Energy independence isn’t Big Oil’s job
Published: Saturday, July 12, 2008 in The Nashua Telegraph
Big Oil’s prime goal to reward investors
The op-ed column “Energy independence isn’t Big Oil’s job” (June 28 in the Nashua Telegraph) got it exactly right. Like all corporations, “Big Oil’s” primary responsibilities are to make a profit and to work to maximize the return to their investors.
The piece by syndicated columnist Deroy Murdock quotes U.S. Rep. Edward Markey as saying ExxonMobil “only spent $10 million on renewables last year.” It states that ExxonMobil has spent $1 billion since 2004 on cogeneration technology and that the company is donating $100 million to Stanford University’s Global Climate and Energy Project.
Let’s be real. All of these “investments” by ExxonMobil are great public relations but “chump change” compared to ExxonMobil’s cumulative net income of $174.5 billion and its cumulative gross profit of $388.5 billion for the years of 2002 through 2007.
In 2007, the company invested $15.4 billion into capital expenditures, but it also spent $30.7 billion for something called “Retirement of Stock.” So in 2007, ExxonMobil spent about double the amount of funds in buying back its stock than the amount it spent on all capital expenditures.
When a company issues public stock to raise funds, its outstanding stock shares are usually “diluted.” After the issuance of new stock, the original stockholders own a little less percentage-wise of the company.
But when a company like ExxonMobil is flush with cash, it has the option of buying back shares. If the stock price is high, shareholders who sell their stock obtain immediate gratification. Individuals retaining shares (such as company officers and board members: the ones making the buyback decisions) will increase the value of their shares through a “reverse dilution” process.
This is not rocket science. What ExxonMobil and other Big Oil companies have been and will keep doing is in the best financial interest of its investors. It is not, nor has it ever been, corporate America’s responsibility do what is in the best interest of the public or our country.
Rather, the decades-long fallacy that corporate decisions would serve the best interest of the public is a concept that has successfully been sold to Americans by politicians whose true constituents (and major contributors) are the corporations and their corporate leaders.
The shame is not that corporations have been “evil” in pursuing their responsibilities to their investors, but that our government has failed in the 35 years since the first oil shocks of the 1970s to implement substantial national energy policies that take into account the fact that oil is a guaranteed limited global energy resource.
Your guest editorial on that same day (“Additional drilling is not the answer”) also got it right.
Our country will not be able to drill its way out of the current energy problems. It is now time for our politicians to step up and implement sensible national energy policies that encourage conservation and efficiency.
It is time for the politicians to implement legislation that facilitates the development of alternative and renewable energy sources that will reduce our dependence on oil and ensure our country’s national security and economic success.
Stephen C. Nodvin, Ph.D.
Nashua