Industry Critics Fall Silent on Oil Profits
By Robert L. Bradley, Jr.
Just a few short years ago, the shrillest environmentalist voices targeted oil companies’ “obscene” profits. Today, American energy producers are swallowing big losses. Yet rather than celebrating, those same environmentalists have gone silent.
The reason: Their protestation about profits was disingenuous from the beginning. And now, they’ve moved on to other anti-oil arguments such as divestment and ‘keep it in the ground.’
It’s worth recalling just how frenzied the attacks on oil companies’ profits were. Back in 2012, back-to-nature ecologist Bill McKibben, noting the $1 trillion profit made by the top five oil firms, stated that “having found a profitable vein, they’re compelled to keep mining it, more like efficient automatons than people with free will.” Oil Change International, meanwhile, bemoaned how oil companies were “making ridiculous profits in the billions, raking in more money than most of us can even fathom.”
Anti-energy politicians were even more aggressive. House Democrats proposed establishing a Reasonable Profits Board, which would have the power to confiscate up to 100 percent of so-called “excess” profits.
What do we hear now that BP has reported a $3.3 billion loss in just three months? Shell’s income is 87 percent below 2014 levels — and Chevron posted a quarterly loss for the first time in 13 years?
Crickets
For some companies, this is nothing short of a struggle for survival. Last year, almost 70 U.S. oil and natural gas companies filed for bankruptcy — up nearly 400 percent from the year before. The sector also lost over 258,000 jobs worldwide — and expects to cut even more workers this year.
What’s more, by the end of 2016, one out of three oil companies could be bankrupt.
The point isn’t that anyone should feel bad for oil companies. But the magnitude of the oil-price cycle — artificially engendered in part from quantitative easing by the Federal Reserve Bank — should not have happened. The least able drillers got subsidized loans, which allowed them to overdrill and drive prices down for the better-capitalized producers. That amount of capital was employed to nobody’s benefit.
The price cycle has been driven by new technology that has permanently revolutionized American energy production. A year and a half ago, we overtook Saudi Arabia as the biggest oil-producing nation on the planet. And during November of 2015, the last month on record, the United States produced its highest monthly production since 1986.
This boom has been a major factor in declining energy prices worldwide. And while that price decline has caused oil companies’ profits to sink, it’s fattened the pocketbooks of families across America. Last year, consumers enjoyed $130 billion in savings — more than $1,000 for each two-driver household.
So far from the nefarious greedy automatons of green fever dreams, oil companies are also subject to market caprices. But artificial stimuli from easy money policy is a boom that has a day of reckoning.
Today’s silence on the subject exposes the environmentalists’ anti-profit obsession for what it was: an opportunistic drive-by hit on Big Oil, not a legitimate critique of industry economics.
The truth is, these fossil fuel opponents wouldn’t be satisfied no matter how low profits drop. They simply hate the oil industry. Full stop. But when companies’ bottom lines begin to grow again, will the critics remain silent rather than fuss about high profits? Here’s a prediction: The answer will be a hypocritical no.
Robert L. Bradley Jr. is the founder and CEO of the Institute for Energy Research.
