ExxonMobil's stingy approach to looking for new oil 6/2/2007 9:58:12 AM
This week's Time magazine has an excellent article by Justin Fox about how the actions of ExxonMobil will contribute to keeping gas prices at record highs in the future. In 1981 when gas prices hit an all-time high at the time, Exxon poured $11 billion into capital investment & oil exploration. This was an increase of 35 percent over the previous year's budget and was three times the profit they made in 1979. The result contributed to new oil development that helped bring down gas prices. Through 2003, ExxonMobil invested more in capital investments and oil exploration than it paid out in profit.
Starting in 2004, Exxon Mobil stopped this pattern of oil exploration and started paying more profit to shareholders than it spent in capital and oil exploration spending. In 2006 ExxonMobil showed a profit of $39.5 billion on sales of $365.4 billion, which is more than any other corporation ever. More telling, it returned to its shareholders $39.5 billion, while investing half as much ($19.9 billion) in capital and oil exploration.
The other major oil companies all spent more in capital & oil exploration (relative to their size) than did ExxonMobil. Shell, for example, spent 25 percent more than ExxonMobil. So, when ExxonMobil executives claim that their company is doing all that they can to bring more oil to market (their official mantra), just know that they are doing less than all the other oil companies while recording their highest profits ever.
Their biggest issue is being able to get their hands on known oil fields. Only seven percent of the world's estimated oil & gas reserves are freely available to western oil companies like ExxonMobil. Seven percent! The remainder is held by state-owned oil companies in Saudi Arabia, Iraq, Russia, Venezeula, etc. Today's gas prices are the result of supply and demand, with active oil rigs in April, 2007 being only 2,836 (versus a high in December, 1981 of 6,227).
Everyone really should read this Time article by Justin Fox.
After reading this Time article, I got to wondering why would ExxonMobil in 2004 stop spending more on obtaining new oil sources than it had done in the past. Why did it feel safe paying such huge profits to its shareholders now and risk falling behind in finding new oil sources for its future? HELLO! Maybe ExxonMobil can pay such huge profits since it knows it will have access to new oil in the future, i.e. ExxonMobil does not have to explore for new oil because it expects to gain new access through the actions of someone else. And who is that someone else? Why good old Bush and his war on Iraq. I once read that Iraq has the second largest oil reserves in the Middle East. Before we attacked Iraq, Iraqi oil was controlled by their national government and was headed mainly to supply Europe with oil. However, there is a bill in the Iraqi parliament that will take control away from the Iraq national government and place it in the hands of an oil board that will have western oil companies as members. This will open up access to Iraqi oil to western oil companies. (Can you say ExxonMobil?) Our going to Iraq was for their oil. ExxonMobil knew this was coming; hence their change in company exploration policy in 2004. Does the lying and seeming stupidity behind the Bush war now make more sense to you? It does to me. Our troops are fighting and dying to gain access to Iraqi oil for our big oil companies like ExxonMobil. Simple enough...ExxonMobil has known this for years.
