Obama goes back to Bush playbook and declares war on “price gouging” oil companies

"I’m concerned about higher gasoline prices. The government has the responsibility to make sure that we watch very carefully and investigate possible price-gouging, and we will do just that." — George W. Bush, 4/17/2006

Congress is vowing to take actions that it believes will reverse runaway crude and gasoline prices. Oil rose above $136 a barrel on Monday – more than double what it cost a year ago – and gas hovered around $4.07 a gallon.” – CNN, 6/24/2008

"We are going to make sure that nobody is taking advantage of American consumers for their own short-term gain." – Barack Obama, 4/20/2011

Whenever the price of gas spikes the call goes out from Washington to investigate price gouging. Unfortunately, this leads to one of the great intellectual challenges of capitalism: Defining price gouging. Problem is no one can separate “taking advantage of consumers for short-term gain” from what is usually called profit taking.

To quote Collateral Damage Sr.: "In a society that has a free market fetish, if not a religion, what is price gouging? Is nine percent profit gouging the price? Or 15 or 50 percent? At what price point does profit change into gouged profit?"

Well, here are a few samples from people who have tried to split that particular hair.

First, former Rep. Bart Stupak, (D-Mich), from 2006:

When we were doing the Energy Policy Act last fall, in the town of Midland, right by my district there, gas went up 90 cents in one day. Now, is that not gouging?

If you take a look at it, from September 2004 until September 2005, refineries have increased their prices 255 percent. Isn’t that gouging?

I mean, I think we all know what gouging is. What we need is a federal standard so we can hold the oil companies’ feet to the fire and make sure we know what factor goes into every gallon of gasoline, so at least the American public will have some transparency and get a fair shake on what goes into a price of a gallon of gasoline.”

Next up:

New York State law prohibits price gouging during a state of emergency. The law specifically provides that, in order to prevent any party from taking unfair advantage of consumers during an abnormal disruption of the market, the charging of "unconscionably excessive" prices is prohibited.”

I like that one the best because it is by the former Attorney General/Governor of New York, Eliot Spitzer. Did he wonder about price gouging as he paid all those ladies of negotiable morality?

And finally this one from the very accurately named blog, Neutral Source:

There is no objective definition. Economists–who specialize in price theory and the behavior of markets and can study these things ad nauseum–have no definition for it, either. In fact, economists have avoided the term as if it were a social disease. A review of all the microeconomics textbooks on Neutral Source’s bookshelf reveals that none have as much as an index entry.”

Price gouging, like porn, is in the eye of the beholder. One thing everyone agrees on about it is that it is always committed by someone else.

For businesses price gouging is "when my competitor gets away with charging more than I thought to charge."

For the general public, price gouging is when a company that I don’t work for or have investments in is charging me too much. Profits are when my company is making enough money to not lay me off.

Actually addressing this problem would involve fundamental changes in our system that are much needed but which no one is willing to actually contemplate. Instead we will get more of this Kabuki Theater. The next act will come when the oil companies declare their quarterly earnings. This will be followed by bi-partisan denunciation of  their “excessive profits” and a number of bills will be proposed which will go nowhere.  Then the oil companies will attempt some sort of PR move to show that they are really nice guys and that will be that.

 

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Transocean cites safety record in doling out bonuses despite 11 deaths and totally screwing up the Gulf

Never, ever, let it be said that mere facts will come between an executive and his or her bonus. Transocean which – along with BP – is responsible for 11 deaths while creating the worst environmental disaster in US history, used its safety record as the reason for giving out exec bonuses.

According to the company’s financial proxy:

"Notwithstanding the tragic loss of life in the Gulf of Mexico, we achieved an exemplary statistical safety record." Based on the total rate of incidents and their severity, "we recorded the best year in safety performance in our company’s history."

Transocean’s PR person (now there’s a job for you) said, "The statements of fact in the proxy speak for themselves” before adding the requisite comments about feeling bad for all the little people.

It is worth noting that the company’s execs did NOT get their bonuses the year before because of safety issues. It really isn’t reasonable to expect them to go two years without bonuses. That could lead to the departure of all the great talent that got the company to where it is today.

Let us not think that Transocean is alone. Our good friends in the banking industry have been doing the exact same thing even while they were destroying the economy.

The past few years have been very rewarding for bank employees. OK, maybe not the government rescues, stagnant loan books, layoffs and litigation. But none of these disasters hurt pay at banks.

A review of call reports filed with the Federal Deposit Insurance Corp., compiled by BankRegData.com, shows that average compensation in the last few years rose — and at the same rate as it did before the crisis. Employees of the largest banks realized the largest gains. The increases significantly outstripped inflation and can’t be attributed solely to shifts in pay schemes or recovering profitability. Banking in general shielded pay from its cost-cutting ax.

Ah, personal accountability in action.

As American Banker points out: “Over the last eight years, average compensation for a full-time bank employee has risen 35% to $83,050, twice the rate of inflation. In 2003, the banking industry’s 1.3 million full-time employees took home $78.3 billion. In 2010, its 2.1 million employees took home $168.1 billion.”

How much of that do you think went to the tellers and branch managers?

Oh and don’t forget: It’s all those millionaire public-sector employees’ fault.

The 10 Biggest Marketing Blunders of 2010

This year it was a race for 2nd place because the top honors were nailed down before the rest of contestants were even out of the starting gate.

1) BP & Tony Hayward

Under the astute guidance of now former-CEO Tony “I want my life back” Hayward, BP proved time and time again why it so wisely decided to can its positioning as the environmentally friendly oil company. Here’s just a few of Tony’s finer moments:

1. Creates one of the quotes of the year by saying, “I want my life back.”
2. In testimony before Congress he makes a point to remind us all that, “We care about the little people.”
3. At the height of the spill he takes a weekend off to go watch yacht races at the Isle of Wright in England.
4. In a slick video ad he takes pride in the fact that BP has “organized the largest environmental response in this country’s history.”
5. His parting words on stepping down as CEO: “Safety, people and performance have been my watchwords. We’ve made significant progress.”

But Tony didn’t win this award all on his own. No he had help from literally thousands of BP execs like BP spokesman Randy Prescott: who said, “Louisiana isn’t the only place that has shrimp.” While space prevents from listing all the asinine things the company did, here are a few of the lowlights:

1. Decided to pay out $10 billion in dividends to stockholders while failing to pay people hired to clean up its mess.
2. Employed the engineer who wrote in an email about the decision not to install all the safety devices on the Deepwater Horizon, “Who cares, it’s done, end of story, will probably be fine.” The email was sent on April 16th – Four days before explosion that killed 11 people.
3. “BP is going to [spin] off its Gulf of Mexico spill operation to a separate in-house business to be run by an American in a bid to isolate the “toxic” side of the company and dilute some of the anti-British feeling aimed at chief executive Tony Hayward, the company said today.” Because it’s all about protecting Tony, that’s why.
4. Continuing to spend millions of dollars on ads promising to fix the damage its done and emphasizing how much effort it is putting into stopping the catastrophe it created.
5. Put together an internal report on the disaster so vapid that the best defense BP’s safety honcho Mark Bly could offer was, “It wasn’t intended to be anything it isn’t.”
6. Lying about the amount of oil being spilled in order to limit liability.
7. Blocking the press access to the scene of the crime by banning flyovers and keeping reporters from beaches where the oil might be seen.

Of course these last two would not have been achievable without the aid and support of the US government. Reporters calling The Coast Guard about their inability to go look at the ocean were (and maybe still are) ROUTINELY referred to the BP press office. So BP gets to enforce the 1st Amendment. Ahh, the watch/lap dogs of government.

Dishonorable mention for its actions also go to: Rep. Joe Barton and The House Conservative Caucus for apologizing to BP. They called the President’s pallid pursuit of the company a “Chicago-Style Political Shakedown.”

2) Christine O’Donnell

In The Great Book Of Political Campaigns the first rule is “Never Have To Deny That You Are A Witch”. Coming up with the other best quote of the year (“I am not a witch.” Like you needed to be reminded) was but one in a cascade of highlights for Delaware’s GOP candidate for Senate. She also thought that an ad pointing out she had never been to Yale would be a good thing. Instead it merely highlighted the fact that she hadn’t actually graduated from college at all – despite her claims to the contrary. But, in the silver lining department, all the hoopla around her claims did get her to finally finish up the work on the degree she had begun working for 17 years earlier. Two weeks before election day she was awarded a BA in English from Fairleigh Dickson University. Despite having a degree in English it turned out that reading was not her strong suit shown when when she claimed that the separation of Church and State was not, in fact, a part of the constitution.

Not content to go quietly into the good night, O’Donnell returned to the public stage earlier this month, telling a gathering, “Tragedy comes in threes. Pearl Harbor, Elizabeth Edwards’s passing and Barack Obama’s announcement of extending the tax cuts, which is good, but also extending the unemployment benefits.” Tragedy may come in threes, but in this instance stupidity is singular.

3) TIE: Sharron Angle/Alex Sink/Libby Mitchell

• Sharron Angle should have easily won the Nevada Senate seat. In a year when not being a Democrat was pretty much all you needed to win, she was running against Harry Reid – a man about as popular as Bernie Madoff. She managed to lose because of a campaign that rivaled Ms. O’Donnell’s for egregious stupidity. Of many great moments in her run for office my favorite was when she told the Rancho High School Hispanic Student Union, “You know, I don’t know that all of you are Latino. Some of you look a little more Asian to me. I don’t know that.” To make it clear just how hard it can be to tell who is Latino and who is Asian and who is white, Angle added, “I’ve been called the first Asian legislator in our Nevada State Assembly.”
• Alex Sink, the Democratic nominee for governor of Florida, lost to Rick Scott — a man with no political experience who ran a company involved in the biggest medicare fraud case in American history.
• Libby Mitchell, Democratic nominee for governor of Maine, came in third and lost to Republican Paul LePage – a creationist. While neither Sink nor Mitchell’s campaigns were as spectacular a flop as Angle’s, the results speak for themselves.

4) Summer’s Eve says, “Want a raise? Wash your vagina.”

The literal and metaphorical douchebags at Fleet Labs ran a full page ad in Women’s Day that opened with the headline, “Confidence at Work: How to Ask for a Raise.” It then listed eight steps to getting more money out of the boss. Number 1? “Start with the usual routine and all things you do to feel your best, including showering with Summer’s Eve Feminine Wash or throwing a packet of Summer’s Eve Feminine Cleansing cloths into your bag for a quick freshness pick-me-up during the day.”

5) Montblanc regrets “honoring” Gandhi with $24K fountain pen

Either Montblanc’s execs have a brilliant sense of irony or they’re complete idiots. I’ll report, you decide. Whichever is the case, they have “unconditionally apologized” to an Indian court about it – at least until the court rules on whether the company can continue to sell the pen. The pen was marketed as a way of honoring 140th birthday of the brilliant spokesman for the poor.What, you may ask, justifies the $24,000 cost of this ink delivery system?

“The gold and silver limited edition pen includes an engraving of Gandhi and comes with an eight-meter golden thread that can be wound around the pen, representing the spindle and cotton Gandhi used to weave simple cloth.”

Montblanc made only 241 of the handmade pens, one for each mile Gandhi walked in his famous march against salt taxes in 1930. It should be noted that the company did think of the needs of the less affluent consumer when producing this pen. They are also offering ballpoint and rollerball versions for a mere $3000 per.

6) Drake University boasts about being a D+ school

Let’s pretend you are an institution of higher learning. Let’s say the name of your institution starts with the letter D. Now you want something special for your marketing, something that talks about the special magic that occurs when a student comes to your university. So what do you call it? Anything BUT “D+.” Well, unless you’re Drake University. Much to the school’s surprise, some have taken the now-dead recruitment campaign amiss. Go figure. Maybe they needed a better slogan. How about, “Drake, the ultimate safety school.” I sure hope the faculty are smarter than the admissions office. The only thing dumber than the campaign is the school’s effort to explain it away.

“In hindsight, introducing the concept and the testing that was conducted with the target audience may have minimized some of the concerns that have been expressed, and we are very sorry that many of you were caught by surprise as a result.”

They used 42 words to say “Mistakes were made.”

“Our experience in the survey and in the field suggests that the kind of students whom we want to attract to Drake easily understand and appreciate the irony of the D+.”

Ahhh, irony the last excuse of the incompetent. Or, as Calvin Trillin once said, “I never did very well in math – I could never seem to persuade the teacher that I hadn’t meant my answers literally.”

7) Medal of Honor video game shoots itself in the foot

Simple marketing rule: Don’t include a feature in your product that directly contradicts the name of your product. Case in point: The Medal of Honor video game from EA games. In this first person shooter, players get to pretend they are soldiers. I assume it lets you pretend you are a US soldier since those are the only people who can actually win a Congressional Medal of Honor. The latest version of the game — coming out next month — includes a feature where you can play as a member of the Taliban … and thereby shoot US soldiers. Here’s the brand disconnect: Shooting US soldiers is definitely NOT going to let you get a Medal of Honor.

Surprisingly, many people and organizations were upset by this. A lot of those people are the families of soldiers who have been killed in the war. Who could have seen that coming? Also upset is the commander of the US Army and Air Force Exchange Service (that’s the group that runs the stores on military bases), who has decided that they won’t sell the game. That will hurt because, as Sgt. Big Brother CollateralDamage can attest, military folk LOVE games like this. It will also hurt because it will make Walmart and co. think twice about stocking the game. Congrats, guys, on a blunder that could have easily been avoided.

8) Sperm Logo Sneakers

I can’t top what Rebecca Cullers wrote over at AdFreak:

Do you wake up in the morning wishing you could wear shoes with a picture of a sperm prominently displayed on them? Well, now, with Gravity Defyer sneakers, you can! The Web site refers to the sperm logo as the ‘Slick Seed of Life Logo,’ and says it’s there ‘because it’s cool!’ As you can see from the full-page advertisement … wearing these shoes is like pouring an energy drink on your feet. At least, I’m assuming the can (also covered in sperm pictures) that’s splashing liquid on the shoe is supposed to be an energy drink. In a press release, company officials explain how, despite a couple of retail partners who’ve pulled out due to the logo, they intend to keep it: “Our logo is deliberate. … There’s no shame, there’s pride,” they write. In my mind, there’s a big gap between not being embarrassed by sperm and wanting to have it all over my shoes.”

9) Video game lets players bomb illegal immigrants.

Spain’s conservative Popular Party launched the video game, Rescue, on its website as part of the party’s campaign for regional elections in Catalonia.

In the game, Alicia Sanchez-Camacho – the president of the PP branch in Catalonia – is depicted riding a white seagull called Pepe. She is dubbed Alicia Croft, in a reference to Lara Croft, the heroine of the popular video game Tomb Raider. Points are awarded to players when they direct the bird to bomb aircraft containing illegal immigrants or symbols of Catalan nationalism.

The game was taken down within hours and the party of course found someone else to blame for it. In this case, it was the developer who allegedly failed to follow directions. Instead of bombing the immigrants, the PP  claimed, the seagull should have targeted the organized crime groups that traffic them.

Hey, who hasn’t made that mistake?

10) Magazine industry spends millions preaching to the choir

On a list of industries with too much money the leader would clearly be banking followed probably by oil. What about magazine publishing? While it is certainly ahead of typewriters (repair & manufacture of), I don’t think it would crack the top 1000. Despite this, the industry has collectively decided it is time to waste some of this precious resource. Thus the just-announced multimillion-dollar ad campaign touting the “power of print.”

The campaign, funded by five leading publishers, seeks to convince people that “magazines remain an effective advertising medium in the age of the Internet because of the depth and lasting quality of print, compared with the ephemeral nature of much of the Web’s content.”

And how are they going to get this message across? “Nearly 1,400 pages of the ads will be sprinkled through magazines including People, Vogue and Ladies’ Home Journal this year.”

Let me get this right – you’re going to tell magazine readers that reading magazines is a good thing? Maybe it’s just me but I’m pretty sure they already know. Aren’t the people you want to reach the ones who aren’t trying to discern the difference between the ads and the articles in GQ?

SPECIAL BONUS: BEST UNINTENTIONAL MARKETING MISTAKE OF THE YEAR

Rhode Island outraged by use of Massachusetts to illustrate size of oil spill

Rhode Island, perhaps because it is the smallest state in the union, is the preferred media reference when describing the size of something. This works well for both the factual and the fantastical.

The following are just from news stories in the past week:

• Charles Mix County covers an area about two-thirds the size of Rhode Island and about half the size of Delaware,
• The Basque Country, a region the size of Rhode Island, straddles the border of Spain and France. It’s historically comprised of seven provinces
• Complete with hand-dial radio and a trunk the size of Rhode Island,
• We’ve literally lost an area the size of Rhode Island off our coast," said Jindal.

The ice sheets that peel off of Antarctica all seem mathematically related to the Ocean State. The most recent: An Ice Shelf the Size of Rhode Island Breaks Up in Just 24 Hours

For those of you keeping track at home, Rhode Island is either 1000 square miles in size (just measuring the land part) or 1,500 sq. mi. if you include Narragansett Bay as well. Now comes the horrific news that MASSACHUSETTS!!! of all places is being used as a measure.

They say the dead zone is roughly the size of Massachusetts, or at least 7,722 square miles. The largest ever measured was just over 8,000 square miles in 2001.

Rhode Island has always had a chip on its shoulder about Massachusetts. My home state was literally founded by Bay State castoffs (cast off because they were in favor of things like religious tolerance, I might add). So this trend has to be stopped in its tracks. NOW. So Mr. Reporter, lets try again. It is nearly EIGHT TIMES THE SIZE OF RHODE ISLAND!!! Now, isn’t that more impressive?

Goldman Sachs best marketing move would be to shut up

Some hugely successful companies are never going to be loved or even liked. Top of that list: Oil companies and banks. The smart move would be to take their billions in profits and be happy with that. For some reason, though, that’s not enough.

Thus we get

Goldman Sachs is considering a corporate branding campaign in a bid to improve its battered reputation, and has even discussed placing Chief Executive Officer Lloyd Blankfein on the “The Oprah Show.”

The oil industry tried something similar a few years ago. Here’s what I wrote then and it stands up: The oil industry should just give a gag order to itself. Yes, they are making a helluva a lot of money — the biggest challenge they face is choosing between "obscene" and "pornographic" when describing their profits. They feel compelled to defend their earnings because … well, I don’t know why. Because some PR person said they have to? The only explanation that anyone would believe — "Because we can" — is apparently not an acceptable sound bite.

The oil companies’ profits don’t depend on the public’s goodwill. They make the overwhelming majority of their money on wholesale, not retail. For them it’s all about price and reliability. As BP has proven all you really have to do is keep your head down and your environmental disasters in Africa or other places the major media don’t cover.

True, Goldman et al. do depend slightly on public goodwill. The fact that they’re being investigated by everyone except the commissioner of baseball has made some public groups suspend their relations with Goldman. But a PR campaign about what alleged good Goldman does is exactly the wrong move. All it will do is keep the issues alive in the public eye. The public isn’t going to believe a damn thing Goldman says anyway. I mean I don’t even believe their justification for the campaign:

Fiona Laffan, Goldman Sach’s head of media relations in Europe, Middle East and Africa, told a communications industry event here that mistrust and hatred of bankers, not just those at Goldman Sachs, remained near an all-time high and that the bank, as an industry leader, needed to do a better job of explaining what it did and how.

Please. We all know what you do and how and we were all in favor of it until you nearly cost us the economy. You’re just scared about how we’ll respond if someone can prove you were betting on the failure of companies you were giving financial advice to. Look, just sit still and shut up and we’ll forget all about it. The US public has the attention span of a mayfly on crystal meth. Just wait and let BP’s decision to roast turtles work in your favor.

Joe Barton wasn’t only GOP-er apologizing to BP

Wow. The Republicans sure seem determined to give the mid-term elections back to the Democrats.

BP’s marketing stupidity flows even faster than its oil

I have never said this so early in a year before but … the worst marketing of the year competition has been decided. BP’s ongoing attempts to clean up its reputation as it fails to clean up the Gulf are so horrendous it is impossible for anyone else to catch up.

It is only fair to point out that BP has used a ringer, someone whose skills are so extraordinary that having him on the team is almost like cheating. I speak, of course, of soon-to-be-unemployed CEO Tony Hayward. Hayward is so astoundingly dangerous in front of a microphone that he makes Joe Biden and former GM CEO Rick Waggoner seem like the second coming of Ronald Reagan.

First there was the spectacularly stupid whine about wanting his life back. In one little phrase Hayward made it clear that he views this entire incident as an imposition on him and can’t quite remember that actual lives have been lost.

But wait, that’s not all! Today he replied to his critics thusly: "They’ve thrown some words at me, but I’m a Brit. Sticks and stones may break my bones but words will never hurt me.” OK everyone, put down the tar and feathers and go get some sticks and stones. If Mr. Hayward continues on in this manner his PR staff will likely be first in line to deliver the wood-and-rock therapy.

Speaking of BP’s PR staff … no one – not even John McCain – can win an award of this magnitude all by themselves. Mr. Hayward is being aided and abetted by a group of people whom I must assume are paid many millions of dollars a year and whom I wouldn’t let promote a church car wash. These are people like BP spokesman Randy Prescott: who said, “Louisiana isn’t the only place that has shrimp.”

But, let’s be honest, these are just individual gaffes from individual idiots. This is really an enterprise-wide award which takes enterprise-wide effort to take it up another level and execute some truly world-class stupidity. To wit a brief list:

• “BP is going to [spin] off its Gulf of Mexico spill operation to a separate in-house business to be run by an American in a bid to isolate the "toxic" side of the company and dilute some of the anti-British feeling aimed at chief executive Tony Hayward, the company said today.” Because it’s all about protecting Tony, that’s why.
• Decided to pay out $10 billion in dividends to stockholders while failing to pay people hired to clean up its mess.
• Consistently downplayed the amount of oil being spilled in an attempt to limit liability.
• Continues to spend millions of dollars on ads promising to fix the damage its done and emphasizing how much effort it is putting into stopping the catastrophe it created.
• Continues to try to block the press from the scene of the crime by banning flyovers and keeping reporters from beaches, a tactic that – like everything else they’ve done – just makes things worse.

Congrats to all those responsible at BP and God help us all.

Bad brand ideas: Gasoline promises to be “terror-free”

Next time you’re in Omaha, Nebraska, take a quick stop by the corner of 129th & Q. There you will see the first location of Terror Free Oil, a new company that promises to only sell “Oil that does not come from the Middle East (Persian Gulf) or other countries whose regimes and/or populations are hostile towards the United States and its allies.” Which basically means the US and Canada, unless the Canadians get uppity. (Why do I think that for most of us the phrase “terror free gas” means it sells for less than $2 a gallon?)

Should you not have the fortune of living in Omaha but still wish to avoid terrifying gas, the TFEC maintains a list of oil companies that it believes only buy domestic dead dinosaur. These include Hess, Sunoco and a wonderful brand that I didn’t even realize was still with us: Sinclair.

I’m not sure exactly how you discern the provenance of petroleum. Does the 2007 Alaskan Sweet Crude really taste different than the same vintage from the Mid East? The TFEC itself admits that it can be difficult to make sure all their gas is devoid of corruption: “Oil is a fungible commodity, and gasoline from the international community gets mixed into the pipeline.” That said they do buy all their gas from Sinclair which the Dept. of Energy says only uses home brew.

Doing some driving abroad and want to top off with Good Guy Gas? In Brazil it’s safe to use Petrobras. Oddly, Yukos has also received the TFEC seal of Clean Living. Are we talking about the same Yukos that the Russian government basically took over? I don’t mean to speak ill of an ethnic group I’m descended from, but if Yukos isn’t paying off terrorists and mobsters to do business then they are the only such business in The Motherland.

Also, if this seems like an incredible business opportunity TFEC is offering the most reasonable franchise opportunities I’ve ever seen. Franchise fee: $1. In addition to only selling Good Guy Gas, franchisees must donate 1% of revenues to a counter-terrorism organization. Dibs on the CIA!

I feel safer already.

I now understand BP’s claim to be a green oil company

Quoth the Wall Street Journal:

Public, Political Pressure May Rise
As Inquiry Looks Into Possibility
Of Manipulation in Gas, Oil Prices

Federal investigators are examining whether BP manipulated crude-oil and unleaded-gasoline markets, signaling a rise in regulatory scrutiny of the British energy giant, said lawyers and traders close to the case.

See here we all thought that by green they meant concern for the environment. That claim was so ludicrous (see Alaskan oil fields) but now it makes sense: Green = $. And it’s refreshingly honest, too.
If these allegations are true it proves that BP has problems on more than just a moral level. How dumb does a gas/oil company have to be to bother with manipulating markets in THIS economy? Mr. Gild, meet Mr. Lilly. Even by my lax standards this falls under “excessive profit taking.”

Big Oil’s latest staggeringly dumb PR move

Top executives at oil giant Shell have begun a 50-city tour across the United States this summer in hopes of persuading angry consumers that Big Oil is not ripping them off.

John Hofmeister, president of Shell Oil Co., and other company execs “plan to meet with everyone from average Americans struggling to pay rising prices at the pump to city officials and governors on their tour.” What exactly to call this tour … Gasapalooza? Monsters of Capitalism? Nasty As They Wanna Be? And who’s the opening act? Maybe the CEO of Merk trying to persuade angry consumers that Big Pharma is not ripping them off?

How rampant is the insecurity over there at Shell HQ? I don’t see any other possible explanation as to why these guys feel it so important to be liked? This is like a crack dealer wanting hugs from his customers.

Speaking as a consumer of oil-products, I find this whole idea more than a little insulting. We’re not stupid, Mr. Hofmeister. There’s no part of the phrase “record profits” that we don’t understand. We all know where those profits are coming from because we all fill up our cars. We all remember when the idea of $3 a gallon gas was impossible to imagine. Not to long ago, gas at that price was supposed to be one of the signs of economic apocalypse.

Hofmeister explained the trip by saying: “These are unprecedented times that require unprecedented responses.” Yes, how about some nice unprecedented silence? Remember your PR strategy: Speak very softly and carry a big profit margin.

My sympathies to whomever is stuck doing Shell’s PR work … I do not think they are responsible for this. Ideas this bad have to come straight from the CEO because otherwise it would have never got off the whiteboard.

There is always a well-known solution to every human problem–neat, plausible, and wrong. — Mencken

Dear Big Oil: It’s time to declare victory and shut up…

"If we didn't have this level of profitability, I don't think we could get the supplies to where they need to get to."

— John Hofmeister, president of Shell Oil Co.

The oil industry should just give a gag order to itself. Yes, they are making a helluva a lot of money — the biggest challenge they face is choosing between "obscene" and "pornographic" when describing their profits. They feel compelled to defend their earnings because … well, I don't know why. Because some PR person said they have to? The only explanation that anyone would believe — "Because we can" — is apparently not in the approved soundbite check list. 

Oil companies should consider it, though. Not onlu would it have the novelty of being the truth, but it is also far better than what they actually are saying. In addition to the quote above, other excuses include the famous "in Europe gasoline prices are more like $5 per gallon to $7 per gallon." (Ummm, isn't most of that because of taxes? What does that have to do with profits? Maybe the oil companies are saying that if their profits were really big they would be pay for for national healthcare and college tuitions?) Another loser: saying oil is inexpensive because look how much it would cost to fill it up with … (not making this up) … coffee. Fortunately for the oil co. exec who said this did it on NPR so the interviewer neither laughed in his face nor asked a follow up question.

Word to the wise: It's never too late to shut up.

Perhaps the oddest comment on the topic of oil from the Sunday yak fests:

"This is a global business, and it's not only that we need to add to supply, but we need to reduce demand. In the United States alone, we have about 2 percent of world oil reserves, 5 percent of the population and yet we use about 25 percent of the world's consumption of oil."

This from wild-eyed radical conservationist James J. Mulva (who is not only the chairman of ConocoPhillips Co. but the only oil company CEO to have played a key role in a Seinfeld episode). Are consumers so gullible as to believe the oil-company-as-environmentalist PR position? Probably, and if they don't it won't be because BP didn't try hard enough.

Tuesday’s Quote of the Day

"I'm concerned about higher gasoline prices. The government has the responsibility to make sure that we watch very carefully and investigate possible price-gouging, and we will do just that." — George W. Bush

George strikes his head against one of the great intellectual challenges of capitalism: Defining price gouging. Traditionally, prige gouging has been defined as "when my competitor gets aways with charging more than I thought to charge." In this case it might be defined as ridiculously high prices charged when I have gotten out of the business. Enlightened self-interest, indeed.

Allow me to quote myself from November 3rd of last year:

There is a problem that every company and industry would like to have: Record profits and ever-increasing demand for your product. So why is it that oil companies announcing third-quarter profits are squirming like Kathy Lee Gifford touring a sweat shop? Three reasons. One, they sell a product whose price fluctuations are posted on practically every street corner. Two, the US public’s knee-jerk reaction is to suspect the oil companies of ripping them off at the pump no matter what. Third, well, these profits all came in the wake of hurricane season when gas prices were at an all-time high. In other words – it sure looks like they were making money on tragedy.

How much money have they made? During the third quarter of this year Exxon Mobil had $10 BILLION in profits. Collateral Damage Sr. did the math on this: The company has been making exactly $74,879.23 every minute.

How bad is this for the oil cos? If you’re an investor, not bad at all. However, in the public marketplace it is a disaster. Things have gotten so bad that an increasing number of those socialists in the GOP want the industry to kick in 10 percent of their profits to pay for winter heating bills. Iowa Sen. Charles Grassley, who chairs the Senate Finance Committee, said he sent a letter to oil companies to "embarrass" them into contributing to the Low Income Home Energy Assistance Program. The wind seems to be blowing extra cold out in the prairie states these days as Nebraska Rep. Lee Terry, a Republican who sits on the House Energy and Commerce Committee, is also calling for Big Oil to pony up.

How do you address this from a marketing perspective? Have your lobbying group claim that A) you really haven’t made that much money and B) it’s really everyone else’s responsibility.

According to a nice article over at AdAge, American Petroleum Institute prez Red Cavaney says "A number of people in Congress are railing against the industry’s windfall profits, but we made only 7.5 cents on a dollar of sales." Cavaney says that on a per-dollar basis, several companies – including Citigroup, Microsoft and Coca-Cola – all made more money last quarter. (And that’s leaving out the undoubtedly equally ridiculous per-dollar profits of Google.) Big Oil also thinks that, really, consumers ought to be more conservation minded. Drive less. Car pool. That sort of thing. Not sure how that will help this winter, though. Can we all share the same domiciles to pool our heating?

Mr. Cavaney is in one of those impossible positions periodically foisted on industry leaders by capitalism. Clearly he had to say something. Just as clearly his industry is being pilloried for being successful. What do you say? While his response of "No, we aren’t" was never going to fly, is there anything that would have? Quoth AdAge: "A majority of Americans, 87%, said oil companies are gouging them on gasoline prices, according to a survey in mid-September by Opinion Research Corp. for the non-profit Civil Society Institute."

But that begs the question – again quothing CD Sr. – "In a society that has a free market fetish, if not a religion, what is price gouging? Is nine percent profit gouging the price? Or 15 or 50 percent? At what price point does profit change into gouged profit?"

In the public eye, price gouging is when you are charging me too much and profits are when I am making a decent amount. I am sure it is just coincidental that gas prices are falling faster than FEMA’s approval ratings in the wake of all this political hullabaloo. Yep. Just a coincidence.