Big Oil uses record profits to hold us hostage

Editorial written April 4, 2008

By Don Hutchens, Nebraska Corn Board

I’m not sure if oil companies think we are that naïve, or that we all just love paying nearly $4.00 a gallon for gas while they bask in record profits.

Exxon Mobil reported record profits of $40.7 billion last year, while it and the other four leading oil companies combined for profits of $123 billion. At the same time, the value of the entire U.S. corn crop in 2006-07 was $32 billion – that’s the gross value, or the value before any expenses and taxes are paid.

Those incredible profits by the oil industry – which are 90-160 percent more than they were just a few years ago – are part of the reason Big Oil executives were called to Congress to explain how they could show those kinds of profits while American consumers are staring $4.00 gas in the eye. “We have to move to a renewable energy economy,” Rep. Edward Markey (D-Mass.), chairman of the Select Committee on Energy Independence and Global Warming, told a CBS morning program. “We can never get out of this trap as long as the oil companies want to hold us hostage to this old agenda.”

To hold on, oil companies play an age old shell game that they have the money to control: Blame someone else for the problem while you profit, and keep those you blame on the defensive. One way to keep corn ethanol on the defensive is to blame corn producers and the ethanol industry for a variety of problems, real or perceived.

Unfortunately, Big Oil’s well-oiled machine has been successful over the last year, as corn farmers have had to defend themselves for causing everything from obesity to starvation to being the root cause of higher food costs.

The simple truth is some food prices have gone up. But the real driver behind the increase isn’t corn. It’s the cost of energy. Big Oil won’t admit it, but studies show that high fuel prices have twice the impact on food costs as corn. So not only are consumers getting raked over the coals in the grocery store, but the oil companies make sure to rake us all again when we fill up on the way home.

Fortunately for motorists, ethanol is priced much less than regular gas and helps lower fuel costs. One economist recently calculated that ethanol lowers the price of a gallon of gas by 5 to 10 cents. Another study suggested the savings were 6 to 9 cents. That may not seem like a lot, but across the country that means a savings of $7 billion to $14 billion each year. That’s a lot of money!

There is also enough ethanol production now that it helps meet this country’s fuel demands by making up for oil company refineries that haven’t been expanded and, in some cases, are operated below capacity. In fact, the oil industry has not opened a single new refinery to make more diesel and gasoline in more than two decades.

In a report by the Consumer Federation of America last month, Dr. Mark Cooper explained: “For a half a decade the major oil companies have exercised their market power. …In response to record high prices, consumers are cutting their consumption and lower priced alternatives, like ethanol, are expanding supplies.”

The report went on to say, however, that if oil stays around $100 per barrel and refiners cut their production runs to increase margins, consumers could see gasoline increase as much as 75 cents per gallon or more before the Memorial Day weekend. That’s right – refiners may actually cut production to maintain margins.

American corn growers, though, have increased acres and are poised to plant the second-largest corn crop in history in order to meet demand. They’ve aided local economies by investing in new equipment and technology to become more efficient and lower costs. They’ve met demands for feed, food and fuel, and are working hard to meet the demand for corn in the future.

What has Big Oil done for you lately with their record high profits? Are they working to meet your demands – or theirs?

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