Profiting Too Much?
When is a company earning too much? According to ABC, that’s when it is doing better than the tiny country of Iceland. ABC’s “World News with Charles Gibson” on October 26 used that unusual comparison to state that Exxon Mobil’s third-quarter profits were too high.
The segment skewered Exxon with a combination of statistical spin, reporter Mike von Fremd’s reference to the firm’s “astounding profits” and a call for a windfall profits tax from a left-wing think tank.
Von Fremd identified that group, a huge proponent of windfall profit taxes, as simple “consumer advocates.” But Joan Claybrook is no mere consumer advocate, and neither is her group Public Citizen. It is a leftwing advocacy organization founded by Ralph Nader in 1971 and Claybrook, the president, is a progressive who distrusts “market forces.”
She wasn’t the only oil critic that appeared in the report. Von Fremd said “many filling their tanks today say it’s just too much” and then showed an unidentified man who naturally complained.
The report began to a backdrop of gold dollar signs parading behind anchor Charles Gibson. Von Fremd then spun the profit numbers to make the “oil giant” look bad. According to information he emphasized:
· The $10.5 billion profit for the quarter is equal to $75,000 a minute
· The profit is about the same as Iceland’s entire Gross National Product
In Exxon’s case, the profit margin equaled just 10.5 percent, less than the profit margin of von Fremd’s own employer: Disney Corporation, which owns ABC. Its third quarter profit margin was 13 percent.
The comparison of Exxon’s profit to Iceland’s economy was designed to impress. But the entire population of Iceland is a scant 299,388 – roughly equivalent to the bustling metropolis of Newark, New Jersey.
Von Fremd excluded profit margin from his report, which the American Petroleum Institute says are more accurate. “The total profits earned reflect the size of an industry or company, but are not necessarily an accurate reflection of financial performance,” said API’s website.
The story did not elaborate on who those Exxon profits are helping. Primarily, investors who include “American savers and retirees, whose pension plans and retirement accounts typically include significant investments, direct or indirect, in oil company shares,” according to former Clinton advisor Robert J. Shapiro.
Von Fremd did at least include a quote from Exxon Vice President Ken Cohen who complained, “We are making about a dime a gallon, the tax man is making about four times that.”
The American Petroleum Institute backs that claim saying that state and federal taxes make up an average of 45.5 cents of the cost of a gallon of gasoline as of October 2006, but that was not in the ABC report.
No criticism of a windfall profits tax was provided either, although there are critics including Sharpiro. In a November 2005 study, he estimated such a tax “would discourage domestic oil production and increase U.S. dependence on imports from the Persian Gulf.”
Von Fremd’s one-sided report didn’t end there. He also inaccurately referred to “record oil prices this year” While oil prices did climb, as BMI has previously reported, they did not pass the $86.99 inflation adjusted high of 1981.
He also left out how much gas prices have fallen: 83.3 cents per gallon from their August high of $3.036.
Von Fremd also included a brief mention of the oil exploration being done by Exxon, stating that “some energy analysts agree saying Exxon is doing an amazing job drilling for oil in some of the most difficult and dangerous places on the planet.” He did not say that Exxon increased their spending on exploration by 15 percent over last year, or that they can face serious threats such as terrorist attacks in countries like Nigeria which occurred earlier this week.