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Since January, demand for gasoline has jumped more than 5% over a year ago. Consumption of unleaded gasoline has soared 25%, far surpassing the capacity of refineries to make enough. To keep abreast of demand, refineries have had to wring every last drop of gasoline out of crude oil shipments, and this has held down production of heating oil. Now, just as the summer driving season is approaching, refineries may have to cut back on gasoline production in order to increase output of heating oil to replenish stockpiles.
Though the companies are only doing what is necessary to keep the oil flowing, their public-image difficulties are compounded by one economic fact that no oilman can explain away: for better or for worse, the Seven Sisters, and many of their smaller competitors as well, have interests that are often parallel to those of the price-gouging OPEC cartel.
Many factors—earnings, accounting practices, taxes—discourage companies, often forcefully, from pressuring OPEC to hold down prices. That is something that the companies once managed with ease, but now no longer have much power to accomplish. Yet if they tried, they would be harming their own interests. The Sisters hold concessions in non-OPEC areas, like the British and Norwegian North Sea and Canada. Every time the cartel jabs up the price, up goes the value of the companies' holdings as well.
The Big Exporters 1978 estimates
Saudi Arabia $35,200,000,000 Iran $20,700,000,000 Iraq $9,800,000,000 Libya $9,800,000,000 Nigeria $9,500,000,000 United Arab Emirates $8,600,000,000 Kuwait $7,700,000,000 Indonesia $6,500,000,000 U.S.S.R. $5,800,000,000 Venzuela $5,400,000,000 Algeria $5,100,000,000 United Kingdom $2,400,000,000 Norway $1,700,000,000 Mexico $1,600,000,000
The Multinationals excluding government-owned oil companies operating in only one country. 1978 sales** Exxon $60,334,527,000 Royal Dutch/Shell $44,054,400,000 Mobil $34,736,045,000 Texaco $28,607,521,000 British Petroleum $27,390,915,000 Standard Oil of Calif. $23,232.413,000 Gulf Oil $18,069,000,000 Standard Oil (Indiana) $14,961,489,000 ENI (Italy) $12,500,000,000 Atlantic Richfield $12,298,403,000 Française des Pétroles $10,875,1 17,000 Continental Oil $9,455,241,000 Petrobrás (Brazil) $9,131,101,000 Elf -Aquitaine (France) $8, 341,081,000 *1977 **minus excise taxes
American companies that operate abroad, including the oil firms, also enjoy the U.S. tax code's foreign credits. Unlike most nations, the U.S. not only taxes domestic income, but all earnings worldwide of American taxpayers. The credits are quite legitimately designed to make sure that a company is not taxed twice on foreign income.
For oil companies, however, the credits produce a perversely beneficial result. Instead of simply holding their U.S. tax liability to the nation's corporate rate of 46%, which is what they are intended to do, the credits sometimes let companies pay no taxes at all on their foreign profits. The basic reason: if a company has to pay taxes of more than 46% on its profits in a foreign country, the excess is counted as a credit. Then the company can use the credit to reduce or even totally wipe out income taxes owed to the