Exxon Mobil Corp., the world’s largest company by market value, posted its largest profit in almost three years as soaring gasoline prices fueled discontent among consumers and policymakers.
With U.S. motorists paying the most for gasoline since prices reached a record $4.11 a gallon in the summer of 2008, Exxon said today that its first-quarter net income jumped 69 percent to $10.7 billion. The Irving, Texas-based company is sitting on a cash pile of $13.2 billion, even after distributing more than $7 billion to shareholders in buybacks and dividends.
President Barack Obama has called for an end to decades-old tax breaks for domestic oil and natural-gas drilling, and urged Saudi Arabia, the world’s largest crude exporter, to help rein in surging world crude prices by boosting output. Exxon said inflicting higher taxes would drain funds the company needs to find new oil and gas fields.
“Over the past five years, we incurred a total U.S. tax expense of almost $59 billion, which is $18 billion more than we earned in the United States during the same period,” Kenneth Cohen, Exxon’s vice president of public and government affairs, said yesterday in a blog post on the company’s website. “Critics often try to ignore these facts by saying the oil and gas industry receives ‘subsidies.’ But what they really mean is that they want to increase our taxes by taking away long-standing deductions for our industry while leaving these same deductions in place for other sectors of the economy.”
Exxon’s expenditures for new wells and production platforms rose 24 percent during the first three months of this year to $6.9 billion, the company said today in a statement. New projects such as West Qurna 1 in Iraq contributed to a 10 percent increase in oil and gas production.
Exxon was the latest oil company to report expanding first-quarter profits. Earlier today, Royal Dutch Shell Plc, the world’s second-largest gasoline producer after Exxon, said net income rose 30 percent to $6.3 billion. Occidental Petroleum Corp., the largest onshore oil producer in the continental U.S., said first-quarter profit increased 46 percent to $1.56 billion.
ConocoPhillips, the third-largest U.S. oil company, yesterday reported a 44 percent profit gain. Chevron Corp., the No. 2 U.S. energy producer, is expected to report a 31 percent increase in net income when results are announced tomorrow, according to the average estimate of four analysts in a Bloomberg survey.
The average U.S. price for regular gasoline touched $3.886 a gallon yesterday, the highest since August 2008, according to AAA. Prices have escalated 26 percent this year. The all-time high of $4.11 was reached on July 15, 2008, which helped drive Exxon’s record $14.8 billion quarterly profit that summer.
“The government should tax the windfall profits of the oil giants and invest the money in renewable energy programs so that we reduce our dependence on oil and dirty energy,” said Robert Weissman, president of Public Citizen, a Washington-based consumer advocacy group.
Exxon fell 70 cents to $87.08 at 12:14 p.m. in New York Stock Exchange composite trading. The stock has 10 buy ratings from analysts, 12 holds and one sell.
Exxon plans to spend $34 billion this year on capital projects such as new oil wells, pipeline repairs and refinery upgrades. Chief Executive Officer Rex Tillerson told analysts last month that he is targeting a 4 percent increase in oil and natural gas production this year.
“Increased capital expenditures are necessary to continue adding reserves,” said Eliecer Palacios, energy sector specialist at Maxim Group, a boutique investment bank.
U.S. House Speaker John Boehner, an Ohio Republican, told ABC News in an interview broadcast on April 25 that subsidies for oil and gas companies are “certainly something that we ought to be looking at.”
“Everybody wants to, to go after the oil companies,” Boehner said. “And, frankly, they’ve got some part of this to blame.”
Obama’s fiscal 2012 budget plan, unveiled Feb. 14, proposes eliminating oil and gas tax breaks estimated at $46.2 billion over 10 years. They include $11.2 billion from the so-called percentage depletion deduction for oil and natural gas wells, which benefits small producers.
Taking resources from highly taxed companies that use profits “predominantly” to reinvest in creating future supplies of energy is “the wrong thing” to do for an energy policy, ConocoPhillips Chief Financial Officer Jeff Sheets said yesterday in a telephone interview.
“We disagree that we’re under taxed currently when we’re paying taxes at rates that are higher than what most other industries are paying,” Sheets said.