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Sorry, but ExxonMobil (XOM, news, msgs) critics are just plain wrong. They've picked the wrong target for their rage. ExxonMobil is actually doing a good job at what an oil company is supposed to do: find oil and gas and sell it to make money for its shareholders.
Want to get mad at somebody? How about oil-company executives like Lee Raymond, who resigned as chairman and CEO of ExxonMobil last December after pocketing $4 million in salary, $4.9 million in bonus and $32 million in stock -- just for 2005? Or the boneheads in Washington who, flush with oil and auto company campaign dollars, have kept automobile mileage standards stuck at the same level since 1985? When any politician pretends outrage at the pain the "average consumer" feels at the pump, blow 'em the raspberry they deserve.
Want a short-term fix? Drive less. Drive slower. Car pool. Take a bus. Buy a more energy-efficient car. Put a solar hot water heater on your roof. Lobby Congress to stand up to Detroit and require higher miles per gallon in the cars it builds.
Really, really want to hit the oil companies where it hurts? Use less oil.
But, please, stop whining when an oil company does what it's supposed to do.
A cash conflagration
Sure, ExxonMobil's $10.4 billion in profit for the second quarter -- that's just three months, remember -- is a staggering amount of money. And I certainly understand if you want to lash out at somebody when gasoline is selling for, on average, $3 a gallon.But slapping a windfall-profits tax on ExxonMobil and other oil companies isn't going to produce another single barrel of oil. And asking ExxonMobil to invest more in exploration and production than the $20 billion budgeted for 2006 is like asking the company to simply put a match to billions -- and it won't reduce what you pay at the pump by a penny.
Face it. The world has a shortage of cheap, easily refined oil. It's become harder and harder to find significant new reserves of oil -- especially reserves outside the control of the national oil companies of Russia, Saudi Arabia, Venezuela and the rest of OPEC. And much of tomorrow's supply of hydrocarbons is going to come from unconventional sources that are expensive to tap and that take a long, long time to get into production. I don't think we're ever going back to the days of cheap gas.
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Take a minute and read ExxonMobil's second-quarter press release beyond the headline number of $10.4 billion, the second-largest quarterly profit ever for a publicly traded U.S. company (after ExxonMobil's fourth-quarter 2005 numbers.)
ExxonMobil spent $4.9 billion in the quarter on capital and exploration projects. That was up 8% from the second quarter of 2005. For the full year, the company now expects to spend $20 billion on capital and exploration projects. That would be roughly a 13% increase from the $17.7 billion spent in 2005.
All that spending helped push production of oil and natural gas up about 6% from the same quarter in 2005. We won't know until the end of the year whether it also enabled ExxonMobil to find more new oil than it pumped. ExxonMobil won't report official reserve numbers until December, but in 2005, ExxonMobil saw its total proved reserves, developed and undeveloped, fall by 2.4%.
What that spending didn't do was increase the company's production and sales of refined products. In the second quarter, the company's refineries actually produced fewer barrels of refined products, about 6% less than in the second quarter of 2005. Profits from the company's refining and marketing operations, however, climbed about 12% as the profit margin climbed on each barrel of oil that ExxonMobil refined.
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