Tuesday, July 22, 2008
Do oil companies invest their profits in new drilling?
Yesterday, MSNBC featured a big AP story on whether or not oil companies are really using their “windfall” profits to find new oil. It provides a photograph of CEO Jim Mulva of ConocoPhillips, and claims that his company spent $275 million on new exploration but $2.5 billion on buying back shares of its stock.
The story is here.
The story says that the five biggest international oil companies spent 55% of their profits on buybacks; that is up from 30% in 2000 and 1% in 1993, when Bill Clinton took office.
The story says that ExxonMobil spent $8.8 billion on stock buybacks and $5.5 billion on exploration, which is better than Conoco.
The story mentions ExxonMobil and Chevron as major investor owned companies and as holding less than 10% of the world’s proven oil reserves. The CEO of Chevron (David O’Reilly) recently appeared on Larry King Live on CNN.
The story gives another link to Newsvine for public discussion of “policy v. profits”, here.
It is significant that retirees and pension funds that were prescient enough to invest in oil stocks are benefitting from the runup in oil prices. It is the people who have to drive long distances for a living who hurt the most, as well as anyone hit hard by food prices, an indirect result of increased demand for oil.
ExxonMobil has a current account ("America the efficient: Using energy wisely can drive down consumer costs and strengthen U.S. energy security") of its own stand on the issue with a July 10 op-ed on its own site (it’s a formal site, not quite a corporate blog) here.
Windfall profits taxes have made attractive word salad for politicians. President Nixon proposed them back in 1973.