Oil Industry Profits: Analysis of Recent Performance

High prices for crude oil in 2004 and into 2005 have reduced consumers' purchasing power and raised costs for businesses while providing billions of dollars to the oil industry and oil exporting countries. The industry's increased revenues have led to record profit levels. As the 109th Congress engages in oversight of recent broad energy legislation which aims to increase the domestic supply of crude oil to mitigate oil price increases in the longer term, another key factor in determining increased supply is how oil companies decide to allocate their profits between shareholder returns and investment in oil production. This report is written in response to a number of requests from Congress concerning profits in the oil industry. This report provides background information concerning the level of oil industry profits, the sources of those profits, and a discussion of the potential uses of profits.