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US economy slowing, but oil companies riding 'black gold' boom
By Justin Cole
AFP
WASHINGTON
Petroleumworld.com 10 28 06
The US economy might be faltering, but the oil industry is riding a "black gold" boom as gushing oil wells swell the corporate coffers of ExxonMobil, Chevron and ConocoPhillips by billions of dollars.
Corporate America is used to vast profits, but the oil industry's earnings dwarf all other industries, including banking, technology, and food and drink.
The country's largest energy group, and the world's biggest company, ExxonMobil Corp., posted record third-quarter net profit of 10.49 billion dollars, or around 114 million dollars a day, on Thursday.
Its earnings soared by 26 percent over the same period a year ago, largely as a result of searing-hot crude oil prices which hit records over 78 dollars in July and August, although they have since fallen to around 61 dollars per barrel.
Put in perspective, ExxonMobil's quarterly profits at over 10 billion dollars were bigger than the latest quarterly profits of banking titan Citigroup (5.5 billion dollars), Internet search colossus Google (773 million dollars) and beverage giant Coca-Cola (1.5 billion dollars) combined.
Wall Street and industry analysts have cheered such astronomical earnings, but Democratic lawmakers, including senators Hillary Clinton and John Kerry, renewed calls this week for an end to oil industry tax breaks.
Industry executives, meanwhile, have been careful not to overcelebrate their companies' high returns and kept their comments to shareholders tempered.
"Higher crude oil and natural gas realizations, and improved marketing and chemical margins, were partly offset by lower refining margins," ExxonMobil chairman Rex Tillerson said of the Texas energy firm's results.
Chevron's Dave O'Reilly said Friday, as the California-based group posted bulging quarterly net profit of five billion dollars, that the company's refineries had worked more efficiently.
"Downstream profits increased to 1.4 billion in the third quarter, driven by higher utilization of our US refineries and improved refined-product margins in most of our areas of operation," O'Reilly said.
He spoke two days after rival ConocoPhillips announced a quarterly net profit of 3.87 billion dollars, and as the political heat mounts days ahead of the November 7 US congressional elections, with the Democrats vying to retake control of the legislature.
"Over 10 billion in profits during this quarter alone are what Big Oil got in return for writing the energy bill, reaping billions in taxpayer-funded giveaways, winning commercial access to federal lands and rolling back environmental initiatives," Kerry thundered in a statement.
"Is it any wonder, then, that Exxon has contributed 89 percent of their campaign contributions to Republicans?" Kerry said.
Oil executives bristle at suggestions of unfettered profits, saying their profit margins are lower than those of other industries.
At congressional hearings into their operations, executives have said earnings are big because the industry is big and stressed that extracting oil from under the sea or the Arctic tundra is technical and very costly.
It costs tens of millions of dollars to build an oil rig, float it out into the Gulf of Mexico and keep it pumping oil around the clock, they say.
Executives also say the industry donates millions of dollars to charitable causes and that crude prices have risen partly as a result of the growing economic demands from states like China and India.
But pressure does appear to be mounting against the industry.
A worker and union-backed website www.chevronwontyoujoinus.org is calling on Chevron to help provide health insurance to cleaners who work in its Texas offices.
Oil companies' profits, however, have also swelled as they have become bigger entities in recent years.
Exxon merged with Mobil in 1999, while Chevron combined with Texaco in 2001 and Conoco and Phillips won their merger approval in 2002. Thus, as the industry has gotten bigger, so has its coffers.
AFP 27 2128 GMT 10 06
Copyright ©2006 AFP. All Rights Reserved.
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