While the top executives from the nation's top five oil companies gathered on Capitol Hill yesterday for a hearing with the Senate Finance committee yesterday, Nancy Pelosi hinted at the connection between oil profits and gas prices. "American consumers are paying a big price at the pump, with gas prices going sky high, while oil companies raked in $30 billion in profit in the first quarter," she said. The intricacies of the oil economy are probably too complex to be broken down into a simple cause and effect relationship, but Pelosi understood the end result, that oil companies end up making more money when the price of gas goes up. In other words: high gas prices can't just be explained away as oil companies being squeezed by higher costs and passing the cost along.
The chart above, compiled with data from Compustat and the U.S. Energy Information Administration, helps illustrate just how connected gas prices and oil company revenues are. Net income per year for the three top-earning oil companies in 2010 (ExxonMobil, Chevron and Shell) in billions of dollars, took on a nearly identical trajectory as the line charting the cost of gas since 1999. Data was unavailable for years previous. The trend has continued in 2011, with gas last listed by the government at $4.2 a gallon on May 2nd. The profits of the big five oil companies are now up more 40 percent from a year ago.
"I don't think American people want shared sacrifice," John Watson, CEO of Chevron told the Senate Finance commitee yesterday. "I think they want shared prosperity." Looks like the American people don't have to fear shared sacrifice, at least for the moment.
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