ExxonMobil recently announced annual net income of $36 billion, the highest profit ever reported by an American Corporation.
At the same time, gas prices are putting the squeeze on Americans.
Is there anything wrong with the oil companies making a profit?
Are there any ethical issues involved?
Recently the Florida A&M University School of Business & Industry held a business ethics essay contest to solicit students’ views on this controversial topic.
“The idea would be to take advantage of topical interest in this subject, and stimulate students to thinking about the nature of business profits, and ponder whether or not there are any ethical issues,” said Craig Reeder, a visiting accounting instructor at SBI.
Reeder further explained that the essay was not judged on right or wrong.
“It is a thinking piece,” he added.
Here is the winning essay by Ray Shackelford, 19, a sophomore business administration student from Tallahassee.
Is There Anything Wrong With Oil Company Profits?
Americans’ hostility toward oil companies is wrong.
Most Americans look at the bottom line of how increasing gas prices are affecting their lives.
American citizens need to realize the changing global picture: America is not alone in the world.
Both China and India are quickly becoming economic forces.
China and India combined have contributed a third of the global gross domestic product in the past two years.
China alone witnessed a Gross Domestic Product increase of ten percent for the previous year, and India witnessed a GDP increase of eight percent for the previous year.
As somewhat of a comparison, America’s GDP for the previous year increased 3.5 percent.
This information is relevant to the topic because, as their economies grow, so must their sustaining factors, in this case, oil consumption.
India now has an emerging middle class.
India’s middle class is demanding more automobiles, which is the reason General Motors, Suzuki, and Hyundai plan to expand their companies in the region.
Unfortunately for the United States, most cars run on gasoline.
India’s growing demand for cars equates to a growing demand for gasoline; however the current supply of gasoline cannot fulfill the desired demand.
In order to reach equilibrium of supply and demand, to avoid shortages, oil companies must raise the price of gasoline.
China too needs gasoline to not only support its middle class, but also to support existing infrastructure.
China has quickly become the second-largest consumer of oil in the world, and in 2004 became the third largest importer of oil.
This means their demand for oil is increasing, and as stated before, the supply cannot fulfill the demand.
Some may argue against the increasing profits of these oil companies, but in order to reach equilibrium of supply and demand, and to avoid shortages, oil companies must raise the price of gas.
The desired effect of increasing the price of gas is to slow demand.
What is happening to make oil company profits rapidly increase is, regardless of price, Americans still buy the same amount of gas.
In conclusion, oil companies should not be placed at fault for profit increases.
While Americans are upset at the increased prices at the pump, these increased prices protect us from global shortages.