Letters to the Editor
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Test of a theory
Theories are tested by their congruence with the facts. If Exxon is having trouble 'increasing' production, that might indcate that peak oil - now - is not a wacko 'theory' but matches what is happening.
The question is, how much did the "loss" of control of the field in Venezuela contribute to this? If the amount is less than the shortfall, then we have something.
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Please forward...
Please forward this nugget of information to the respective campaigns of John McCain and Hillary Clinton. They fail to grasp a basic understanding: Oil production will eventually (perhaps now) reach a point where it can no longer increase. Demand is only going to increase as industrialization spreads in countries like India and China. The only feasible options then are fuel alternatives and conservation.
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Exxon is far from the biggest oil company on the planet.
I think your closing might be misleading - Exxon is the biggest publicly traded oil company on the planet, but in terms of oil reserves, it is a distant 13th, topped by NOCs like Saudi Aramco, National Iranian Oil Company, and the Iraq National Oil Company.
To put it in perspective, in 2006 Saudi Aramco's estimated reserves were at 260 billion barrels of oil. Exxon has around 8.2, depending on which accounting method is used.
This is precisely why Exxon's having trouble replacing reserves - NOCs are growing increasingly proprietary on in-country development. This is a trend that will continue far into the future.
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Worldwide Oil production
According to the Department of Energy worldwide oil production has been essentially flat for the last three years ('05 -'07: 73.8, 73.5, 73.2 million barrels per day respectively), while worldwide consumption has gone from 83.6 to 85.5 Mb/day over the same period.
Peak oil is here; we had better to come to grips with that fact.
To download report for yourself go to:
http://www.eia.doe.gov/mer/inter.html
and click on the acrobat icon next to the International Petroleum heading.
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return on invested capital
one thing i would someday like to see in coverage of oil industry profits is what the return on invested capital is rather than profits in absolute dollar terms. $11bn of profit is a lot if you're talking about capital of $60bn but if the capital base is $300bn it's not that great a return. so which is it?
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Profits of Exxon Mobil
5-Year Averages, for Exxon Mobil, per Forbes:
Return on Equity 30.2%
Return on Assets 15.6%
Return on Invested Capital 28.6%
Pretty good return, what? By the way, Bloomberg reports that Exxon Mobil production, after you deduct Venezuela and national increases in profit-taking, declined by 3% for oil/natural gas.
Since my home is heated by natural gas, and we have long winters, the fact that natural gas is also going to hit a 'peak gas' point is also disquieting.
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Diversification is always a mixed blessing
That's the whole point. Diversify to see moderate success in a variety of market conditions, instead of just kicking ass in one, and then failing in all others.
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Misleading
Showing gross profits without context is misleading. You are taking a shot at Exxon which is held by many pension funds and investment houses. If you find your pension fund holding Exxon shares what would you do? Divest?
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Never trust an oil company
I wonder if there is a way to really know if Exxon is unable to increase production or doesn't really want to. If the future price of oil were expected to decline, then there is an incentive to sell as much now as possible, but if the long term expectation is an increase in real price, then there is incentive to hold back current production. Holding back production both saves more to sell at the higher price and can also cause the price to rise faster. I suspect intentional holding back is easy to hide.
The argument that I like best for developing alternative sources of energy is the sort of auto-regulatory effect it has on current energy costs. But just like everything else, there is a bad side effect, and it is not just that cheaper prices reduce the incentive for alternative development. It is that if you do not timely find effective alternatives, the day of real oil shortages comes sooner.
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@Alan Bennett
You said:
Showing gross profits without context is misleading. You are taking a shot at Exxon which is held by many pension funds and investment houses. If you find your pension fund holding Exxon shares what would you do? Divest?
This is actually an argument that circulated around the conservative internet email blasts a few weeks back. The subject line (my aunt in Oaklahoma sent it to me) said something like "Pelosi wants to tax your pension funds -- what is this woman thinking?" The email says she wants to tax pension funds, as if she had proposed to do it directly. It never mentions oil. The full story was that Pelosi wants a windfall profits tax and an Exxon spokesman argued that because Exxon is in pension funds, that this is really a tax on the funds.
It is a bad argument, though, because the price of oil effects the earnings of nearly every other company negatively and those companies are also in pension funds. Windfall profits taxes are appropriate when the profit is ...well... a windfall (not earned).
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It's time the United States got serious about putting a very large Solar Thermal
Electrical/Water Desaltination plant in Arizona/New Mexico that would feed clean water to the LA/Pheonix area and provide power to virtually the entire US. This would not seem expensive if the ramifications of not doing this soon are thought out.
The time is now. Or maybe when we have the next administration.
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Do liberals understand . . .
the difference between "revenue" and "profit"?
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Yuo might find this interesting...
http://blogs.dallasobserver.com/unfairpark/2008/04/rockefeller_heirs_demand_exxon.php
It seems the Rockefeller family realized that profits like these won't be around for long if we really have hit Peak Oil.
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no more oil?
thought we went over there to Iraq to get their oil? 5 something years later, no contracts, no deals, just shooting and bombing. think we have a a management problem here. just looked at the chart for HAL(Halliburton), they seem to have done ok since '03.
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Exxon just as utility?
Economists wedded to their supply demand curves always get it wrong. They assume that while intrinsic value remains constant, any rise in the cost of production results in a lower price paid for the raw material, in order to balance the equation.
The housing market offers a analogy to the problem. Housing costs are based on raw material, labor, and the cost to borrow money. Typically when interest rates go down, homes are worth more. Alter any point in the equation and the other variables should fall into line, assuming inflationary pressure are not a factor. Inflation is the only reason to change the intrinsic value of something,( or maybe the government threatens to jail everyone who doesn't own a home).
Now in this instance lower interest rates may actually drive home prices lower, because bankers refuse to lend, and buyers with cash or a large down payment are more reluctant, because they are putting their own skin in the game, and paying inflated costs which reflects the devaluation in the credit markets, and not any intrinsic change in value. With credit markets tight, its hard to sell price increases based on inflationary pressures.
Like bankers who won't lend money, at some point the oil suppliers simply shut off the spigot, circa 1970's. There is no hard cash to offer the suppliers, only increasingly worthless dollars, which are probably being manipulated higher through bogus government intervention.
Exxon is like the banker who doesn't want to loan money, (and part of the problem in housing is that banks became utilites, which simply passed on the mortgage paper to investors, without risking any of their money. That was the plan...)
Exxon's profit margin isn't there, they have to pay too much for the raw product, and they cannot pass on their costs to the consumer. The COngress can make them sell gasoline, which they will respond by telling Congress that gasoline is too cheap, and ask for more subsidies. The housing problem has caused national angst, but who cares about the energy market? Nobody really.