The combined profit for the two companies was close to $17 billion—$9.08 billion for Shell and $7.6 billion for BP. These figures include earnings attributed to the rise in oil prices. If this rise is factored out (as is done in the so-called current cost of supplies figures), Shell’s profits were $7.8 billion and BP’s were $6.6 billion. That is, at least $2 billion in profit for the two companies can be attributed solely to the recent rise in oil prices.
Analysts expect the profits for Exxon Mobil, the largest private energy company, to soar to $11.2 billion in the first quarter, an increase of 22 percent over 2007. If the company’s profits exceed expectations, however, it could beat its fourth quarter profits from 2007 of $11.66 billion—the record for a US company.
Of course, the top executives and investors will benefit enormously from these windfalls. Exxon CEO Rex Tillerson received an 18 percent raise in 2007, pulling in $21.7 million. The oil companies will also give back billions to investors in the form of stock buybacks and dividends.
The news from Shell and BP came as a surprise to analysts, who have been concerned about profit troubles in the refinery component of production, which transforms crude oil into useable products like gasoline and diesel. Giants like Shell and BP, and US companies Exxon and Chevron, are vertically integrated, including in their operations both oil extraction and refining.
While the Bush administration cites a lack of refineries for energy shortages, internal oil industry documents show that five years ago companies were looking for ways to cut refinery output to boost profits.
It takes about four years to build a large refinery so any substantial additional new capacity from new plants would have had to begin by the mid-1990s, energy experts acknowledge.
Internal documents from some of America’s biggest oil companies suggest higher prices at the pump may, in part, be a result of a deliberate strategy to limit domestic gasoline production,"These documents say point blank, look if you really want to boost your profits, you have to reduce refinery capacity," said Sen. Wyden. "This industry went to great lengths to limit refinery capacity, control markets, restrict supply to boost their profits, increase costs to consumers, and then argue we should relax environmental laws."
One Chevron memo warns the oil industry would never see higher profits, if it didn’t reduce the amount of gasoline being refined.
"If the U.S. petroleum industry doesn’t reduce its refining capacity, it will never see any substantial increase in refinery margins (profits)," said an internal Chevron document in November 1995.
The memo cited warnings given about refinery profits by a senior analyst from the American Petroleum Institute, the industry trade group, at an industry conference that year.
API spokesman Jim Craig said Thursday, "We don’t know about these alleged internal company memos, but the idea that the API would warn member companies on profits is ludicrous."
A year later, an official at Texaco, in a memo marked "highly confidential," called concerns about too much refinery capacty "the most critical factor" facing the refinery industry – resulting in "very poor refining financial results."
The Texaco memo, written in March, 1996, concluded that "significant events" were required to deal with the excess refinery capacity problem and suggested one solution might be to get the government to lift clean air requirements for an oxygenate in gasoline. Removal of the additive would require more gasoline to be used in each gallon of fuel, tightening supplies.
Yeah yeah, I love the simple economics answer. BS. I figured it out just after katrina. Ever since then, when the wind blew the price went up. Excuses after excuses. It is simply that. Greed.
We spend so much time in unstable parts of the world getting oil (Saudi Arabia, Iraq, Iran, Kuwait, Libya, Nigeria), why don’t we get it from the country right next door.
Canada’s proven oil reserves were estimated at 179.2 billion barrels as of 2007, placing it second only to Saudi Arabia. Over 95% of these reserves are oil sands deposits in the province of Alberta. Although Alberta contains nearly all of Canada’s oil sands and about 75% of its conventional oil reserves, several other provinces and territories, especially Saskatchewan and offshore Newfoundland, have substantial oil production and reserves. Total Canadian oil production was about 1.2 gigabarrels in 2006, giving Canada about 150 years of reserves at current production rates.
It’s closer, safer and there isn’t a huge Ocena between us and them.
Over 99% of Canadian oil exports are sent to the United States, making Canada, not Saudi Arabia, the United States’ largest supplier of oil.
The picture is complicated somewhat by the fact that Canada has a highly sophisticated energy industry and is both an importer and exporter of oil and refined products. In 2006, in addition to producing 1.2 gigabarrels, Canada imported 0.44 gigabarrels, consumed 0.8 gigabarrels itself, and exported 0.84 gigabarrels to the U.S. The excess of exports over imports was 0.4 gigabarrels.
Analysts estimate that a price of $30 to $40 per barrel is required to make oil sands production profitable. With oil prices at $100 per barrel, oil sands production has become profitable enough to trigger over $100 billion worth of new oil sands projects.
The biggest constraint on oil sands development is a serious labor and housing shortage.
So be patient, maybe the cost at the pumps will come down and the Oil Sheiks will be begging in the streets.
something I think about. What are your thoughts. For those ofyo who dont know what peak oil is. It is the point in time that Oil production peaks then goes into decline as we slowly but surely run out of it. Prices will go up and as it gets worse the standard of living will go down. It is forecast to happen any time between 2010 to 3020
I ment 2030 sorry. Also do you not think govements will squabble over the lat bits of oil rather than actually work together?? Russia has already started by claiming much of the artic for itself so it can get the oil there.
We desperately need to develop an alternative to fossil fuel, or shortages are going to cause much pain. Instead of spending 500 billion to rebuild Iraq, it would have been much smarter to invest that money in science projects to develop new fuel sources. That would also help our chemist employment who have been devastated by outsourcing. It would do a great deal to eliminate the money going to terrorist and unfriendly governments, and that would help keep the peace.
I’ll have to agree with the Democrats on this issue. "NO" to offshore oil drilling. First, it would take a few years to come to production which would have no immediate effect on one of societies biggest fears right now…"rising gas prices". Second, the oil that would be produced would only last for about 3 years. Third, you risk the chance of damaging the ocean and ecosystem there. Last but not least; this is just a plot for the oil industry to boost more profits off of a commodity that is not in short supply. There is plenty of oil out there being produced. This industry is all based off price speculation and amatuer investors rushing in to "buy". When the bubble bursts and it will, these people will be slaughtered just like with any bubble market and the rich will get richer. Who do you think is selling? It’s not the middle class and poor selling to the rich!!!
I agree with you. And besides it would take 13 to 15 years for off shore drilling to lessen the price of gasoline after they constructed the wells. So what’s the point. We can have other energy sources developed by then.
I know it helps the environment, but now I’m enjoying life less and will suffer from higher gas prices once again.
It’s like a no-win situation.
That’s simple – the more you conserve, the less money you’re giving to OPEC, and the less control they have over your wallet. Yeah they can always cause the price of oil to increase, but the less you use, the less that will effect you.
Personally I either bike or ride an electric moped to work. I use so little gas that if the price goes up $1/gallon, it only costs me an extra $20/month.
in light of a downturn in the global economy? Will this help or will it be another nail in the coffin?
You do know when they implement this the gas prices will increase again.
We need to lessen our dependency and increase drilling on our soil until a feasible alternative (fuels from food products are questionable since it could cause a food shortage and production is more expensive) can be found, produced and implemented but we all know that will not happen in the immediate future and could take ten years or longer to get started.
I read the news about the stocks today and the 2.2 million dollar cut didn’t have an effect on the market, but we’ll have to wait a few weeks to see if it really has any effect on the prices. Right now with oil trading in the 40$’s we should be paying $1/gal but we’re paying .50-$1.00 more than that across the US which is crap…as usual.
I also read that OPEC wanted to get the prices double their current rate which is also crap, and would have us paying in the $2.50-$3/gal range again.
I agree that we need to cut our dependence and I support alternative fuels, but I realize that those alternatives arent feasable for everyone and oil dependent vehicles will be around for many decades to come even as we transition to alternate forms of fuel.
For instance, many conservatives think the world is less than 10,000 years old.
I can see how someone would think there’s "plenty of oil" –even as consumerist China’s demand looms–
When one thinks that the earth produced oil in only thousands of years….if this were the case, the earth would STILL be producing oil and it wouldn’t be called a LIMITED resource…..
I wonder what other fallacious views cloud their perception………
I am not Conservative or Liberal but all the Republicans I know do not think the earth is only a few thousand years old. I mean c’mon! Only an idiot would think that. I do think that the earth has a shit load of oil from all the life that died before us humans. We are not running out any time soon. We should really use less though for the atmosphere.
If opec decides to cut oil production, since crude oil prices are below $60. How will this impact future/present oil stock earnings ex. xom,chev,axas,apl? I’ve also learned Russia has bout 25% of the worlds oil, and now they are extremely upset
If OPEC announces production cuts it will cause oil price to increase somewhat. However, if everything else remains the same it probably will not last long. If oil production cuts are successful prices will go up if oil inventories decrease But OPEC nations cheat! That is why production cuts usually aren’t very successful. Saudi Arabia’s production costs are less than $10 a barrel. They are still making plenty of money and they want a certain amount of dollars flowing in every month. Concerning Russia,their production cost are high.
Russia needed a price of almost $90 a barrel to make anything.That is why they are upset about today’s prices.
For years the United States has been talking about how to reduce our dependence on foreign oil and one company in the small farming town of Odessa is working to be part of that solution. KXLY4’s Sally Showman reports.
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Max Keiser talks to Stacy Herbert about China’s gold reverves and the dollar being dumped
recorded on April 25th 2009
China admits to building up stockpile of gold
http://www.financialpost.com/news-sectors/story.html?id=1530063
China has admitted what many gold bugs have long speculated: it’s been stockpiling gold since 2003.
SHANGHAI/BEIJING – China revealed on Friday that it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes – or a pot worth about US$30.9-billion – and confirming years of speculation it had been buying.
Hu Xiaolian, head of the State Administration of Foreign Exchange, told Xinhua news agency in an interview that the country’s reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.
The confirmation of its surreptitious stockpiling is likely to fuel market talk about Beijing’s ability to buy secretly and its ambitions for spending its nearly US$2-trillion pile of savings. And not just in gold: copper and other metals markets are booming thanks to China’s barely-visible hand.
Speculation has gathered speed over the last year, since the tumbling dollar has threatened to weaken China’s buying power – and give it yet more reason to diversify into gold, oil and metals.
Gold prices jumped on the news of Chinese buying and were up more than 1% on the day at US$912.05 an ounce at 0715 GMT. By a Reuters calculation, China’s holding of gold would be worth around US$30.9-billion at current prices.
That accounts for only about 1.6% of China’s total foreign exchange holdings and is little more than one-tenth of the value of the U.S. gold reserve, the world’s biggest. It also means gold has slipped as a share of China’s total reserves from about 2%, based on end-2003 prices.
Only six countries hold more than 1,000 tonnes, and China is ranked fifth, having leap-frogged Switzerland, Japan and the Netherlands with its announcement.
However, the International Monetary Fund and the SPDR Gold Trust exchange traded fund are even bigger, leaving China with the world’s seventh-biggest pot of gold.
Several gold market participants said they thought China had bought on the international market, helping to absorb hundreds of tonnes sold off by central banks and the International Monetary Fund in recent years.
“China has been buying via government channels from South Africa, Russia and South America,” said Ellison Chu, director of precious metals at Standard Bank in Hong Kong.
But Hu said the increase in China’s stocks was achieved by buying on the domestic market and from domestic producers.
China is the world’s largest gold producer and does not permit exports of gold ingots, only jewellery, leaving plentiful supplies for the domestic market.
China produced 282 tonnes of gold last year, meaning the state bought around one quarter of domestic production, assuming 454 tonnes increase in state purchases were spread out over the six years since China last reported a change in its holdings.
Despite the rumours, buying by the state was partially obscured by soaring demand for gold as an investment, especially after the bursting of the Shanghai stock market bubble last year.
Investment demand in China rose to 68.9 tonnes from 25.6 tonnes in 2007. But that was still less than one third of retail demand in India, where total bullion consumption topped 660 tonnes last year.
Hu said China recently reported the change in its gold holdings to the International Monetary Fund and would include the latest change in central bank reports and balance of payment statistics.
She did not say when China notified the IMF.
Although gold rose after Hu’s comments were published, the price move was not a huge one for the highly liquid market. Prices had jumped by US$13 in the space of an hour on Thursday.
Gold market participants said the news signalled likely further buying by China.
“The comments indicate that China will buy more gold as reserve to improve its foreign reserve portfolio. This is a trend,” said Yao Haiqiao, president of Longgold Asset Management.
Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes.
“It’s not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis,” he said.
“The financial crisis means the U.S. dollar value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage.”
The European Central Bank recommends its member banks hold 15% of their reserves in gold, but among Asian nations the percentage is far smaller, said Albert Cheng, World Gold Council managing director for the far east.
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