Political News — February & March 2008

Article 1

WHY OBAMA WON'T BE PRESIDENT

OBAMA CAN’T WIN THE PRESIDENCY. The traditional dirty tricks makes me believe that big money and the Republicans would like to see Obama run. He would be easily defeated. He will protrayed as a black racist and Muslim sympathizer. The article below refers to his race vulnerability The Democrats’ Class War Views > February 8, 2008, in These Times by David Sirota, Senior Editor, at http://www.inthesetimes.com/article/3519/the_democrats_class_war/

Views > February 8, 2008, in These Times by David Sirota, Senior Editor, at http://www.inthesetimes.com/article/3519/the_democrats_class_war/

For all the hype about generational and gender wars in the 2008 Democratic presidential primary, we have a class war on our hands. And incredibly, corporate America’s preferred candidate is winning the poorer “us” versus the wealthier “them”—a potentially decisive trend with the contest now moving to working-class bastions like Ohio and Pennsylvania. In most states, polls show Hillary Clinton is beating Barack Obama among voters making $50,000 a year or less—many of whom say the economy is their top concern. Yes, the New York senator who appeared on the cover of Fortune magazine as Big Business’s candidate is winning economically insecure, lower-income communities over the Illinois senator who grew up as an organizer helping those communities combat unemployment. This absurd phenomenon is a product of both message and bias. Obama has let Clinton characterize the 1990s as a nirvana, rather than a time that sowed the seeds of our current troubles. He barely criticizes the Clinton administration for championing job-killing trade agreements. He does not question that same administration’s role in deregulating the financial industry and thereby intensifying today’s boom-bust catastrophes. And he rarely points out what McClatchy Newspapers reported this week: that Clinton spent most of her career at a law firm “where she represented big companies and served on corporate boards,” including Wal-Mart’s. Obama hasn’t touched any of this for two reasons. First, his campaign relies on corporate donations. Though Obama certainly is less industry-owned than Clinton, the Washington Post noted last spring that he was the top recipient of Wall Street contributions. That cash is hush money, contingent on candidates silencing their populist rhetoric. But while this pressure to keep quiet affects all politicians, it is especially intense against black leaders. “If Obama started talking like John Edwards and tapped into working-class, blue-collar proletarian rage, suddenly all of those white voters who are viewing him within the lens of transcendence would start seeing him differently,” says Charles Ellison of the University of Denver’s Center for African American Policy. That’s because once Obama parroted Edwards’ attacks on greed and inequality, he would “be stigmatized as a candidate mobilizing race,” says Manning Marable, a Columbia University history professor. That is, the media would immediately portray him as another Jesse Jackson—a figure whose progressivism has been (unfairly) depicted as racial politics anathema to white swing voters. Remember, this is always how power-challenging African-Americans are marginalized. The establishment cites a black leader’s race- and class-unifying populism as supposed proof of his or her radical, race-centric views. An extreme example of this came from the FBI, which labeled Martin Luther King Jr. “the most dangerous man in America” for talking about poverty. More typical is the attitude exemplified by Joe Klein’s 2006 Time magazine column. He called progressive Rep. John Conyers, D-Mich., “an African American of a certain age and ideology, easily stereotyped” and “one of the ancient band of left-liberals who grew up in the angry hothouse of inner-city, racial-preference politics.” The Clintons are only too happy to navigate this ugly cultural topography. After a rare Obama attack on Hillary Clinton for supporting policies that eliminated jobs, Bill Clinton quickly likened Obama’s campaign to Jackson’s, and the Clinton campaign told the Associated Press Obama was “the black candidate.” These were deliberate statements telling Obama that if he talks about class, they’ll talk about race. And so, as Marable says, Obama’s pitch includes “no mention of the class struggle or class conflict.” It is “hope” instead of an economic case, bromide instead of critique. The result is an oxymoronic dynamic. Obama, the person who fought blue-collar joblessness in the shadows of shuttered factories, is winning wealthy enclaves. But Clinton, the person whose globalization policies helped shutter those factories, is winning blue-collar strongholds. Obama, who was schooled by the same organizing networks as Cesar Chavez, is being endorsed by hedge fund managers. But Clinton, business’s favorite, is being endorsed by the United Farm Workers—the union that Chavez created. Obama, the candidate from Chicago’s impoverished South Side, is finding support on Connecticut’s gilded south coast. But Hillary Clinton, the candidate representing Big Money, is finding support from those with relatively little money. As the campaign heads to the struggling Rust Belt under banners promising “change,” this bizarre class war may end up guaranteeing no real transformation at all. Teddy Roosevelt's advice that, "We must drive the special interests out of politics. The citizens of the United States must effectively control the mighty commercial forces which they have themselves called into being. There can be no effective control of corporations while their political activity remains."

In most states, polls show Hillary Clinton is beating Barack Obama among voters making $50,000 a year or less—many of whom say the economy is their top concern. Yes, the New York senator who appeared on the cover of Fortune magazine as Big Business’s candidate is winning economically insecure, lower-income communities over the Illinois senator who grew up as an organizer helping those communities combat unemployment. This absurd phenomenon is a product of both message and bias.

Obama has let Clinton characterize the 1990s as a nirvana, rather than a time that sowed the seeds of our current troubles. He barely criticizes the Clinton administration for championing job-killing trade agreements. He does not question that same administration’s role in deregulating the financial industry and thereby intensifying today’s boom-bust catastrophes. And he rarely points out what McClatchy Newspapers reported this week: that Clinton spent most of her career at a law firm “where she represented big companies and served on corporate boards,” including Wal-Mart’s.

First, his campaign relies on corporate donations. Though Obama certainly is less industry-owned than Clinton, the Washington Post noted last spring that he was the top recipient of Wall Street contributions. That cash is hush money, contingent on candidates silencing their populist rhetoric.

Article 2

Prescription drugs from China sicken and kill Aamericans

Doing as big PHARMA wants—ineffective regulatory review, Congress and the Presidents have reduced the FDA’s ability to regulate the drug industry. This is free-market economics at work. There is virtually no inspection of Chinese companies. FDA in crisis? Then show them the money http://www.fiercepharma.com/story/fda-in-crisis-then-show-them-the-money/2008-02-04?utm_medium=nl&utm_source=link Pony up, Congress. Stop whipping the FDA for its failures and fork over the cash necessary to fix the problem. That's what editorial writers at the Boston Globe and New York Times said over the weekend. "Congress should boost FDA spending to whatever level it takes to restore public trust in the agency," the Globe contended. We all know the stats by now: Though 80 percent of drugs sold in the U.S. are made overseas, the number of import inspectors has dropped by a third, and only a handful of the thousands of foreign manufacturing plants are inspected each year. The FDA's $2 billion budget has dropped by $400 million in inflation-adjusted dollars over the last 14 years. Meanwhile, more than 100 statutes over the last 20 years have handed the agency new duties. As the Times points out, informed observers are nearly unanimous: the FDA is in crisis. Even Congressional Democrats and Republicans agree on this point. The Bush administration has shown little appetite for the major increase in funding the FDA needs. Recently, it established a working group on the safety of imports but it stipulated that any reform proposals should be "within available resources.""The FDA desperately needs an infusion of money and talent," notes the Times. In another editorial--linked to coverage of a Chinese company that distributed tainted cancer drugs, paralyzing hundreds--the paper calls on Congress and the White House to "move quickly" to strengthen the FDA. We'll see if the government takes heed. Oh, woe is the FDA. The Government Accountability Office is set to release a new report on the agency's terrifically inadequate inspection record overseas. According to the New York Times, which obtained a copy early, the FDA is so understaffed that it would need at least 27 years to inspect every foreign medical device plant and 13 years to check every foreign drug plant. Think that's bad? Catching up on food inspections would take a mind-boggling 1,900 years. The attrition in personnel has been especially acute among inspectors of the exploding market in imported goods. While 80 percent of all drugs sold in the United States are made overseas, the number of import inspectors has plummeted, from 531 in 2003 to 380 in 2006. In 2007, the FDA inspected just 30 of several thousand foreign drug-making plants. It inspected just 100 of 190,000 foreign food plantsc Most disturbing is the fact that the agency is farthest behind in--you guessed it--China, that bastion of impure and unsafe exports. China has more drug and device plants than any other foreign nation, and FDA inspections there are few, the Times notes. Those resources are so insufficient that a former associate commissioner of the FDA, William Hubbard, told the Globe last year that the FDA checked just 2 percent of all food imports from China, a country with a record of shipping food contaminated by carcinogens, filth, and pesticides. Congress should boost FDA spending to whatever level it takes to restore public trust in the agency. Right now, it is failing in its mission to protect buyers of food and medicines. The GAO will present this bad news at a hearing before the House Energy and Commerce Committee, which has been dogging the FDA for months now. One witness set to testify said, "This is a fundamentally broken agency, and it needs to be repaired." We advise the FDA to focus on the "repair" part of that sentence. Today will be painful, sure, but it could lead to a sorely needed increase in funding. If the stars and politicians line up just right, that is.

http://www.fiercepharma.com/story/fda-in-crisis-then-show-them-the-money/2008-02-04?utm_medium=nl&utm_source=link

Pony up, Congress. Stop whipping the FDA for its failures and fork over the cash necessary to fix the problem. That's what editorial writers at the Boston Globe and New York Times said over the weekend. "Congress should boost FDA spending to whatever level it takes to restore public trust in the agency," the Globe contended.

We all know the stats by now: Though 80 percent of drugs sold in the U.S. are made overseas, the number of import inspectors has dropped by a third, and only a handful of the thousands of foreign manufacturing plants are inspected each year. The FDA's $2 billion budget has dropped by $400 million in inflation-adjusted dollars over the last 14 years. Meanwhile, more than 100 statutes over the last 20 years have handed the agency new duties. As the Times points out, informed observers are nearly unanimous: the FDA is in crisis. Even Congressional Democrats and Republicans agree on this point.

The Bush administration has shown little appetite for the major increase in funding the FDA needs. Recently, it established a working group on the safety of imports but it stipulated that any reform proposals should be "within available resources.""The FDA desperately needs an infusion of money and talent," notes the Times. In another editorial--linked to coverage of a Chinese company that distributed tainted cancer drugs, paralyzing hundreds--the paper calls on Congress and the White House to "move quickly" to strengthen the FDA. We'll see if the government takes heed.

Oh, woe is the FDA. The Government Accountability Office is set to release a new report on the agency's terrifically inadequate inspection record overseas. According to the New York Times, which obtained a copy early, the FDA is so understaffed that it would need at least 27 years to inspect every foreign medical device plant and 13 years to check every foreign drug plant. Think that's bad? Catching up on food inspections would take a mind-boggling 1,900 years. The attrition in personnel has been especially acute among inspectors of the exploding market in imported goods. While 80 percent of all drugs sold in the United States are made overseas, the number of import inspectors has plummeted, from 531 in 2003 to 380 in 2006. In 2007, the FDA inspected just 30 of several thousand foreign drug-making plants. It inspected just 100 of 190,000 foreign food plantsc

Article 3

Supreme Court shields drug companies

MEDICAL DEVICE MAKERS SHILEDED FROM LAW SUITS, THE DRUG COMPANIES WILL BE SHIELDED IN THE NEXT SUPREME COURT SESSION. By logic this ruling will extend to all drugs approved by the FDA, and preempt state laws. For the 37 page ruling http://www.supremecourtus.gov/opinions/07pdf/06-179.pdf. Justices Stephen Breyer and Anthony Kennedy "expressed broad skepticism" about liability suits against drug makers, Forbes reports. Breyer said--and this is key--that the suits second-guess the FDA's decision to approve the drug. An expert agency is better qualified to make decisions about a drug's safety than is a jury of 12 randomly selected citizens, Breyer said. Supreme Court shields device makers February 21, 2008 http://www.fiercepharma.com/story/supreme-court-shields-device-makers/2008-02-21?utm_medium=nl&utm_source=link

By logic this ruling will extend to all drugs approved by the FDA, and preempt state laws. For the 37 page ruling http://www.supremecourtus.gov/opinions/07pdf/06-179.pdf. Justices Stephen Breyer and Anthony Kennedy "expressed broad skepticism" about liability suits against drug makers, Forbes reports. Breyer said--and this is key--that the suits second-guess the FDA's decision to approve the drug. An expert agency is better qualified to make decisions about a drug's safety than is a jury of 12 randomly selected citizens, Breyer said.

http://www.fiercepharma.com/story/supreme-court-shields-device-makers/2008-02-21?utm_medium=nl&utm_source=link

Medical device makers got some supreme protection yesterday. The highest court raised a partial shield against lawsuits, saying that devices that passed the FDA's most stringent premarketing review are exempt from consumer lawsuits. Essentially, the justices ruled that federal law--i.e., FDA regulation--preempts liability under state law for these devices. Can drugmakers anticipate their own celebration when the Supreme Court decides a couple of other preemption cases that involve meds instead of a device? Don't buy the champagne yet, some legal experts say. In ruling for Medtronic yesterday, the Court relied on a federal law specific to medical devices, not drugs. The Medical Device Amendments of 1976 set up detailed requirements for FDA testing of devices, wrote Justice Antonin Scalia in the majority opinion, and prohibited states from imposing different requirements. The ruling will affect numerous outstanding lawsuits, but some pending cases will still be allowed to go forward; the ruling doesn't keep consumers from suing if a device was made improperly, contrary to FDA specifications. The Court will hear one drug-related case Monday and will consider another in October. Ironically, the justices are considering these rules just as big questions have been raised about the FDA's ability to effectively regulate drugs and devices. Several recent reports have castigated the agency for scientific shortcomings, outdated technology, and mismanagement. Experts say the agency is way underfunded and understaffed. If the courts want FDA as our final authority, then shouldn't it be good at its job? - read the story in the Washington Post- see this New York Times article- check out the NYT's take on preemption under an inadequate FDA- find this Q&A with a consumer in a preemption case at Pharmalot This will apply to drugs as well

Can drugmakers anticipate their own celebration when the Supreme Court decides a couple of other preemption cases that involve meds instead of a device? Don't buy the champagne yet, some legal experts say. In ruling for Medtronic yesterday, the Court relied on a federal law specific to medical devices, not drugs. The Medical Device Amendments of 1976 set up detailed requirements for FDA testing of devices, wrote Justice Antonin Scalia in the majority opinion, and prohibited states from imposing different requirements.

The ruling will affect numerous outstanding lawsuits, but some pending cases will still be allowed to go forward; the ruling doesn't keep consumers from suing if a device was made improperly, contrary to FDA specifications.

Article 4

No Universal Health Care

Without getting business out of government there is no chance of a decent and affordable universal health care plan this article shows. How we compare to the Canadian system and the problems with market forces. Clinton’s tried in 94, only to have the business forces propose an impractical system ran by the insurance industry. The same is on the horizon In These Times, article by Joel Bleifuss http://www.inthesetimes.com/article/3528/political_climate_change/ Views > February 19, 2008 Political Climate Change

Paul Krugman, president of the Hillary Clinton fan club, writes in his New York Times column that if Barack Obama gets the nomination, there is no chance “that we will get universal healthcare in the next administration.” He has criticized Obama for not supporting mandates, as Clinton does, that require everyone to buy insurance. Lost in this debate is one stark fact: Neither Clinton nor Obama are proposing a clean break with our for-profit insurance system. Both Clinton’s and Obama’s plans allow for the possibility of a public plan replacing private insurance at some point in the future. But given the realities of Washington, it is easy to imagine a scenario in which the public’s money would subsidize a grossly expensive and inefficient private system into the indefinite future. At a time when progressives are starting to dream big again, why settle for a compromise with Corporate America? Critiquing the Clinton plan in a Times op-ed in December, Drs. Steffie Woolhandler and David U. Himmelstein wrote, “The ‘mandate model’ for reform rests on impeccable political logic: avoid challenging insurance firms’ stranglehold on healthcare. But it is economic nonsense. The reliance on private insurers makes universal coverage unaffordable … [O]nly a single-payer system of national healthcare can save what we estimate is the $350 billion wasted annually on medical bureaucracy, and redirect those funds to expanded coverage.” There is really nothing to debate. According to Physicians for a National Health Program (pnhp.org), Canadians, who have a single-payer universal system, spend far less per capita on healthcare and have better access to it than Americans. The point is not that Clinton and Obama should see the light and endorse single-payer universal healthcare. That would be too much to expect, considering that the two candidates have taken $2.8 million and $2.2 million, respectively, from the healthcare sector, according to the Center for Responsive Politics website (opensecrets.org). Progressives should reject the convoluted public/private hybrid systems championed by Krugman, Clinton and Obama, and say, “No thanks, we can do better.” But why stop there? An out-of-control War Department (as it was called until the age of polite euphemisms) will eat up 56 percent of the proposed discretionary budget for 2008, at a time when many urban and rural communities have Third World school systems. Our criminal injustice industry has created a whole class of separate and unequal citizens: poor young men (and women)—white, black and brown—who cycle in and out of court and prison. Candidates can’t be—and shouldn’t be—the vehicle for all of our hopes and dreams. Clinton, Obama and others who aspire to federal office are constrained by the political realities of a system that was bought and paid for long ago. Fortunately, we the people owe nothing to special interests. It is our job as advocates, activists and agitators to change the political climate in which politicians operate and to make the wrath of the angry multitude more fearsome than the displeasure of the lobbyist. To quote an old song, “We want no condescending saviors, to rule us from their judgment hall.” Universal, single-payer healthcare? Functioning schools? Well-paying jobs for the dispossessed? We can do it. Joel Bleifuss is the editor of In These Times, where he has worked as an investigative reporter, columnist and editor since 1986. Bleifuss has had more stories on Project Censored's annual list of the “10 Most Censored Stories” than any other journalist

Lost in this debate is one stark fact: Neither Clinton nor Obama are proposing a clean break with our for-profit insurance system.

Both Clinton’s and Obama’s plans allow for the possibility of a public plan replacing private insurance at some point in the future. But given the realities of Washington, it is easy to imagine a scenario in which the public’s money would subsidize a grossly expensive and inefficient private system into the indefinite future. At a time when progressives are starting to dream big again, why settle for a compromise with Corporate America?

Critiquing the Clinton plan in a Times op-ed in December, Drs. Steffie Woolhandler and David U. Himmelstein wrote, “The ‘mandate model’ for reform rests on impeccable political logic: avoid challenging insurance firms’ stranglehold on healthcare. But it is economic nonsense. The reliance on private insurers makes universal coverage unaffordable … [O]nly a single-payer system of national healthcare can save what we estimate is the $350 billion wasted annually on medical bureaucracy, and redirect those funds to expanded coverage.”

There is really nothing to debate. According to Physicians for a National Health Program (pnhp.org), Canadians, who have a single-payer universal system, spend far less per capita on healthcare and have better access to it than Americans.

Article 5

stimulus package swindle

In These Times At www.inthesethesetimes.com or monthly by subscription February 11, 2008 By Jared Bernstein and Lawrence Mishel Jared Bernstein is a senior economist at the Economic Policy Institute and author of the forthcoming book, Crunch: Why Do I Feel So Squeezed? (And Other Unsolved Economic Mysteries) (Berrett-Koehler, 2008). Lawrence Mishel is president of the Economic Policy Institute.

Jared Bernstein is a senior economist at the Economic Policy Institute and author of the forthcoming book, Crunch: Why Do I Feel So Squeezed? (And Other Unsolved Economic Mysteries) (Berrett-Koehler, 2008). Lawrence Mishel is president of the Economic Policy Institute.

In Escape from Recession, Economic Policy Institute economists Jared Bernstein and Lawrence Mishel give readers a useful primer on the need for -- and limitations of -- a congressional economic stimulus package. As President Bush signed the bill yesterday, In These Times talked to Bernstein about the specifics of the package and the possibility of Democrats proposing further measures to minimize the effects of an ensuing recession. 1) Maneuvering by the Senate Democrats yielded what some are calling a more decent deal than expected. Would you agree? The deal that Bush has agreed to sign this week is better than the original House deal in that it reaches about 20 million low-income seniors who would have been left out. Presumably, a) they need the money, and b) theyll spend (not save) the rebates and that will help boost consumption a bit more. 2) What proposals didn't make the final version of the bill that should have? The package could have been a lot better. As we noted in our article, expanding unemployment insurance and investing in public infrastructure -- schools, roads, bridges, waters systems -- gets you a much better bang for the buck and could be done in such a way as to help states that are quite strapped right now. 3) There's been talk that the Democrats are gearing up for an even larger second stimulus plan, one that could include revisions to the tax code. Is that likely to work its way through Congress or is it a political gambit? If it does, could it help minimize the effects of the ensuing recession? I've not heard anything regarding tax code revisions. Remember, stimulus is by definition temporary, and while our tax code could use some revamping (which it may well get if the next President is Clinton or Obama), it doesn't make sense to do this in the context of stimulus. I do think that Congress will go back to some of these issues if the economy remains weak and unemployment is rising by late in the year, especially if there's evidence that lots of folks are using up their 26 weeks of unemployment insurance. If that happens in enough places, look for an extension to UI to pass later this year. Click here to read Escape from Recession from our March issue. Senior Editor David Sirota touched on the same subject in his recent column The Stimulus Swindle. Sirota ponders why a package to energize our sagging economy took so long to surface in the first place.

1) Maneuvering by the Senate Democrats yielded what some are calling a more decent deal than expected. Would you agree?

The deal that Bush has agreed to sign this week is better than the original House deal in that it reaches about 20 million low-income seniors who would have been left out. Presumably, a) they need the money, and b) theyll spend (not save) the rebates and that will help boost consumption a bit more.

The package could have been a lot better. As we noted in our article, expanding unemployment insurance and investing in public infrastructure -- schools, roads, bridges, waters systems -- gets you a much better bang for the buck and could be done in such a way as to help states that are quite strapped right now.

Article 6

SHELL OIL RAKES IT IN--EXXON EVEN MORE

Royal Dutch Shell, the world's second-largest publicly traded oil company, today reported net income up 60 percent last quarter to a record $8.47 billion, thanks to the same rising crude oil prices that most observers expect will lift the profits of Exxon Mobil and Chevron tomorrow to nearly historic levels Shell's results were shy of the largest quarterly profit ever for a company in the United States, the record $10.7 billion that rival Exxon earned in the fourth quarter of 2005. But Shell's full-year profit for 2007 of $31.3 billion set a record for a European company. Still, CEO Jeroen van der Veer's muted comment was that the results were "satisfactory," and the company's stock reacted to the news with a downward slide. It wasn't just that Shell's results were in the lower range of expectations. Weighing on the company appeared to be the now apparent fact that Shell is producing less oil and that its performance cannot be sustained if a slowing economy lowers oil prices. Shell's increase in profits last quarter came despite a 5.7 percent drop in production. Shell's chief financial officer, Peter Voser, also said that 2008 would see a decline in oil and gas production because of woes in Nigeria and the loss of company assets. Most notable: a decreased stake in the huge Sakhalin Island project that Russia forced on the company after it had invested in it heavily for years. This marked the first time that Shell did not announce its reserves figures along with its year-end financial results. Although that puts the company in step with its U.S. competitors, which announce their holdings later in the spring, most analysts viewed it as a sign that the company was losing assets faster than it could replace them. Another downside to high oil prices for Shell and the other multinational oil companies: Their production-sharing deals with many of the countries in which they operate, most notably in the former Soviet states and Africa, are structured so the oil companies earn less of a share of each barrel's profit with more going to national governments as oil prices rise. Voser also said this contributed to Shell's lower production. High profits also mean increased political risk for all the oil companies; British labor union leader Tony Woodley immediately called for a windfall tax after Shell's announcement. In the United States, although similar efforts in Congress fizzled last year, the oil industry fears the idea will gain new steam once the full industry profit picture becomes apparent especially with the federal government in deficit and about to hand out billions in an economic stimulus plan. The portion of the oil industry that could be the bellwether for economic downturn is refining. With gasoline demand down, the profit margins in the business of making gasoline and other fuels have shrunk, leading some analysts to warn that that could weigh on profits. But last week, when the No. 3 U.S. oil company, ConocoPhillips, which has huge refining operations, reported profits up 37 percent in the fourth quarter, Wall Street again began looking for stellar results. "Unless oil prices collapse, companies will probably have another strong year, if not a record year," says Fadel Gheit, oil analyst with Oppenheimer & Co.

Shell's results were shy of the largest quarterly profit ever for a company in the United States, the record $10.7 billion that rival Exxon earned in the fourth quarter of 2005. But Shell's full-year profit for 2007 of $31.3 billion set a record for a European company. Still, CEO Jeroen van der Veer's muted comment was that the results were "satisfactory," and the company's stock reacted to the news with a downward slide. It wasn't just that Shell's results were in the lower range of expectations. Weighing on the company appeared to be the now apparent fact that Shell is producing less oil and that its performance cannot be sustained if a slowing economy lowers oil prices.

Shell's increase in profits last quarter came despite a 5.7 percent drop in production. Shell's chief financial officer, Peter Voser, also said that 2008 would see a decline in oil and gas production because of woes in Nigeria and the loss of company assets. Most notable: a decreased stake in the huge Sakhalin Island project that Russia forced on the company after it had invested in it heavily for years. This marked the first time that Shell did not announce its reserves figures along with its year-end financial results. Although that puts the company in step with its U.S. competitors, which announce their holdings later in the spring, most analysts viewed it as a sign that the company was losing assets faster than it could replace them.

Another downside to high oil prices for Shell and the other multinational oil companies: Their production-sharing deals with many of the countries in which they operate, most notably in the former Soviet states and Africa, are structured so the oil companies earn less of a share of each barrel's profit with more going to national governments as oil prices rise. Voser also said this contributed to Shell's lower production.

High profits also mean increased political risk for all the oil companies; British labor union leader Tony Woodley immediately called for a windfall tax after Shell's announcement. In the United States, although similar efforts in Congress fizzled last year, the oil industry fears the idea will gain new steam once the full industry profit picture becomes apparent especially with the federal government in deficit and about to hand out billions in an economic stimulus plan.

The portion of the oil industry that could be the bellwether for economic downturn is refining. With gasoline demand down, the profit margins in the business of making gasoline and other fuels have shrunk, leading some analysts to warn that that could weigh on profits. But last week, when the No. 3 U.S. oil company, ConocoPhillips, which has huge refining operations, reported profits up 37 percent in the fourth quarter, Wall Street again began looking for stellar results. "Unless oil prices collapse, companies will probably have another strong year, if not a record year," says Fadel Gheit, oil analyst with Oppenheimer & Co.