Does Exxon Mobil need a hug?

Ben Stein is a smart guy and in his March 2, 2008 column in the New York Times attacks Barack Obama’s idea that Exxon Mobil’s huge profits ($12B last quarter) are going into the hands of–his words–“some cabal of reactionary businessmen”. The company, he say, is owned by “ordinary Americans” such as poor elderly folks who depend on its dividends to buy their “oxygen tanks”.

This argument is surprisingly easy to refute. First, ExxonMobil pays only a small fraction of its profits out in dividends–the most recent figure is 19.54%. Second, the “ordinary Americans” Ben refers to are predominantly rich investors who are using the dividends to buy yachts, not oxygen tanks. Third, Stein claims that “when ExxonMobil earns almost $12 billion in a quarter, or $41 billion in a year, as it did in 2007, that money does not go into the coffers of a few billionaire executives quaffing Champagne”, but nearly $500M did exectly that in the obscene payout to the recently retired CEO Lee Raymond. .” This applies to Big Oil. Its profits are our income. Its employees are overwhelmingly not millionaires — and, by the way, it’s not illegal or evil to be a millionaire. They are our neighbors and the people who get us the gasoline to run our cars and trucks and the oil to heat our homes.

And, after expenses, the money hauled in by Exxon Mobil and other companies like it goes vastly more toward exploration and finding new ways of delivering oil and gas to us slobs in our cars than it does to well-heeled oil executives. It may be a scary fact, but we need the oil companies.

Meanwhile, all over the world, from Russia to Venezuela to Africa to the sands of the Mideast, nations with large oil reserves are making it harder for American energy companies to get their hands on oil and gas. If they succeed and re-cartelize the price, current prices may look cheap.

We should not be beating up Exxon Mobil and its brethren and making them cry uncle to Uncle Sam. A better policy might be to keep making sure they have no role in price-fixing, and then to encourage them to go after and lock up as much oil and gas as they can for us to burn up. We would be better off with stronger oil companies that can serve our energy needs for the long haul than with weak and overtaxed oil companies that cannot deliver the needed juice.

Finally, envy is simply not good economics. It has never led anywhere except to trouble, and we have enough divisions in this country already. As I said, Mr. Obama is a smart man. And Senator Clinton is a smart woman. I have worked in politics and with politicians. I know they have to say crowd-pleasing things (just as Republican leaders have to say that cutting taxes raises revenue).

But I respectfully suggest that they might want to reconsider their attack on Big Oil. After all, Big Oil is big us. And we need us.

2 Responses to “Does Exxon Mobil need a hug?”

  1. GregH Says:

    Hi Bob! Glad to see you back.

    Sadly, I don’t think Ben Stein is all that smart.

    More on ExxonMobil:

    Please write about India. Thanks!

  2. Arwa Says:

    It’s me. Mrs. Burns. I’m not shut down entirely…. There is a pritectove order and the XOM and EL Paso Corp can deem any of my material confidential.By definition, the fact that it’s in my possession makes it NOT A TRADE SECRET. And, then I will be sanctioned. El Paso Corp has asked that I be sanctioned for trade secrets but the hearing is being scheduled. Really, they are just bullies. ExxonMobil is desperate for the truth about how they carry on not to come out. It’s not just the environment… the rip off their partners and also the appraisal district and the school fund. Thanks for your support. Wish me luck.

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