Why Aren't Oil Companies Drilling?

CBS Evening News: Oil Companies Are Only Exploring One-Third Of U.S. Land They Have Rights To

(CBS)  It was the battle hymn of the Republican National Convention last summer: "Drill baby, drill."

With gas prices soaring to $4 or more a gallon, the call for off-shore oil drilling in places previously off-limits hit a fever pitch, reports CBS News chief investigative reporter Armen Keteyian.

But despite making record profits, today, oil companies are drilling on less than one-third of the acreage in this country that they have the rights to.

John Felmi represents the oil industry.

"The leases aren't being used because there's probably no oil there," said Felmi, the chief economist with the American Petroleum Institute.

A recent U.S. Government Accountability Office report suggests otherwise. Bottom line: oil companies only "develop leases when it is most profitable to do so."

"There are clearly oil and gas resources that are undeveloped in some of the existing leases," said Frank Rusco, with the GAO.

The Department of the Interior estimates 68 billion barrels of oil lie in areas already accessible to drilling in the Gulf of Mexico and Alaska. But today, nearly half of the existing rigs sit idle. Setting the stage, experts insist, for yet another oil crisis when the economy comes back to life.

"I suspect we'll end up having a shock, and a shortage and then the prices will skyrocket," said Matthew Simmons, an energy investment banker.

The oil industry, which made nearly a quarter of a trillion dollars in profits in the last two years, an all-time high, argues that its hands are tied to shareholders.

"We had a serious decline in terms of prices and in terms of earnings in the 4th quarter of last year," Felmi said. "It's hard to spend money on investment that you don't have."

It is hard to fathom, when Exxon-Mobil's earnings last year were a staggering $45 billion - the largest corporate profit ever. While Exxon is increasing its spending on oil product by $3 billion, it is pumping over 10 times that - $35 billion - back into its stock, shareholder dividends and cash reserves. At a time when America needs more energy, needs more oil, Exxon is raking in record profits and stashing away $35 billion.

"I consider it being prudent with the owners of your money," Felmi said.

Exxon-Mobil declined our request for an interview. In a statement, the company said it's "investing at record levels to find and develop new supplies of energy."

Consumer advocates like Dan Weiss are not impressed.

"Big oil is swimming in profits with money drained from the pockets of American families," said Weiss, who is a senior fellow with the Center for American Progress. "In the meantime, they're doing little to alleviate future oil shocks."

Rending moments like the cheering at the Republican National Convention virtually meaningless - until Big Oil decides the price is right to drill baby, drill.

[noloyalisti]

It's a lot easier for the oil companies to use American taxpayer money and troops to steal oil in other countries like Iraq. As in most fascist countries like the United States, you have right wing big corporations running the media, the military and legislature for their own profit.

That is why they have these lobbyists buy Congressman and buy elections through private donations.

[carbonates]

I guess the stockholders of publicly traded oil companies are supposed to accept that drilling is required and that they should shoulder the loss incurred by drilling in unprofitable leases. Perhaps the government should return the money the oil companies paid for these leases, which amounts to billions of dollars each year. I am sure the taxpayers will be happy to carry the extra burden- in fact maybe we should get CBS to pay for that. I am sure they have no profit motive. CBS news has reached a new low of sensationalist, biased, incorrect reporting on this. I knew there was a reason I never watched CBS.

[KathyJB]

Oh, and there are thousands out of work because Oil Companies aren't drilling. I thought things would pick up the end of this month, April, but it doesn't look like it will. There are a lot of other companies who are connected one way or another with the oil field, right on down to the local bakery, who are hurting.
In my own opinion, they are waiting to see just how many taxes and fees will be thrown at them from the EPA, and whoever else want to punish them. They are going to have to raise the price of a barrel of oil to phenomenal amounts just to make a profit.

[KathyJB]

Most of the Americans at the Tea Bag protests were about all of our money they are throwing out the window. I think it is vile how the left media zealots have been so vulgar in their descriptions of these protests. Just goes to show why they are losing money.

[maverickgrn]

Oops. That should have read NOT using the land, but using the lease to maintain their monopoly.

[maverickgrn]

If these places that are being leased are not being used because they are not realistically useful for oil production, then the leases should be canceled or not renewed. The land should be used for a better purpose. If it is not good for habitat, parks, or agriculture (trees, etc.), then is it a windy spot? Does the sun shine there? There must be some better use than to lease it to a corrupt industry that is using the land, but is using the lease to maintain their monopoly.

[quickly101]

And the greed goes on.

[dodgefan95]

Something needs to happen soon....with all the drilling rigs that are stacked out, there are alot of laid off rig hands wondering when they may be going back to work!

[hm1342]

Posted by gopisajoke at 10:40 AM : Apr 14, 2009:

"Do you really expect to ever see them supporting something that puts money in workers' pockets and lowers the prices of the goods they sell?"


Actually the answer is "yes". Once someone or some company delivers a fuel source and propulsion system that is economically competitive to internal combustion engines, then you will see the oil companies falling all over themselves to make gas as cheap as possible by drilling everywhere that has oil. OPEC countries would do the same if they saw oil prices (and their economic power) plummet. Currently electric cars are suitable only for urban commutes. Hybrids are a step in the right direction but have issues of their own and overall operating costs may actually be higher than conventional vehicles. Ethanol is a government-subsidized joke at this point.

[hm1342]

And you failed to mention the taxes that were not paid on that oil via the bush tax CUTS. - Posted by rharrin1 at 5:22 AM : Apr 14, 2009

According to CNN (a highly partisan right-wing news organization - NOT):
http://money.cnn.com/2008/07/31/news/companies/exxon_profits/

"In addition to making hefty profits, Exxon also had a hefty tax bill. Worldwide, the company paid $10.5 billion in income taxes in the second quarter, $9.5 billion in sales taxes, and over $12 billion in what it called 'other taxes.'"

So what taxes were you talking about that weren't being paid?

To be fair, Exxon-Mobil and every other for-profit entity passes tax costs on to employees, shareholders and consumers in the form of lower wages, reduced dividends and higher prices at the pumps...