PeakOil is You
"The pie is shrinking:" Oil company profits
First unread post • 3 posts
• Page 1 of 1
"The pie is shrinking:" Oil company profits
by Leanan » Thu 21 Jul 2005, 13:35:11
Good article today at MSNBC: link The oil industry is awash in record profits. They have so much money they don't know what to do with it all. Why? $this->bbcode_second_pass_quote('', 'T')he reason for the boom is simple. Much of the investment in finding that oil -- and developing the wells and pipelines needed to produce it -- has already been made. So an oil field that was profitable with oil selling for $20 a barrel is much more profitable with oil trading around $60.
But very little of it is going toward exploration. Analysts see this as a problem, because they are risking a consumer backlash.
$this->bbcode_second_pass_quote('', 'A')ll of this industry good fortune has not escaped the notice of consumers, whose anger at higher gasoline prices has been rising in lock step with the price of crude. The energy bill recently enacted by both houses of Congress provides little relief for U.S. energy consumers. But a continued rise in prices could bring increased political pressure to find ways to lower the cost of energy, according to Tom Kloka at the Oil Price Information Service.
"This is something that Americans regard as their birth right," he said. "If gasoline prices are still north of $2.25 (a gallon) when we reach the midterm election, there's going to be an awful lot of outrage."
Oil-producing countries have little reason to encourage foreign investment or increase production:
$this->bbcode_second_pass_quote('', 'D')espite pledges to increase output, most OPEC countries are pumping at full capacity already. And if oil prices are headed higher, those countries with the ability to boost output now have little incentive to do so if they can wait and get more money for the same oil in the future.
So the oil companies have nowhere to put their cash. They've bought back their own shares, paid down debt, paid out dividends, and are trying to buy each other, but still have more cash than they know what to do with.
$this->bbcode_second_pass_quote('', '&')quot;Basically, it's musical chairs, and every time you have fewer and fewer companies,” said Gheit. “The people who are slicing pie among themselves -- the number is shrinking, but the pie itself is not growing. The pie is shrinking."
-
Leanan - News Editor
- Posts: 4582
- Joined: Thu 20 May 2004, 03:00:00
