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JEFF JACOBY

Big oil's real profiteers

WHAT WOULD you call a return of $850,000 on an investment of just $20? A windfall? A rip-off? If such a killing were made by someone who was already a multimillionaire, would you be outraged? Would you insist that his bonanza be slapped with a stiff surtax, the better to redistribute some of that wealth to the less fortunate or to the Treasury?

No need to wonder what Senator Judd Gregg of New Hampshire would say. When his $20 Powerball investment paid off to the tune of $853,492 last month, the wealthy Republican jovially pronounced himself ''truly deserving" and pocketed his winnings without a trace of embarrassment. He cheerfully declined the advice of colleagues like Kent Conrad of North Dakota, who suggested he donate the money to pay down the federal deficit.

No way, said Gregg. He would give some of the jackpot to his family's charitable foundation, but ''the majority I will use personally."

So it goes without saying that Gregg has been stoutly defending the major oil companies from the clamor for a windfall profits tax -- right?

Wrong. Like other politicians on both sides of the aisle, he has been blasting big oil's supposed gluttony and demanding that it be punished for its ''infuriating" windfall profits.

Just days after laying claim to his own windfall profit, Gregg issued a statement denouncing the oil industry for earning billions of dollars at a time when consumers are faced with high fuel prices. He called for an excess profit tax on oil companies, with the proceeds earmarked for low-income subsidies and deficit reduction. ''I cannot sit back in good conscience," he intoned, ''while those in our society struggling to heat their homes are being left in the cold by oil companies." Rarely is hypocrisy so blatant.

''Hey, no fair!" the senator's defenders will protest. ''Powerball is a game of chance. Gregg took a gamble and won, but everybody knows he could have ended up with nothing."

The oil industry is a game of chance, too. Sometimes the price of crude soars to $70 a barrel; sometimes it drops to $10. Sometimes huge sums are invested in wells that turn out to be dry. Sometimes profits are healthy -- and sometimes there are no profits at all. But unlike Gregg's trivial $20 gamble, big oil risks billions. This year alone, the industry will pour an estimated $86 billion into new technology and production. A single offshore drilling platform can run more than $1 billion.

''Come on," the enemies of big oil will snort. ''Gregg's winnings weren't out of line for a lottery winner, and he collected a lot less than some winners do. These oil company profits are unprecedented. ExxonMobil reported $9.9 billion in profits last quarter. That's not just high, that's obscene!"

But profits can't be judged by dollar amounts alone. What counts is the percentage of revenues those profits represent. ''Our numbers are huge because the scale of our industry is huge," Exxon CEO Lee Raymond tried, probably in vain, to explain during last week's big Senate hearing on oil company profits. Exxon's profits last quarter amounted to 9.8 cents for every dollar of sales. Is that obscene? Well, it was more profitable than Shell (which netted 7.8 cents of each dollar of revenue) or Chevron (6.6 cents) or BP (4.6 cents). But compared to Coca-Cola (21.2 cents), Bank of America (28.3 cents), or Microsoft (33.2 cents), it was nothing to write home about.

Smacking oil bosses around may be good politics, but the unglamorous fact is that big oil's earnings, 7.7 percent of income in the second quarter of 2005, is lower than the US corporate average of 7.9 percent. The oil industry is more profitable than some (automobiles, media, utilities), but it can only envy the profits earned by semiconductors (14.6 percent), pharmaceuticals (18.6 percent), or banks (19.6 percent). Exxon didn't hit the big jackpot any more than Senator Gregg did.

In fact, the real gas and oil profiteers weren't represented by the CEOs getting grilled on Capitol Hill last week, but by the demagogues doing the grilling. Over the past 25 years, according to the Tax Foundation, oil companies paid state and federal taxes of more than $2.2 trillion (in inflation-adjusted dollars). During the same period, the companies' profits totaled $630 billion -- less than a third of the government's take. Government revenue from gasoline taxes alone has exceeded oil industry profits in 22 of the past 25 years.

If Gregg and his colleagues want to see what America's greediest oil fatcats look like, they can find the answer in the nearest mirror. Will they do anything to rein in those money-grubbing villains? Don't hold your breath.

Jeff Jacoby's e-mail address is jacoby@globe.com.

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