In these troubled economic times, it's nice to know that someone's doing well. High prices at the gas pump may mean none of us can afford a vacation, but at least American oil companies are benefiting...up to a point, of course. It's not as if they can spend their profits on dinner and a movie, or a European vacation, what with dwindling reserves, and the need to refine crude as well as produce it.
Still: high profits. Very high.
Exxon Mobil once again reported the largest quarterly profit in U.S. history Thursday, posting net income of $11.68 billion on revenue of $138 billion in the second quarter.
That profit works out to $1,485.55 a second.
That barely beat the previous corporate record of $11.66 billion, also set by Exxon in the fourth quarter of 2007 (CNN Money)
Shell and BP made money too.
Earlier in London, Royal Dutch Shell, Europe’s largest oil company, reported a 33 percent increase in second-quarter profit on Thursday, helped by a higher oil price even as production declined.
Like a smaller rival, BP, earlier this week, Shell profited from an oil price that almost doubled in the second quarter from the year earlier, but a 13 percent drop from a record on July 11 raised some concern among investors about whether oil companies can keep up the pace of earnings growth. BP said earlier this week that higher oil prices have started to affect consumer demand for gasoline.
Shell’s profit rose to $11.56 billion from $8.67 billion in the period a year ago. BP reported a 28 percent increase in profit earlier this week and the Italian oil company Eni said on Thursday that profit in the second quarter rose 52 percent. (NYT)
But the news isn't all good, even for Exxon. Apparently this is still less than Wall Street expected. (CNN Money) And production is falling. (NYT)
Oil companies are under pressure to find new reserves as their traditional fields age and are face increasing competition from state-run oil companies in Russia and the Middle East. Shell is also looking to make up for production lost in Nigeria, where militants attacked an offshore production vessel in June, and in Russia, where it had to sell its share in the Sakhalin Island oil and natural gas project to the state-controlled energy company, OAO Gazprom, last year. So, yes, you should’ve listened to your father’s friend when he said to you in college, “petrochemicals.”
Oil and gas production fell to 3,126 thousand barrels of oil equivalent a day from 3,178 thousand barrels (NYT).
Shell's on the case, though, its CEO pledging 'to continue investing to spur growth'
“Shell is making substantial, targeted investments to grow the company for shareholders and help ensure that energy markets remain well supplied,” Mr. van der Veer said in a statement Thursday. (NYT).
Moreoever, it appears that high oil prices have a down side, even for the oil companies. While the producing side is doing great now that prices are high, the refining side of its business has to buy crude oil, and Exxon buys more crude than it sells.
Profits from its refining business totaled $1.6 billion in the quarter, less than half of what they were last year....Record crude oil and natural gas realizations were partly offset by lower refining and chemical margins, lower production volumes and higher operating costs," Exxon said in a statement.
While oil prices in the quarter were nearly twice as high as the same time last year, gasoline prices only rose about 30%. (CNN Money)
So stockholders aren't seeing any big boost, apparently, and can't go to the beach either. (CNN Money)
I feel their pain. My last power bill---it's summer here in Flarduh---is about twice what it was last year, and my salary hasn't gone up at all.
Even so mean Dems are using the poor oil companies as 'political fodder.'
Several bills have been introduced in Congress to enact a "windfall" profits tax on these earnings, or at the very least eliminate manufacturing tax exemption oil companies now enjoy. Presumptive Democratic presidential nominee Barack Obama wants to tax oil companies at a special rate every time crude goes over $80 a barrel.
Most plans would either use this newfound tax money to fund investments in renewable energy, or give it to low income Americans struggling with high energy prices.
But so far those efforts have been blocked - mainly by Republicans - who say raising taxes on oil companies will only discourage investments in finding new oil and raise the price of crude.(CNN Money)
Former Republican John Cole, one of our favorite bloggers, still opposes windfall taxes. On the other hand, 'On the other hand, if I were a Republican running for office in 2008, I would be a little uncomfortable running around screaming “DRILL MORE! DILL MORE! DRILL MORE!” at the top of my lungs while everyone else is suffering the effects of the Bush recession and the oil companies are raking in BILLIONS.' (Balloon Juice)
In other [bad] news, many restaurant chains and department stores are feeling the squeeze, since they pretty much depend on people having money. (NYT) And apparently the tax rebates didn't give the economy the big rebound the Bush administration was expecting. (AP) Via MarketWatch:
Consumer spending was supported by the largest increase in disposable personal income in six years, thanks largely to about $80 billion in tax-rebate checks from Washington.The economy was held back by the crumbling housing market and by the biggest drop in inventories in seven years. Investments in equipment and software also fell during the quarter...."This is a weak report," wrote John Ryding and Conrad DeQuadros of RDQ Economics.
Annual revisions in the report also showed that the economy contracted in the fourth quarter of 2007, falling 0.2% for the first drop in real gross domestic product since the recession of 2001. The economy grew at a revised 0.9% annual rate in the first quarter.
It's looking as if the arbiters of recession may finally call it what everyone has sensed in their guts it is. (Market Watch) But regardless how bad things seem to you, and how out of control things seem to be, it ain't a recession till they call it one.
See: The Economy: There's Really Nothing Anyone Can Say; Pearlstein at WaPo: This Recession is a Mean One, and It's Not Going Away
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How about noting that the profits of Microsoft s a percentage of gross sales were almost three times that of Exxon (and more than that when compared with most other oil companies), Google's were only slightly less than Exxon's and they enjoy close to monopoly status in their industries? Also many other big companies have equal or greater profits as a percentage of sales as oil companies. More importantly, do you realize that the biggest stockholder in Exxon is CALPERS (with 1.7 million hard-working pensioners) and that a huge amount of Exxon's stock is owned by other pension funds? So (1) if Exxon;s profits are a "windfall" so too are Microsoft's, Google's and every other company with profits that are more than 10.5% of gross; (2) lowering the value of stocks held by big pension funds and IRA's is really good for all the working stiffs whose pension funds, IRA's etc. own stock in Exxon and other oil companies. You are either naive, gullible, ignorant or all three.
Posted by: jeff | August 02, 2008 at 05:25 PM