Oil Companies are Thriving While Americans Suffer
Teddy Witt ‘24
Gas prices are continuing to hit record highs this spring.
On May 15, the average price-per-gallon of gasoline in the U.S. reached $4.47, up from just $3.04 on the same date last year. For many, this increased gas spending means cutting corners in other areas. According to J.P. Morgan, Americans spend $1.60 less on other consumer goods for every extra dollar spent on gas—in total, non-gas consumption is expected to decline by $9.6 billion across the country. Blame for this burden on the American economy has been assigned to a variety of causes: the Russo-Ukrainian War, the Biden administration, and COVID-related supply chain pitfalls. While there may be convincing arguments for all three, the fundamental reason for now-prolonged high prices can be boiled down to something else: skyrocketing corporate profits.
American oil companies have raked in extraordinary profits since the new year. ExxonMobil, Chevron, and ConocoPhillips have each made more than $5 billion after taxes. Instead of meeting the fuel needs of Americans by investing in increased production, however, these companies are lining the pockets of their shareholders. During the first fiscal quarter, major U.S. oil companies spent 54 percent more on dividends and stock buybacks—a tactic used to please investors by raising share prices—than on raising pro- duction, according to the Wall Street Journal. Crude oil prices have fallen since their peak in March, but prices paid at the pumps have only gone up, further enriching oil companies and their Wall Street backers at the expense of everyday drivers. While the windfall profits tax proposed by several Democrats in Congress would curb oil giants’ profiteering, it wouldn’t necessarily incentivize increased drilling right now. More importantly, it wouldn’t resolve the critical issue looming over the oil industry: the problem of climate change.
Oil and gas production occupies a unique position in today’s world. As Matt Bruenig wrote in Jacobin, it is “absolutely essential to maintain in the short term and absolutely essential to eliminate in the long term.” As such, the best path forward is nationalization and public ownership. Investors won’t invest in the growth of an important but doomed industry; instead they’ll siphon out all the money they can through dividends and buybacks. The marketplace, by its refusal to meet the public’s need for fuel, has shown that democratic management of the oil industry—an approach that takes into account human need, not profit—is crucial moving forward. Only the federal government, freed of market pressures, can make sure Americans are able to get to work while also phasing out oil and making the necessary transition to renewable energy.
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