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RBA
07-22-2005, 09:42 AM
http://www.msnbc.msn.com/images/MSNBC/msnbc_ban.gif MSNBC.com
Oil industry awash in record levels of cash But a smaller portion of profits is going to find new oil discoveries

Bydocument.write(""); John W. Schoendocument.write(''); (http://mailto:/)
Senior Producer
MSNBC
Updated: 9:12 a.m. ET July 21, 2005

When major oil companies report their quarterly profits next week, they're once again expected to post record numbers. With crude trading around $60 a barrel, the oil industry is enjoying one of the biggest windfalls in its history. But as the industry looks for places to put that cash, it's finding it harder and harder to put funds to work finding new deposits of oil and natural gas.

By just about any measure, the past three years have produced one of the biggest cash gushers in the oil industry’s history. Since January of 2002, the price of crude has tripled, leaving oil producers awash in profits. During that period, the top 10 major public oil companies have sold some $1.5 trillion worth of crude, pocketing profits of more than $125 billion.

“This is the mother of all booms,” said Oppenheimer & Co. oil analyst Fadel Gheit. “They have so much profit, it’s almost an embarrassment of riches. They don’t know what to do with it.

The 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.

That’s left the industry with a happy problem -- what to do with enough cash to fill a supertanker. Many publicly traded oil companies have been busy buying back their own stock, which helps drive up the price of the rest of the shares left on the open market. Since January 2002, stocks of major oil companies have gained 88 percent; during that period the Standard and Poor’s 500 index has gained less than half as much.

Oil producers have also given investors a raise by gradually increasing the dividends paid out to shareholders. And they’ve paid down their debts to record low levels. ExxonMobil, for example, is virtually debt-free -– with a cash pile of more than $25 billion.

All 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."

Even as their overall profits have soared, major oil companies are earning a relatively modest 8.7 percent profit margin -- the portion of the sale of each barrel that hits the bottom line. Major banks and drug makers, for example, enjoy profits margins that are twice as big.



Keeping the oil flowing
Not all of the proceeds from the surge in oil prices has gone straight to the industry’s bottom line. As oil prices rise, so do oil companies' costs. For starters, they pay royalties to governments that lease the rights to drill -– a payment that ranges as high as 18 percent in the U.S. Domestic oil producers also pay taxes of about 40 percent, according to Gheit. So as the price of oil rises, so does the bill for royalties and taxes.

Oil producers also have to spend money to keep oil flowing from aging fields, by drilling more holes in the ground to squeeze fewer and fewer barrels out of the same fields. The cost of these oilfield services, everything from drilling rigs to pipelines, has risen by as much as 50 percent over the past five years, according to Gheit. So the cost of maintaining existing levels of production is now consuming more than half of the industry’s annual capital outlays, most of which used to go to discovering new oil fields.

That means a smaller portion of oil industry profits are being put to work to find more oil. One big reason is that finding promising areas to develop new reserves has become increasingly difficult. In part, that's because the bulk of the world’s oil reserves sit in the ground controlled by authoritarian regimes. The higher the price of oil goes, the easier it is for those regimes to maintain power and the less they need to turn to outside oil companies for investment, said A.G. Edwards futures analyst Bill O’Grady.

“Foreign investment brings in foreigners and their ideas,” he said. “OPEC countries and Russia have worked vigorously not let that happen.”

Despite 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 wait and get more money for the same oil in the future.

As a result, Western oil producers have been forced to look for new reserves by shopping for other oil companies that have already found and developed deposits of oil and natural gas. As oil prices have risen, so has the value of another oil company's reserves. The current bidding war between Chevron and China’s state-owned CNOOC is just the latest example.

But none of that investment in other oil companies is increasing the world’s supply of oil. And without new discoveries, the price of oil will likely continue to rise.

"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."


© 2005 MSNBC Interactive
© 2005 MSNBC.com

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Johnny Footstool
07-22-2005, 10:33 AM
I thought one of the benefits of the war in Iraq would be to keep oil prices down. That's what my Republican friends told me.

Also, does anyone else remember Bush campaigning and telling the public that "Gore wants gas prices to go up" so we'd all have to drive electric cars? I remember that.

Dom Heffner
07-22-2005, 10:45 AM
Also, does anyone else remember Bush campaigning and telling the public that "Gore wants gas prices to go up" so we'd all have to drive electric cars? I remember that.

To which I always replied that Bush wanted them to go up to help his oil buddies.

macro
07-22-2005, 10:52 AM
It's comforting to know that these people aren't going hungry.

registerthis
07-22-2005, 11:33 AM
Price fixing.

zombie-a-go-go
07-22-2005, 12:49 PM
Price fixing.

Maybe we should get George Soros to buy BP so Congress will revoke their antitrust exemption?

Mutaman
07-22-2005, 02:17 PM
The oil industry runs the country. The present administration consists of men and women with significant ties to the oil industry. Why should the fact that the oil industry is making record profits surprise anybody? When people voted for Bush didn't they realize that they were giving the oil industry a liscence to make money?

savafan
07-22-2005, 04:18 PM
Give me a candidate who will do something about the things that effect us all every day like gas prices, health insurance, unemployment, etc. and not worry about legislating what people can put into or take out of their own bodies, and they will get my vote.

registerthis
07-22-2005, 04:33 PM
Give me a candidate who will do something about the things that effect us all every day like gas prices, health insurance, unemployment, etc. and not worry about legislating what people can put into or take out of their own bodies, and they will get my vote.
<ahem>

Ralph Nader.

Just sayin'.

savafan
07-22-2005, 04:42 PM
<ahem>

Ralph Nader.

Just sayin'.

Yeah, but so many people in this country only believe in the two party system and refuse to accept the existence of any other candidates. Many uneducated people vote a straight party ballot, as they've done for years, without even caring what the candidate says or believes. These same people then complain about how bad things are and question what can be done to change it.

registerthis
07-22-2005, 04:46 PM
Yeah, but so many people in this country only believe in the two party system and refuse to accept the existence of any other candidates. Many uneducated people vote a straight party ballot, as they've done for years, without even caring what the candidate says or believes. These same people then complain about how bad things are and question what can be done to change it.
Oh, believe me, you're preaching to the choir here. In 2000, I listened to Nader speak several times, and was just amazed that he was receiving no more support than he was. He just made sense on so many issues, particularly those that--as you put it--affect us in our day-to-day lives.

Falls City Beer
07-22-2005, 05:00 PM
Give me a candidate who will do something about the things that effect us all every day like gas prices, health insurance, unemployment, etc. and not worry about legislating what people can put into or take out of their own bodies, and they will get my vote.

*cough* John Kerry *cough*

savafan
07-22-2005, 05:00 PM
An example of what I'm talking about, I wonder how many Republican voters in Ohio are still glad that they voted for Bob Taft?

Mutaman
07-22-2005, 05:00 PM
Oh, believe me, you're preaching to the choir here. In 2000, I listened to Nader speak several times, and was just amazed that he was receiving no more support than he was. He just made sense on so many issues, particularly those that--as you put it--affect us in our day-to-day lives.

You're right but...

Don't you agree that if Nader had not run in 2000, Gore would have been elected? Don't you agree that as an incumbant Gore would have probably been re-elected and we'd be in the middle of Gore's second term? No Iraq, no Schiavo, No John Roberts, no neo-cons, no Bush. But for Nader, things would have been a lot different. A lot of people who voted for him in 2000 now tell me that they made a mistake.

Falls City Beer
07-22-2005, 05:02 PM
You're right but...

Don't you agree that if Nader had not run in 2000, Gore would have been elected? Don't you agree that as an incumbant Gore would have probably been re-elected and we'd be in the middle of Gore's second term? No Iraq, no Schiavo, No John Roberts, no neo-cons, no Bush. But for Nader, things would have been a lot different. A lot of people who voted for him in 2000 now tell me that they made a mistake.

Agreed. There's a difference between having ideals and being idealistic.

I've never in my life recalled such voter regret on the part of Republicans vis. Bush Deux. It's hilarious. Before last November 2, I predicted that Bush, if he won, would be the worst two-term President in this country's history. So far, I'm dead-on.

savafan
07-22-2005, 05:03 PM
You're right but...

Don't you agree that if Nader had not run in 2000, Gore would have been elected? Don't you agree that as an incumbant Gore would have probably been re-elected and we'd be in the middle of Gore's second term? No Iraq, no Schiavo, No John Roberts, no neo-cons, no Bush. But for Nader, things would have been a lot different. A lot of people who voted for him in 2000 now tell me that they made a mistake.

I often think about how Gore would have handled 9/11.

Falls City Beer
07-22-2005, 05:09 PM
I often think about how Gore would have handled 9/11.

Remind me, other than standing on top of rubble with a bullhorn and shuffling the Bin Laden's out of the country, how did George "handle" 9/11? He sure as hell didn't prevent it.

Mutaman
07-22-2005, 05:11 PM
I often think about how Gore would have handled 9/11.

Dare I say it... or if there would have been a 9/11? Dare I say it?

We do know two things if Gore was president-

1. When he got the memo warning that OBL was planning to fly planes into lower Manhattan he wouldn't have taken a month off to clear brush on his ranch.

2. On 9/11 Rudy would have put his arm around Berrnie kerrick and said " Thank God Al Gore is president".

savafan
07-22-2005, 05:15 PM
Remind me, other than standing on top of rubble with a bullhorn and shuffling the Bin Laden's out of the country, how did George "handle" 9/11? He sure as hell didn't prevent it.

Okay, what I meant was the aftermath. I could see Gore possibly invading Afghanistan, but he would have done so with the approval of the UN and kept us looking good to the rest of the world.

No chance in hell Gore attacks Iraq in response to 9/11.

Falls City Beer
07-22-2005, 05:16 PM
No chance in hell Gore attacks Iraq in response to 9/11.

Right. You nailed it. Exactly. :)

registerthis
07-22-2005, 05:22 PM
You're right but...

Don't you agree that if Nader had not run in 2000, Gore would have been elected? Don't you agree that as an incumbant Gore would have probably been re-elected and we'd be in the middle of Gore's second term? No Iraq, no Schiavo, No John Roberts, no neo-cons, no Bush. But for Nader, things would have been a lot different. A lot of people who voted for him in 2000 now tell me that they made a mistake.
I've never subscribed to that view...i voted for Nader in 2000, and I don't regret it, and here is why:

the election was Gore's to lose. And he lost it. Sure, you can look at the closeness of the vote in Florida and say, gee, if Gore had even a small percentage of Nader's votes he would have won Florida-and the election. True.

But the election should never have been that close to begin with. Nader spoke to disenfranchised voters who were sick of the standard two party system--and while I have no doubts that a Gore Presidency would have been better than a Bush one, I'm sickened by the idea that I have to vote the lesser of two evils into office.

A Democrat--no candidate, for that matter--receives my vote by default. I look at it as I do a restaurant tip...I'm always happy to tip a generous amount if the service has been good, but it's not automatic. In much the same way, I would have been happy to vote for Gore in 2000 if he had given me a good reason to. "I'm not Bush" just doesn't do it for me.

EDIT: I feel obliged to point out that I was prepared to vote for Ralph again in 2004, until I watched Kerry's debates with Bush, and became convinced that Kerry would have made a good leader for the country, due mainly to the way he soundly defeated Bush in all three debates. Kerry came off much better against Bush than Gore ever did in 2000, so i had no reservations voting for him.

Falls City Beer
07-22-2005, 05:25 PM
I've never subscribed to that view...i voted for Nader in 2000, and I don't regret it, and here is why:

the election was Gore's to lose. And he lost it. Sure, you can look at the closeness of the vote in Florida and say, gee, if Gore had even a small percentage of Nader's votes he would have won Florida-and the election. True.

But the election should never have been that close to begin with. Nader spoke to disenfranchised voters who were sick of the standard two party system--and while I have no doubts that a Gore Presidency would have been better than a Bush one, I'm sickened by the idea that I have to vote the lesser of two evils into office.

A Democrat--no candidate, for that matter--receives my vote by default. I look at it as I do a restaurant tip...I'm always happy to tip a generous amount if the service has been good, but it's not automatic. In much the same way, I would have been happy to vote for Gore in 2000 if he had given me a good reason to. "I'm not Bush" just doesn't do it for me.

Gore wasn't a "lesser evil," as you put it.

I see Nader's stubborn hubris as the greater evil in the equation.

ochre
07-22-2005, 05:25 PM
Ban all political advertisements.

Not much need for huge campaign coffers if there is no place to spend the money. Make the candidates run on the merits of their platform instead of the glitz of their marketing company.

registerthis
07-22-2005, 05:26 PM
Gore wasn't a "lesser evil," as you put it.

I see Nader's stubborn hubris as the greater evil in the equation.
In your opinion, perhaps. I viewed him as a lesser evil--better than Bush, but far from ideal. Nader was the candidate who I agreed with the most during the election, he gets my vote. It's pretty simple, really.

registerthis
07-22-2005, 05:28 PM
Ban all political advertisements.

Not much need for huge campaign coffers if there is no place to spend the money. Make the candidates run on the merits of their platform instead of the glitz of their marketing company.
100% publicly-financed campaigns. I've no problem with candidates doing advertising espousing their views and concerns via advertisements, but make it come from all public funds.

savafan
07-22-2005, 05:30 PM
In your opinion, perhaps. I viewed him as a lesser evil--better than Bush, but far from ideal. Nader was the candidate who I agreed with the most during the election, he gets my vote. It's pretty simple, really.

I wish more Americans thought like you.

Falls City Beer
07-22-2005, 05:30 PM
In your opinion, perhaps. I viewed him as a lesser evil--better than Bush, but far from ideal. Nader was the candidate who I agreed with the most during the election, he gets my vote. It's pretty simple, really.

You're entitled to vote for whomever you wish, I just think "the third party" is an ignis fatuus, a fata morgana that leads sailors to crash on the rocks.

ochre
07-22-2005, 05:31 PM
100% publicly-financed campaigns. I've no problem with candidates doing advertising espousing their views and concerns via advertisements, but make it come from all public funds.
That's what I used to back too. I've become more disgruntled. Ban the ads altogether. :)

traderumor
07-22-2005, 05:34 PM
“Foreign investment brings in foreigners and their ideas,” he said. “OPEC countries and Russia have worked vigorously not let that happen.”

Despite 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 wait and get more money for the same oil in the future. Isn't this the real problem and always has been, even when George W. was just a pup? Weren't oil prices a problem for Democratic presidents too?

And I honestly don't say that to defend George W. because I do not pledge allegiance to any president, but high oil prices have been a problem since the mid 70s, and it just seems like we are getting "frog in kettle" price increases from OPEC that any of our presidents have been powerless to stop.

registerthis
07-22-2005, 05:37 PM
You're entitled to vote for whomever you wish, I just think "the third party" is an ignis fatuus, a fata morgana that leads sailors to crash on the rocks.
And you're entitled to believe that voting for a third party is equivalent to throwing away your vote. Just understand that whether or not Gore was an ideal choice is entirely your opinion, and so long as people continue to believe that their votes can only go to Dems or Republicans, don't expect a great deal of honesty or accountability from either party.

Falls City Beer
07-22-2005, 05:41 PM
And you're entitled to believe that voting for a third party is equivalent to throwing away your vote. Just understand that whether or not Gore was an ideal choice is entirely your opinion, and so long as people continue to believe that their votes can only go to Dems or Republicans, don't expect a great deal of honesty or accountability from either party.

Or you can, like Howard Dean, attempt to pull the Democratic party back to liberalism from within, instead of acting like the lone ranger.

registerthis
07-22-2005, 06:43 PM
Or you can, like Howard Dean, attempt to pull the Democratic party back to liberalism from within, instead of acting like the lone ranger.
And I would have voted for Dean.

Rojo
07-22-2005, 06:49 PM
Or you can, like Howard Dean, attempt to pull the Democratic party back to liberalism from within, instead of acting like the lone ranger.

The only other choice is to change the way we vote - institute Instant Runoff Voting.

paintmered
07-24-2005, 04:38 PM
An example of what I'm talking about, I wonder how many Republican voters in Ohio are still glad that they voted for Bob Taft?

This one isn't.

Although looking back on it, it was definetly one of those "lesser of-two-evils" votes. I forget who the dem nominee was, but he ran such a horrible campaign (in my opinion) it was almost impossible to vote for the guy.

savafan
07-24-2005, 05:42 PM
This one isn't.

Although looking back on it, it was definetly one of those "lesser of-two-evils" votes. I forget who the dem nominee was, but he ran such a horrible campaign (in my opinion) it was almost impossible to vote for the guy.

He was that guy who was married to Captain Janeaway.

Redsfaithful
07-24-2005, 06:02 PM
This one isn't.

Although looking back on it, it was definetly one of those "lesser of-two-evils" votes. I forget who the dem nominee was, but he ran such a horrible campaign (in my opinion) it was almost impossible to vote for the guy.

It was Tim Hagan. I thought he stomped Taft in the debate(s?), but I doubt anyone was actually watching.

paintmered
07-24-2005, 06:09 PM
It was Tim Hagan.

Thanks. :thumbup: