HOUSTON, July 22, 2008
Big Oil Profits Go To Investors, Not R&D
More Than Half The Money Made By The Five Largest Oil Companies Goes To Stock Buybacks And Dividends
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In this May 14, 2008 file photo, Jim Mulva, CEO of ConocoPhillips, uses a chart to explain the high cost of gasoline during a press conference in Houston. (AP PHOTO)
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Investor-owned companies like Exxon Mobil and Chevron hold less than 10 percent of global oil and gas reserves, way down from past decades. And finding new oil has become harder and more expensive.
State-run oil companies, like those in Saudi Arabia and Venezuela, control about 80 percent of oil reserves - and at today's prices, it's not surprising they're keeping a tight grip on what they have. Scarce equipment and hard-to-find labor also pose problems.
No one questions that Big Oil is rolling in cash. The cash the biggest oil companies bring in from running their businesses, or operating cash flow, is four times what it was in the early 1990s.
"It becomes a management decision," said Howard Silverblatt, a senior index analyst at Standard & Poor's. "It's not like they're going to the board and saying, 'Well, I can do one or the other or the other.' The balance sheets are flush with cash."
So what's Big Oil to do?
The companies say they are doing what they can to find more fossil fuels around the world, but the easy oil is gone. Exploring these days may mean expensive projects in thousands of feet of water in the Gulf of Mexico or costly ventures pulling petroleum from Canada's vast oil-sands deposits.
TransCanada Corp. and ConocoPhillips Co. just said they'd spend $7 billion to nearly double the amount of crude flowing through a pipeline from Canada's tar sands to the U.S. Gulf Coast.
And analysts point out that because there's no guarantee oil prices will stay in the stratosphere, oil companies should approach exploration projects with caution.
"There's only so much money you can throw at it without being ridiculous," said Joseph Stanislaw, a senior adviser to Deloitte LLP's Energy & Resources practice. "I think they're doing what they can."
It's also important to remember it can take several years before a company produces the first barrel of oil from a new field.
One example is an oil field in the Gulf of Mexico called Thunder Horse. Operated by BP and partly owned by Exxon Mobil, the platform only last month began producing oil and gas - nine years after the field's discovery.
At its peak, the multibillion-dollar project is designed to produce 250,000 barrels of oil and 200 million cubic feet of natural gas each day, which would make it the Gulf's largest producer.
"When you look at the spending that's going on, the companies are bringing on a lot of long-term discoveries," said John Parry, a senior analyst with John S. Herold Inc.
At ConocoPhillips, the capital spending budget for 2008, which includes exploration and production, is $15.3 billion, more than double the spending of five years ago.
"Could we spend $20 billion or $25 billion? Absolutely," spokesman Gary Russell said. "Could we do it effectively, in a way that provides ultimate value to our shareholders? Probably not."
Exxon Mobil, known for its disciplined approach to investing in energy projects, has drawn criticism for its reluctance to invest in alternative energy sources like wind and solar power.
The company expects to spent $25 billion to $30 billion on capital and exploration projects each of the next five years. Last year, it spent about $32 billion on share buybacks.
"You fund your investments that make sense," said spokesman Alan Jeffers. "You have criteria, and you have to meet that to be a good investment for the shareholder. And then if you've got cash that's left over, you're going to return it to the shareholder because it's theirs."
Exxon Mobil often touts its $100 million contribution to Stanford University's Global Climate and Energy Project. By contrast, BP says it plans to spend $8 billion over the next decade developing alternative energy using wind, hydrogen and other means.
Big Oil isn't alone buying back large amounts of stock, but the companies are certainly some of the biggest indulgers.
A boom in stock buybacks has been under way in corporate America since 2004. In the first quarter of this year, Exxon, ConocoPhillips and Chevron were all among the top 10 companies for share buybacks in the S&P 500.
In Washington, one Democratic proposal would impose a 25 percent tax on "unreasonable" profits of the top five oil companies, which together made more than $120 billion in 2007, and put the money toward a trust fund for investment in alternative energy sources. Republicans say it's a gimmick that won't help at the pump and will discourage domestic oil production.
But Sen. Charles Schumer, D-N.Y., said the fervor for stock buybacks is a clear sign Big Oil isn't interested in new production or alternative energy.
"When you hear that," he said, "it screams out for a windfall profits tax."
© MMVIII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.
Best-selling author Mitch Albom on his first nonfiction work since "Tuesdays with Morrie."
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Posted by lovesamerica at 06:36 PM : Jul 22, 2008
Nope, i used my substantial profits from oilsand stocks to pay for my downpayment on a condo downtown. Now i dont have a car, 6 min walk to work and live in the entertainment disctrict. Life''s great, i wouldnt even know the gas prices if not for the news, because i never walk past, or have to use a gas station.
Posted by AtheismWins
In your dinosaur brain this is for you true. You are out of line speaking for all people so stop doing it. It is not your place to do so. That is the perverse right wing republican protestant view of humanity that is, humans are selfish and motivated in such base ways. Do not project your immaturity onto others. We are not all the same, nor are we all motivated alike. You are clearly beneath the framers of the constitution of the United States. They could have pocketed all and established a kingdom for themselves but they did not.
It was proposed that the "white house" be called the "president''s palace" but the wisdom of the educated and enlightened of the time refuted that proposal and won.
Posted by l8c6 at 06:53 PM : Jul 22, 2008
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Um, capitalism is what motivates people to work. The only blood here is the votes streaming out of the Dems.
Posted by whiskyrocker
That''s fine, baby''s cry and their parents stick bottles in their mouths to pacify their hunger but if it weren''t for their parents they''d die.
Investors are like babies, they don''t see the big picture. They have no vision they just know they''re hungry, immature and if they whine a bottle will get stuck in their mouths. Visionaries see something much bigger than the needs of a few investors. This country was founded by some great visionaries who saw the folly of the old world and established a living constitutions that cleared the way for the western world to advance from the bitter roots of exploitation, raw capitalism and empire building. GOPers are regressive to humanity. Those who form the DNA of the GOP are antisocial, entitled, self-righteous ones who think they can own God too but they don''t, they are the anti-christ many of them waiting for the rapture.
Posted by whiskyrocker
It''s a little ludicrous to think a few capitalists can hold a gun to the lives of most of human inhabitants.
Labor is treated with absolute disrespect in the world of empire built on capitalism. Capitalism has an evil bloody antisocial history. Christopher Columbus was an evil man along with the cotton plantation owners. The remnants of their DNS continues to plague the western world. The right wing GOP party is regressive. Humanity must progress and it will with God''s help while the GOP minded look for the rapture they will fall behind.
Just how many votes do they want to lose?!?
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The above statement is false. Many Traders are owned in part by the oil companies. And they have a big say into the price of crude.
For years, the oil industry and the GOP have been telling us that the oil companies needed these huge profits to find and drill for new oil. Nothing was ever said about these buybacks and dividends. Now we know better.
Posted by ramos937
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Not to mention what "selective maintainence shutdowns" of refineries and other manipulative devices may have on the price of gas.
When I read this headline - I had to chuckle...
My first thought was: "Why would they spend their own money on R & D when they can shakedown the taxpayer for that?"
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The above statement is false. Many Traders are owned in part by the oil companies. And they have a big say into the price of crude.
For years, the oil industry and the GOP have been telling us that the oil companies needed these huge profits to find and drill for new oil. Nothing was ever said about these buybacks and dividends. Now we know better.
his head is on the chopping block and he is useing the americans tax payers to bail him out.
July 22 (Bloomberg) -- Treasury Secretary Henry Paulson, trying to persuade Congress to approve his rescue plan for Fannie Mae and Freddie Mac, said U.S. financial market stability is at stake and international investors are awaiting the outcome.
``This is about not only our housing markets, but it''''''''s about our capital markets more broadly,'''''''''''''''' Paulson said in an interview with Bloomberg Television today. ``This goes well beyond the two institutions -- Fannie and Freddie -- it has to do with investors in the United States and investors all over the world.''''''''''''''''
yep, we the people get f by whitehouse and congress again..thanks to americans not telling congress to get f on this idear. everyone should hold town by town rally,city by city rally,state by state rallys or completely stop working stop buying,stop them in their tracks.
come on america what will it take for you to stand up for your kids and grandkids futures..
for-america@hotmail.com
americans need to tell congress that the same investors that are putting americans on the streets, need to be told that it goes both ways, and americans are not going to bailout the same investors that started this whole thing in the first place
Heck, i thought they were in business to lose money, and that they spent hundreds of millions in lobbying money to get back billions and billions in tax breaks, research money and ya know our cash so they could do their jobs..... and still give profits over to the owners... almost sounds like business policy.
I''ll Wager, that Big OIL CEOs, have planned this entire scenario for decades and pushed Bush into office with Cheney to mandate a perfect setting for such antics.
Also helps to invest in Oil Sands companies.
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Posted by dchu76 at 12:55 PM : Jul 22, 2008
+ report abuse
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cool now all they need now is for canadians to actually get off thier arses and work..
but then again, that is why they have such an unrestricted immigration policy..they need people to work..terrorists, criminals and illegals welcome..
BEST THING TO DO IS SPREAD THE WORD AROUND A LOT MORE..hope that mexicans and other south american illegals start going up north in droves..
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