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Now This Really Is an Oil Shock


A new poll says fewer Americans blame the industry for $4-a-gallon gas

Gallup Poll Editor-in-Chief Frank M. Newport has come to expect a few things from his opinion research. One is for people to blame the oil companies when gas prices soar. That's why he was surprised by the results of a Gallup survey released on May 28. Only 20% of those surveyed blamed oil company profiteering for $4-a-gallon gas; a year ago, 34% felt that way.

Instead, consumers offered a much broader array of explanations for high prices, including lack of conservation, too much dependence on foreign oil, and war in the Middle East. They even included a couple of villains that hadn't popped up last year—the shrinking dollar and speculators driving up the price. "Americans," Newport says, "are less likely to react in a knee-jerk fashion [to oil prices]." Of course, it doesn't hurt that the oil majors have in recent years rolled out some very effective counter-advertising.

Big Oil certainly didn't have the public on its side during the energy crisis of the 1970s. A Gallup survey in April, 1979, found that 77% of Americans believed gasoline shortages were "created by oil companies." A year later, Congress passed a windfall profits tax on oil company earnings. After oil prices collapsed and the tax generated less revenue than anticipated, it was repealed in 1988.

The oil companies began attracting greater scrutiny again in 2005, when Hurricane Katrina knocked out supplies in the Gulf of Mexico, and gas prices spiked. As recently as August of last year, a Gallup Poll ranked oil dead last among 25 industries in terms of the public's positive feelings about the business. Even the legal profession and the federal government scored higher. But Big Oil's public relations machine has gone into overdrive of late. ExxonMobil (XOM), BP (BP), and Chevron (CVX) spent a combined $327 million last year on advertising, according to TNS Media Intelligence, a 55% increase from 2004.

A LOBBYING RUSH

Many of their ads are issues-related. Chevron's "Will You Join Us" campaign features scary statistics about energy supply and demand. (Sample print ad: Russia, Iran, and Qatar have 58% of the world's natural gas reserves. The U.S. has 3%.) On the campaign's Web site, a rapidly spinning counter adds up how many barrels of oil the world consumes in real time. Company spokesman David Samson says Chevron hopes to get consumers to enter a dialogue about energy issues.

The industry's chief lobbying organization, the American Petroleum Institute, has been running full-page ads in major newspapers showing how little of what the consumer pays for gasoline translates into oil company earnings (8.3 cents out of every dollar). Its public awareness initiatives also include taking journalists out to oil rigs to show them how much work it takes to produce oil and two roving "tech tours" that show off some of the technologies used in oil production.

Big Oil also has stepped up its lobbying, spending $83 million last year, up 60% since 2004, according to the nonprofit Center for Responsive Politics. Those efforts seem to be paying off: Few anti-industry initiatives are becoming law. A bill to repeal $18 billion in tax breaks over 10 years passed the House in February. But it has failed three times in the Senate.

In fact, the political climate has the oil majors confident about extracting concessions once deemed unthinkable. Winning the right to drill in the Arctic National Wildlife Refuge in Alaska is unlikely. But American Petroleum Institute President Red Cavaney believes Congress will eventually allow some drilling in now-closed federal waters off the coasts.

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau .

Silicon Valley State of Mind
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