Spread = price of Refined products - price of crude oil.

Post Katrina, the release of SPR AND refinery bottlenecks drove the price of crude oil down.  The refinery bottlenecks and high consumer demand for fuel drove the price of gasoline and heating oil up.

One party is forgotten in this... the ever-spending, energy guzzling, consumer.

We should also blame government, who are supposed to take a big picture look at the world, and blame them for not being more proactive and also for not educating the public.

Politics, and a generally myopic quarterly focus on results by business, tend to get in the way of doing the right thing on a regular basis. I don't expect Peak Oil to upset what has become standard operating procedure (support the economy at all costs lest the party commit politcal hari kiri).

A possibly too-cynical view: a party in power that realized what was coming would tend to do whatever it took to keep the illusion going, while at the same time shoring up mechanisms (party control, press control, military control - note the talk about changing the role of the military in domestic affairs) that will be needed when the emergency is too obvious to hide any further.

High oil prices are a function of supply and demand. Supply of oil is constrained by geology, NOT by oil companies. In a system of competitive capitalism, it's in the interest of any individual oil company to pump as much as possible. For the oil companies to be blame-worthy, there would have to be some kind of worldwide conspiracy between scores of state-owned and publicly traded oil companies to keep supply low, which is a virtual impossibility because there's too much of a temptation to cheat once the price gets this high. (OPEC is the closest thing you have to cooperation designed to manipulate prices, and just within that group alone you had rampant cheating on quotas. And that was before they agreed to open the taps full throttle.) The oil companies around the world are pumping as much as they can.

So that leaves the demand side. People who use the most oil or gasoline are the ones who are likely to be the most upset by high prices, and the ones who, if they want someone to blame, most ought to look in the mirror.

ought to look in the mirror


Suggested Peak Oil knick knack... imagine a poster of a big SUV or Hummer, focussed on the right hand side mirror.

The End Of Oil

Warning: Objects are much closer
         than they appear.

In the mirror is an artfully designed "Peak Oil" logotype or some other graphic (nothing really comes to mind that would reasonate with public at this time... perhaps a phrase such as 'the end of oil' - not accurate but would have to do... could be used)

Not positive this is related, but I wondered if anybody else had seen this:

NEW YORK, Sept 26 (Reuters) - New Jersey Acting Gov. Richard Codey on Monday said he had sued Motiva Shell, Amerada Hess AHC (AHC.N: Quote, Profile, Research) and Sunoco (SUN.N: Quote, Profile, Research) for overpricing gasoline after Hurricane Katrina shut much of the U.S. Gulf Coast's oil production and damaged refineries.

"We will not allow businesses to exploit natural disasters such as Hurricane Katrina by inflating prices at the pump in violation of New Jersey's laws," New Jersey Attorney General Peter Harvey said in a statement.