Why Aren't Oil Companies Drilling?

oil drills, generic
oil drills, Armen Keteyian

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.