[lit-ideas] Oil company profits, Washington Post cut and paste
- From: "Andy Amago" <aamago@xxxxxxxxxxxxx>
- To: "lit-ideas" <lit-ideas@xxxxxxxxxxxxx>
- Date: Tue, 25 Oct 2005 22:48:35 -0400
Check out the sections that talk about tax breaks and subsidies to the oil
companies, and they're not researching or developing new wells. Like pharma,
just pocketing the money.
Oil Majors' 1st-Quarter Earnings Shoot Up
Higher Crude Prices Leave Exxon Mobil, Others Awash in Cash
By Justin Blum
Washington Post Staff Writer
Friday, April 29, 2005; Page E01
As consumers struggle with high gasoline prices, Exxon Mobil Corp. announced
yesterday that its revenue totaled more than $82 billion in the first three
months of the year.
The world's largest publicly traded oil company boosted its profit by 44
percent, to $7.86 billion, from the corresponding quarter a year ago. That left
Exxon with a cash hoard of $30 billion. Other oil companies' profits are
surging as well, leaving them with piles of cash. "There's an embarrassment of
riches now that is unavoidable," said Lawrence J. Goldstein, president of the
New York-based Petroleum Industry Research Foundation Inc.
Exxon Mobil pumped an average of about 2.54 million barrels of oil a day last
quarter -- slightly more than the output of Kuwait. The Irving, Tex.-based
company's sales for the quarter were more than the annual economic output of
New Zealand.
Exxon Mobil and other major oil companies are benefiting from the same thing
that has hurt consumers and is slowing economic growth: high crude oil prices.
A barrel of oil averaged nearly $50 for the quarter, about 42 percent higher
than during the same period last year.
Increasing demand in China, India and elsewhere has pushed the world's oil
production close to its limits, leaving little cushion in the event of a
terrorist attack or some other problem that affects production. Concern over
those issues has caused traders to bid up the price of crude.
Among companies reporting quarterly profits in recent days, ConocoPhillips Inc.
was up about 80 percent compared with the corresponding quarter last year,
Royal Dutch Shell Group 28 percent, and BP PLC 35 percent.
The major oil companies are selling crude they pump from the ground at higher
prices while their costs are not significantly increasing. At the gas pump,
where gas prices remain above $2 a gallon, Exxon Mobil is reaping more profit
than in previous years as margins have widened slightly, analysts said. But the
company's officials are quick to note that their gasoline refining and
marketing is far less profitable than their crude production.
The oil companies, which also produce natural gas, are benefiting from
continued high natural gas prices, but analysts said those operations have not
generated significantly more profit than they did last year.
Exxon Mobil's profit has increased significantly in its chemical production
businesses -- a market segment that has become more lucrative as a result of
worldwide economic growth bumping up demand.
It said it is returning some of its profit to shareholders by increasing
dividends and accelerating a stock buyback program. The company has not
dramatically accelerated spending in exploration and drilling, which analysts
attributed in part to a lack of opportunities that would yield the kind of
return that Exxon Mobil demands.
"The whole industry is cash-rich and opportunity-poor," said Fadel Gheit, an
analyst with Oppenheimer & Co. in New York.
Other major oil companies have also resisted significantly increasing their
budgets for exploration and drilling, leaving some international energy
officials concerned about whether there will be enough oil flowing from the
ground years from now.
The earnings announcements come a week after the House approved energy
legislation that would give billions in subsidies to oil and gas companies to
encourage new production. The Senate plans to consider its version of the
legislation next month. Lawmakers who opposed the legislation said the profit
reports are evidence that the subsidies are not needed. Rep. Edward J. Markey
(D-Mass.) said oil companies are asking for subsidies at the same time they're
"shaking money from out of [consumers'] pockets at the gas pump."
"I'm sure that they are chuckling at the continued support that they receive
from the Republicans on these subsidies," Markey said.
But supporters of subsidies said that oil prices eventually will fall and the
energy legislation is designed to encourage production even when that happens.
"Profits aren't always up," said Rep. Joe Barton (R-Tex.), chairman of the
Energy and Commerce Committee. "There are lots of times the oil market is
different and the profits are down or nonexistent."
In 1980, after a rise in oil prices and company profits, Congress approved a
windfall profits tax on oil companies. As prices and profits have risen during
the past year, a similar tax has not been on the agenda. Markey said he was too
busy fighting against oil industry subsidies to press for a tax on oil
companies.
The industry says that among companies that have reported earnings this
quarter, profit margins have averaged nearly 9 percent, which is just below the
average across all U.S. companies that have reported results this quarter.
Exxon Mobil had a profit margin of about 10 percent. It said its results were
boosted by the sale of an interest in a Chinese oil company.
"There's no windfall profits," said John C. Felmy, the chief economist for the
American Petroleum Institute, an industry group in Washington.
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