Forget all the "global reasons" for High Gas Prices

[PhillyPhanInDC]

Exxon Sees Record Profits for Any U.S. Co.
Jan 30 11:15 AM US/Eastern


By STEVE QUINN
AP Business Writer


DALLAS


Exxon Mobil Corp. posted record profits for any U.S. company on Monday _ $10.71 billion for the fourth quarter and $36.13 billion for the year as the world's biggest publicly traded oil company benefited from high oil and gas prices and demand for refined products. The results exceeded Wall Street expectations and Exxon shares rose nearly 3 percent in morning trading.

The company's earnings amounted to $1.71 per share for the October- December quarter, up 27 percent from $8.42 billion, or $1.30 per share, in the year ago quarter. The result topped the then-record quarterly profit of $9.92 billion Exxon posted in the third quarter of 2005.

Exxon's profit for the year was also the largest annual reported net income in U.S. history, according to Howard Silverblatt, a stock market analyst for Standard & Poor's. He said the previous high was Exxon's $25.3 billion profit in 2004.

Exxon's results lifted the combined 2005 profits for the country's three largest integrated oil companies to more than $63 billion.

ConocoPhillips said last Wednesday that its fourth-quarter earnings rose 51 percent to $3.68 billion, while annual income climbed 66 percent to $13.53 billion. Two days later, Chevron Corp. said its fourth-quarter earnings rose 20 percent to $4.14 billion, while annual income jumped 6 percent to $14.1 billion.

The oil industry's stellar results renewed talk among some politicians for a windfall profit tax that would push companies to invest more in new production and refining capacity.

Sen. Babara Boxer, a California Democrat who sharply criticized oil executives appearing before Congress in November, struck again on Friday. She called on the Bush Administration and the Federal Trade Commission to "put an end to gouging," then suggested that FTC stood for "Friend to Chevron."

But John Felmy, chief economist for the American Petroleum Institute, a Washington-based trade group, said Monday that the political rhetoric was "not a case based on fact."

"We invested somewhere in the order of $86 billion last year," Felmy said. "Then we have to treat investors appropriately otherwise we'd have the Eliott Spitzers of the world coming after us."

The results for Exxon's latest quarter included a $390 million gain related to a litigation settlement. Excluding special items, earnings were $10.32 billion, or $1.65 per share. The result topped Wall Street's expectations. Analysts surveyed by Thomson Financial predicted earnings of $1.44 per share.

Exxon shares rose $1.87 to $63.16 in morning trade on the New York Stock Exchange.

Quarterly revenue ballooned to $99.66 billion from $83.37 billion a year ago but came in shy of the $100.72 billion Exxon posted in the third quarter, which was the first time a U.S. public company generated more than $100 billion in sales in a single quarter.

By segment, exploration and production earnings rose sharply to $7.04 billion, up $2.15 billion from the 2004 quarter, reflecting higher crude oil and natural gas prices. Production decreased by 1 percent due to the lingering effects of hurricanes Katrina and Rita, which battered the Gulf Coast in August and September.

The company's refining and marketing segment reported $2.39 billion in earnings, as higher refining and marketing margins helped offset the residual effects of the hurricanes.

Exxon's chemicals business saw earnings, excluding special items, decline by $413 million to $835 million, as higher materials costs squeezed margins.

For the full year, net income surged to $5.71 per share from $3.89 per share in 2004. Annual revenue grew to $371 billion from $298.04 billion.

To put that into perspective, Exxon's revenue for the year exceeded Saudi Arabia's estimated 2005 gross domestic product of $340.5 billion, according to statistics maintained by the Central Intelligence Agency.

[Father Demon]

I keep thinking I should buy Exxon, or CP, or one of the other oil stocks, then convince myself that it's too late...

[PoopyfaceMcGee]

I keep thinking I should buy Exxon, or CP, or one of the other oil stocks, then convince myself that it's too late...

Yep, it is.  The big money's already been made.

Plus, I'd hate to invest in something that I HOPE is going to eventually have to come back down to earth.  I don't want to be rooting against my own investments.

[QB Eagles]

Oil stocks really haven't done squat for the past year. This is because production has been down, even when you discount the effects of Atlantic hurricanes. Investors are wary of a collapse in supply. Incidentally that's also part of the reason speculators have been bidding up the price of gasoline, resulting in the prices we pay at the pump. Any time some world event happens around an oil producing country, the stockbrokers start pissing their pants. They are mortified of supply disruption or worse, peak oil.

Another reason that investors have been tepid on oil is that, while profits have been greatly increasing due to phenomenal increases in revenue, profit margins haven't really been changing and aren't as impressive as in fields like pharma, semiconductors, and other hot industries. Profit margins are still something like 8 or 9 cents on the dollar and it's probably not enough to keep exploration up to speed with demand.

Plus, I'd hate to invest in something that I HOPE is going to eventually have to come back down to earth.  I don't want to be rooting against my own investments.

Why would you root against oil company profits? The bigger the profits, the greater the incentive to find additional production and the greater the investment money available for exploration. The corresponding supply increase exerts negative pressure on the market price of oil.

As you can see from the stable stock prices, the shareholders are not seeing those profits. Also, $36 billion is not finding its way into greedy exec's pockets. That's not Christmas bonus change. Oil companies have been plowing as much of that cash back into exploration as they can get away with.

If oil companies make a profit of say, only 1 million dollars on every new field tapped, it would be very difficult to secure investment to spend 1 billion dollars developing that field. There is also much less incentive for additional competition to join the hunt. As oil profits decrease, supply will be unable to keep up with demand and the price of gasoline will rise.

Now, you might say correctly that there is environmental incentive for oil companies to lose profit. Supply would run out, oil prices would skyrocket, and suddenly alternative forms of energy would become the most economically efficient, even if they cost twice or three times the cost of gasoline today. As I work for the DOE in a field supplying an alternative form of energy, I hope this scenario occurs. I'd become a rich man. Plus, I think fossil fuels are damaging the environment. Anyone hoping for affordable gasoline or the best possible performance of the American economy however better hope that oil company profits remain high.

[QB Eagles]

Forget all the "global reasons" for High Gas Prices

Why? Crude oil is traded on the global market and its cost represents 50-60% of what you pay at the pump. And that's the component of the gas price that is responsible for the price increase we've been seeing (except some of the increases in refining and distribution cost around the time of Katrina and Rita).

[LBIggle]

so what your saying is by paying more now we'll be paying less later?

whens this later going to roll around?

[QB Eagles]

No I'm saying that higher profits are not the cause of paying more at the pump, they are the effect.

I don't think oil will ever be down below $2/gal in most of the country ever again. I could be wrong about that, but here's one certainty: in the long run we definitely won't see lower oil prices, unless the world enters a Great Depression or a massive heretofore unknown source of cheaply exploited oil is discovered.

[LBIggle]

what was the name of that oil rich country we just took over. its on the tip of my tongue.

[QB Eagles]

I'm not sure that Iraq is even back up to its pre-war level of production yet. Not exactly the most secure line of new supply at the moment.

[methdeez]

It's not.

[SunMo]

drill farging alaska, i don't give a shtein, i'm never going there.

[MadMarchHare]

Nice.

When the oil runs out, you can make gas from coal.  Then we can completely farg the planet and make it uninhabitable.  Yay!

[Wingspan]

i'll paraphrase george carlin here...

earth day and save the planet is bullshtein. the planet is fine. do you really think the planet care about plastic bottles. again, the planet is fine,  it's the people that are farged. once the earth is done with us it'll shake us off like a bad case of fleas.

[MURP]

George Bush fargs you in the ass again!

[ice grillin you]

so what your saying is by paying more now we'll be paying less later?

whens this later going to roll around?

its that trickle down thing from the 80's we are still waiting for