Scramble for oil catches up with Exxon

This is not the first time Exxon’s output has dropped. And it certainly won’t be the last as global demand for energy continues to push the hunt for oil ever farther into hostile environments, politically unstable or downright dangerous corners of the world.

Add to this the rise of national oil companies, many of which are moving beyond their own borders to compete for access to new exploration tracts. China is a prime example of a country pushing state-owned energy companies into the international arena to secure fuel for its booming domestic economy.
The search has taken China to Latin America, where it is fast-becoming a player in a region once dominated by U.S. oil companies. At the same time, Exxon last month decided to exit Venezuela rather than bow to government pressure to hand over majority control of its oil projects there to state-run Petroleos de Venezuela SA.

All this means Big Oil’s romping ground is shrinking. The “easy” oil is long gone, the rest is getting harder to find, and competition for it is tougher than ever.

If there’s any silver lining in all this for investors, it’s that tight supplies and surging demand are keeping plenty of upward pressure on prices. Crude futures topped $77 a barrel Thursday in New York. And the view that energy prices can only go higher in the long run has supported a 15% increase in Exxon’s share price this year.

But higher crude prices cannot offset losses from a creeping production decline for long. Which is why Wall Street goes so glum on the sector when its leader stumbles — even just a little bit.

Market Watch