By Brett Arends
Wednesday, September 7, 2005 - Updated: 04:27 PM EST
Oil companies came under new fire yesterday when it emerged that ExxonMobil's profits are likely to soar above $10 billion this quarter on the back of the fuel crisis.
That's $110 million a day, and more net income than any company has ever made in a quarter. It's also a stunning 69 percent increase over the same period a year ago and a 34 percent jump from the $7.6 billion Exxon made just last quarter.
"Do you realize President Bush has just given a tax break to ExxonMobil? thundered Rep. Ed Markey (D-Malden). ``Of all the companies in the history of the world that needed a tax break, this month, ExxonMobil should be at the bottom of the list.
The law gives incentives to producers such as Exxon to expand production, such as for drilling for new wells in deeper waters in the Gulf of Mexico.
"It makes me angry, agreed Rep. Marty Meehan (D- Lowell), noting rising fuel prices "are going to have a negative ripple effect throughout the economy.
Meehan yesterday sponsored legislation on Capitol Hill to penalize price ``gouging, assuming it can be agreed what that is. Markey is preparing for Energy Committee hearings on the fuel crisis.
Even oil company shareholders were critical. Hub fund manager Lee Forker, the head of New England Research & Management, said the profits reflected a failure of oil companies' leadership to invest in future production. "They're maximizing present cashflows and ignoring the future, he said.
ExxonMobil is spending about $5 billion a quarter buying back its own shares.
Forker says the oil companies bear responsibility for recent shortages, because they have held back on investment in new production for years due to a fear of a price collapse. "It could just be a big scam – `Let's just restrict the supply along with the OPEC countries and we'll all get rich together' he said.
Crude oil prices fell yesterday by $1.61 to $65.85 a barrel. Gasoline prices also eased slightly from late last week's panic.
But Lehman Brothers yesterday became the first Wall Street investment bank to issue a new profits forecast for Exxon following the week of post-Katrina turmoil, when gasoline prices surged as high as $3.59 a gallon in the Bay State and crude oil prices briefly topped $70.
The new forecast: $1.62 a share, or $10.2 billion in total. Other analysts are likely to follow suit.
Jacques Rousseau, energy analyst at investment bank FBR, yesterday explained that most of the extra money that consumers are paying for gasoline is going straight through to the big companies' bottom line.
The reason? Prices are soaring because of perceived shortages while the cost of producing the gasoline is little changed.