Big Oil to Get $100 Million Makeover

The U.S. oil industry will launch a multiyear, multimillion-dollar public relations push early in 2007 aimed at bolstering its sagging image.

The American Petroleum Institute has enlisted Edelman, the global public-relations agency, and polling experts at Harris Interactive Inc. to fix what it sees as major misperceptions in how everyday Americans view the industry.

"The U.S. public and frankly many policymakers have little or no understanding about the energy business," said Red Cavaney, the institute's president.

Cavaney declined to say exactly how much the industry will spend on the campaign, which takes the form of advertisements in major U.S. newspapers and television commercials.

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One industry source familiar with the campaign pegged its price tag at near $100 million over several years.

That would be funded mainly by a handful of the institute's biggest members, such as Exxon Mobil Corp., Chevron Corp. and ConocoPhillips, the source said on condition of anonymity.

"I nearly fell out of my chair when I heard what they were spending," the source said.

Washington, D.C.-based API is a national trade association serving the oil and natural-gas industry, with 400 corporate members.

Back to School

Big Oil's image may have hit a new low in late 2005, as news of record profits made banner headlines just as consumers were smarting from record-high gasoline prices spurred by Hurricane Katrina.

Not since the 1989 Exxon Valdez oil spill in Alaska, the worst in U.S. history, did the industry suffer so much negative media attention.

To oil companies, the hurricane story was a positive one. They evacuated 3,000 offshore drilling platforms with no loss of life, and kept gasoline supplies flowing with few actual shortages.

"Secretly in our heart of hearts we were hopeful that following that, people would have said, 'Well, nice job,"' Cavaney said. "The reverse happened."

Republican heads of powerful congressional committees - many of them staunch industry supporters - dragged oil company chiefs before hearings and asked pointed questions about industry duplicity in setting prices - an allegation that oil executives vehemently deny.

Not all U.S. policymakers are eager to be schooled in the finer points of the industry.

"Americans get an education about oil prices every time they pull up to the pump and the last thing they need to hear is a phony PR campaign from Big Oil telling them how high prices are good for them," said Rep. Edward Markey, Massachusetts Democrat and a long-time industry critic.

Based on Harris polls, Americans have basic misconceptions about how gasoline is priced and how much profit oil companies reap from on a dollar of sales, Cavaney said.

For example, in a Harris poll of 803 "influentials," or people who have greater public influence than the average respondent, only 19 percent knew that crude oil prices account for about half the cost of gasoline.

Nearly double that number - or 34 percent - thought that crude oil prices made up only a quarter of the cost of gasoline, according to poll results provided by the API.

And nearly half the respondents thought the oil and gas industry earns 13.8 cents on a dollar of sales - the highest amount offered as an answer option. Only 15 percent identified the correct figure - 8.5 cents, according to the data.

Results also suggest that many Americans see a limitless supply of gasoline and oil controlled by Big Oil's whims, not by market economics and geology.

"The most common answer that you end up getting ... is, well, these gas stations are everywhere and these companies must be very powerful to know exactly where the gasoline is so they can put these stations there," Cavaney said.

Most consumers think that the most expensive item they buy by the gallon is gasoline, when the only product that's a better bargain is bleach, he said.

Editor's note:
Warning: Oil Prices Will Collapse, Profit from It!