Big Oil's Public Relations Campaign

First there were record oil-industry profits. Followed shortly by an intense public relations campaign to explain those profits.

As the U.S. consumer struggles under the weight of $120 a barrel oil, the oil and gas industry has moved into overdrive this week in an effort to explain to both consumers and a skeptical Congress why they aren't to blame for those record earnings.

The American Petroleum Institute took out a full-page ad in USA Today, and other major media were tapped this week to provide “straight talk on earnings.” The earnings that need "straight talk" : ExxonMobil’s (XOM) $11 billion quarterly profit, and Chevron’s (CVX) $5.2 billion quarterly profit.

BP (BP), formerly known as British Petroleum, also ran TV ads as part of their continuing “Beyond Petroleum” campaign, which touts the company’s $10 billion five-year plan to invest in alternative energy.

The oil industry goes through this dance with the media and Congress every three months, but recently the pressure on Big Oil has intensified. Last year, the Democratic-controlled Congress subpoenaed the major oil company executives to testify about the rising price of oil, and the corresponding rise in their profits.

The substantial profits have made Congress consider a possible windfall tax for the oil industry, which would skim off a substantial portion of Big Oil's profits over a specific level. 

Analysts say the size and scope of the oil industry explains the profits, rather than the price of oil. The world's major publicly-traded oil companies are some of the largest by market capitalization.

“The oil industry needs to be big because they are the competition for Saudi Arabia and Venezuela,” said Rayola Dougher, senior economic advisor for the American Petroleum Institute, the lobbying organization for the oil companies. “It’s sometimes hard to understand for the general public, but we try."

While Exxon is the largest publicly-traded oil company in the world, it’s not the largest oil company by any means.

“Yes Exxon is huge, but right now that company owns approximately 0.6% of the world’s proven oil reserves,” Dougher said. “That’s the biggest we have in ‘Big Oil’ we have here.”

Along with scale is investment. Each off-shore oil platform costs about $1 billion. That large amount of capital investment has to return a large profit for the oil to be worth going after, experts said.

“If you look at our industry’s profit margin versus other industries, we make less money than food and beverage companies, or even technology companies like Apple Inc.,” Dougher said.

But for many environmentalists and oil industry critics, it’s not the amount of profits that Exxon or Chevron makes. It’s what they do with it.

“Apple isn’t impacting people’s lives day to day with their products,” said Yusef Robb, an environmental consultant who works with various governmental and non-profit organizations. “Gas impacts people’s lives. More importantly, those profits go toward the marketing and perpetuating our addiction to oil.”

Critics contend that the oil industry has been reluctant to invest in anything other than the exploration of more oil, which contributes to global warming and prolongs dependence on a resource that will run out at some future point.

“Presumably these companies are following up on their promises to invest a part of these profits in alternative energy,” said Deron Lovaas, spokesman with the National Resources Defense Council. “But the amount they are investing at this point is unclear at best. Exxon does some work with lithium ion batteries and BP some work with biofuels. But we need a clearer plan for the future.”

Robb also criticized oil companies that, along with investing primarily in oil exploration, spend significant amounts of money buying back stock. 

"That money could be going toward the investment in new technologies," Robb said.

Even major stakeholders in the oil companies have addressed the concern for a lack of investment in alternative energies. The Rockefeller family, representing the descendents of Standard Oil founder John D. Rockefeller, said in a press conference last week that Exxon needs to do more for alternative energy. 

Dougher said the oil industry invested $98 billion into alternative industry between 2000 and 2005. However, she admits the bulk of that investment has been in things like oil shale and several oil-related technologies.

“This industry has always had a long-term investment horizon,” she said. “They are thinking 10 to 20 years out."