While Americans were stung by historically high gas prices this fall, the world's biggest oil companies saw their profits skyrocket.
In October, ExxonMobil, the world's largest publicly traded oil company, announced net income of $9.9 billion for the most recent earnings quarter, eclipsing analyst expectations and dwarfing the $5.68 billion reported for the same quarter in 2004. It was the largest quarterly profit ever for a U.S. company.
ExxonMobil wasn't alone. Royal Dutch Shell saw profits grow 68 percent, to $9.03 billion. BP announced profits at 34 percent above 2004 levels, and ConocoPhillips saw revenue jump 43 percent.
And the trend continued into 2006. Today, ConocoPhillips surpassed expectations with $3.68 billion in fourth-quarter profits. And more sky-high earnings are expected through the end of this week, as the other big companies report.
The main reason for the soaring profits? High oil and gas prices.
Consumers Pay Up
Despite temporary interruptions to refinery and delivery operations after Hurricanes Katrina and Rita ravaged the Gulf Coast, an accompanying surge in crude oil prices and prices at the pump allowed oil companies to bolster their earnings. Crude oil represents more than 50 percent of the cost of gasoline, and many oil companies were able to capitalize when the cost of a barrel of crude climbed above $60.
"What might have been lost in terms of production and refining capacity was more than made up for by the hurricanes driving oil prices up a couple dollars a barrel," said John Parry, an analyst with John S. Herold.
The oil giants' windfall is a stark contrast to the ugly scenes around U.S. gas stations in September -- hours-long lines of drivers desperate to fill up, despite prices that often topped $3 per gallon. Some politicians are questioning why oil companies profited so much while consumers struggled to fill their tanks.
Even Republican lawmakers, who have historically counted on support from the oil industry, are asking for answers.
Senate Majority Leader Bill Frist, R-Tenn., called for Senate hearings to examine the reasons for high energy prices. Noting the contradiction between the soaring profits and squeezed consumer budgets, Frist requested that executives from the country's major oil companies attend the hearings.
The chiefs of five major oil companies went in front of a Senate panel in early November and defended the industry's huge profits. The executives acknowledged that high gas prices had pressured Americans at the pump, but said that profits in the oil industry varied widely depending on worldwide supply and demand for petroleum. They said tight supplies even before Hurricane Katrina supported higher prices, and the post-hurricane shortage made the situation even more dire.
Calls for New Refineries
House Speaker Dennis Hastert, R-Ill., has urged U.S. oil companies to invest in building more refineries and better communicate their efforts at bringing down oil and natural gas costs. It has been 30 years, he noted, since a new refinery has been built in the United States, and extra refining capacity could prevent the shortages and price spikes that follow natural disasters.
But analyst Parry said that, although new refineries had not opened, many companies had made improvements and expansions to their existing infrastructure and refining capacity.
"Total refining capacity has been increased by 10 percent in the past decade -- that's the equivalent of adding seven to eight new refineries," he said.
Some lawmakers have even demanded reimbursement for consumers. Last fall, Sen. Byron Dorgan, D-N.D., proposed a temporary windfall tax on big oil companies -- a 50 percent excise tax on oil company profits when the price of domestic oil is above $40 per barrel. The annual revenues collected from the tax would be returned to individual taxpayers as rebates.
After Katrina, Widespread Suspicions of Price Gouging
Consumers have been equally unhappy, with many suspecting price gouging after the hurricanes. In a September ABC News poll, 72 percent of respondents said they believed the rise in gas was a result of oil companies and gas dealers taking unfair advantage after the hurricanes.
While complaints grew louder after the last round of huge oil industry earnings and could increase as new numbers roll in this week, the industry noted that oil company profits had been weaker over the last decade, as many invested millions and even billions to comply with new environmental standards. Also, refinery and pipeline construction are billion-dollar undertakings that take years, making it unlikely the recent public outcry will produce an immediate response from the oil industry.
"It looks a little bad right now," Parry said after last quarter's earnings came in. "There will be some pressure on companies to spend on things like pipeline infrastructure, but you might not see the evidence of that for another year or two."