‘Today’ Hits an Anti-Corporate ‘Gusher’
NBC criticizes oil company profits, wondering ‘how much is too much?’

By R. Warren Anderson
Free Market Project
Oct. 27, 2005

     NBC’s “Today” on October 27 indicted oil companies for profits that reporters and their sources considered too high. The story urged companies to reinvest their money into building new refineries, without explaining why they haven’t recently.

     Katie Couric said that “one man’s pain is another man’s pleasure,” and the report that followed accused oil companies of subjecting consumers to “pain” at the gas pump while enjoying their own profit “pleasure.” Anne Thompson stated that “while American consumers have suffered through months of record high gas prices, the oil companies have hit a gusher.” She later said “news of these gargantuan numbers is sure to ignite the debate over how much is too much in a time of crisis.”

     Companies’ profits vary greatly from one quarter to the next; it is part of the business cycle. America’s free market allows businesses to prosper as well as they are able, without the government or any other body dictating when a company has made “too much.” And not all profits remain with the company – for example, Exxon Mobil Corp. shares profits with more than 2.5 million individual shareholders, in addition to institutional shareholders. According to Exxon Mobil’s web site, in 2004 Exxon “returned nearly $15 billion to shareholders in dividends and share buybacks.” That’s quite a different picture than the one Thompson painted of a centralized corporation hoarding profits.

     Thompson also didn’t mention that an increase of profits will increase supply, which will in turn decrease prices. As of October 27, the price of gasoline had fallen every business day since October 6, dropping 37 cents per gallon in that time span to 3 cents lower than when Hurricane Katrina struck.

     To strengthen her sentiments, Thompson interviewed Jamie Court from the Foundation for Taxpayer and Consumer Rights, who accused oil companies of manipulating the oil supply to make money. She identified Court as a “consumer advocate,” without detailing the anti-industry position of his organization. The Foundation’s Web site, which calls for a government-mandated “freeze” on gas prices, claims that “Neither ExxonMobil nor the industry has opened a new refinery since 1976 because the companies know keeping refined supply low is a recipe for huge profits. If the White House and Congress don't act to force ExxonMobil to invest in refining capacity after Katrina's lessons, the public might as well clean out that tank and refill it with new blood.”

     Court repeated that accusation on “Today,” saying that “an industry like the oil industry knows that if it just has bare minimum to meet demand, that any shock to the system will drive their prices and their profits up.” “Today” did not mention anything about the group or what exactly they advocate – and Thompson didn’t allow an oil company spokesman to answer the charge.

     Following Court’s views, Thompson failed to explain why oil companies have not built new refineries recently. She said only that “the plants that turn oil into gasoline and heating fuel have a huge public relations problem.” Oil companies can’t expand readily and build more refineries due to governmental restraints that add to construction costs. The industry has spent more than $47 billion to comply with environmental regulations over the past 10 years.

     Ted Robbins of National Public Radio could have filled in some background for Thompson. He did a story in June on Arizona Clean Fuels, the company trying to build the first refinery in the United States since 1976. The CEO, Glenn McGinnis, stated that its pollution will be “less than half of the best refinery in the world today on a per barrel basis.” Despite that fact, Arizona Clean Fuels had to wait five years to get air quality permits. Robbins also interviewed Larry Goldstein of the Petroleum Industry Research Foundation. Robbins quoted Goldstein as stating that “there’s not much oil money left to invest, that’s because intense competition and slim profit margins have forced a lot of small refiners out of business. And the remaining larger refiners have a lot of debt.”

     Thompson didn’t mention any of those issues facing refineries, although she interviewed Gary Ross, the CEO of PIRA Energy Group, a global energy consulting firm. He said that “nobody wants a refinery in their backyard.”