Consumers Angry Over Oil Company Profits

By Alan Fein

New York - Just ask any American who's had to fill up their tank what they think of Exxon Mobil Corp.(NYSE: XOM) and other domestic oil companies when you mention the fact that their second-quarter profits were all record-setting amounts and you'll most likely see frustration and anger in their response.

Exxon reported a 36 percent increase in second-quarter profit that was bolstered by record oil and gas prices as well as improved refining margins, which may sound great if your a shareholder, but to consumers, the word "profit" coming from an oil company is treason.

Record-high energy prices pushed Exxon Mobil second-quarter profit to $10.71 billion, a record income for the Texas-based oil and gas exploration and development company. Exxon Mobil, the world's largest publicly traded oil company, said earnings amounted to $1.72 per share in the second quarter compared with a profit of $1.20 per share a year ago. Its results even beat the savviest energy analysts estimates, which the average earnings estimate on Wall Street was $1.64.

While investors smiled, lawmakers didn't. Rep. Edward Markey (D-Mass.) said Thursday that the nation's consumers have been "tipped upside down and have had their savings shaken out of their pockets at the gas pump." But big oil argues that it has troubling supplying the market and demand is outstripping production.

"We continue to see demand growth year over year," Henry Hubble, Exxon's vice president of investor relations, told analysts. "We're selling everything we can make." Exxon Mobil reported revenue of $99.03 billion in the second quarter, up from $88.57 billion in the prior-year quarter. That was short of Exxon Mobil's record third-quarter revenue of $100.72 billion - which also stands as record revenue generated by any U.S. public company in a quarter.

But Exxon's not alone in reporting strong second quarter results. Chevron Corp. (NYSE: CVX) also reported record second quarter revenue and earnings. Chevron said it earned $4.35 billion, or $1.97 per share, for the three months ended in June. That represented an 18 percent increase from net income of $3.68 billion, or $1.76 per share, at the same time last year. It was also the largest profit in any quarter in Chevron's 127-year history.

Royal Dutch Shell PLC (NYSE: RDS-A) came close to matching Exxon Mobil Corp.'s 36 percent quarterly earnings boost on Thursday, posting net income of $7.3 billion, an increase of 40 percent from the year before. ConocoPhillips (NYSE: COP), the nation's third-largest oil company, earned $5.18 billion, or $3.09 per share, compared with $3.14 billion, or $2.21 per share, in the second quarter of 2005. The result was a 65 percent increase in profit.

This week the Senate sought to help out the energy industry by working on an election-year bill that would open a large area of the central Gulf of Mexico to oil and gas drilling in an attempt to boost domestic oil production.

By a vote of 86-12 the Senate agreed Wednesday to proceed with the legislation that opponents fear could clear the way to lifting a federal drilling moratorium that has protected 85 percent of the country's Outer Continental Shelf from New England to Alaska for a quarter century.

In turn, companies like Exxon Mobil are looking to boost their spending. Exxon just announced that it would increase exploration spending by $1 billion on top of its $19 billion already earmarked. Over the last year, Exxon has increased production 6 percent.