Big Oil, unveiled

Oct. 8, 2007
Need a surefire way to liven up boring party banter? Just introduce the phrase “Big Oil” into a dying conversation with practically anybody, and spirited discussion will closely follow.

Need a surefire way to liven up boring party banter? Just introduce the phrase “Big Oil” into a dying conversation with practically anybody, and spirited discussion will closely follow. It’s a near guarantee.

This is particularly true in the US because the mere mention of Big Oil stirs in most Americans negative emotions. For example, the emotions of US citizens reach boiling points whenever Big Oil turns significantly higher profits. Emotions are stirred even more, especially among hard-working car owners, when those profits seemingly result-directly or otherwise-from rising gasoline prices.

And when the emotions of the US populace are stirred, executives of large oil companies are typically summoned by politicians to the nation’s capital to supply answers to questions about those high profits and spiking gasoline prices. This is as it should be, for it is those executives after all who are cashing in big on those exorbitant profits, right?

The real ‘Big Oil’

A recent study commissioned and released by the American Petroleum Institute reveals, in fact, that the ownership of America’s oil and gas companies is made up of a broad cross-section of Americans. The study, says one of its authors, in effect “disproves the popular misconception that ‘Big Oil’ is owned by a small group of industry insiders.”

Robert J. Shapiro, study author and undersecretary of commerce for economic affairs under former President Bill Clinton, said, “In reality, across the oil and natural gas industry only 1.5% of shares of public companies are owned by company executives.” Shapiro worked with economist Nam D. Pham on the study, entitled “The Distribution of Ownership of US Oil and Natural Gas Companies.”

The study’s data show that the majority of industry shares are held by institutional investors, “often on behalf of millions of Americans through mutual funds, pension funds, and individual retirement accounts,” Shapiro said.

API Chief Economist John Felmy said, “When politicians seek to punish these companies and ‘take their profits,’ they are not targeting industry executives but the hard-earned savings of working people.”

The study’s findings include:

  • 43% of oil and gas company shares are owned by mutual funds and asset management firms that have mutual funds, which manage accounts for 55 million US households with a median income of $68,700/year.
  • 27% of shares are owned by other institutional investors like pension funds. In 2004, more than 2,600 pension funds run by federal, state, and local governments held almost $64 billion in shares of US oil and gas companies.
  • 14% of shares are held in individual retirement accounts (IRAs) and other personal retirement accounts. Forty-five million US households have IRA and other personal retirement accounts, with an average account value of just over $22,000.

Comments abound

API’s study’s findings made their way to the web site R-Squared Energy Blog, an energy-focused discussion web log authored by Robert Rapier ( Rapier holds a master’s degree in chemical engineering from Texas A&M University and recently left Montana for an assignment in Scotland, where he maintains the personal blog site.

R-Squared readers left comments about Rapier’s Sept. 18 entry that highlighted the study. Few of those leaving comments were surprised by the study’s findings.

One reader noted that he wouldn’t want to “stick it to Big Oil” but would “be content if they got no more or less special treatment than any other energy company.”

Another reader commented that those unhappy about Big Oil’s high profits should dig into their own pockets to buy a piece of a big oil company.

These are valid points, as were those left by many dozens of other R-Squared readers, but probably not the typical thinking of average Americans. Were these blog readers in attendance at the aforementioned party, no doubt they could hold their own in any emotionally charged conversation about “sticking it” to Big Oil.

Then those party-goers enraged by gasoline prices and oil company profits-particularly those whose mutual fund shares are growing in value-would come to learn that Big Oil, it seems, has many Little Owners.