Our Profit, Their Loss
Energy: As U.S. oil companies suffer their steepest profit declines in five years, American consumers should be sadder than the tycoons in 10-gallon hats. Lower earnings mean less investment in our own sources of energy.
You could be walking in a very cold, cruel world in the very near future.
Nowadays, what exactly does the derogatory term "Big Oil," which so easily leaves the lips of liberal politicians, even mean anymore?
Maybe it means communism, because Beijing's PetroChina, which is 90% owned by the Chinese government, has just become the first company ever valued at a trillion dollars.
Its shares are four times as expensive as those of Exxon Mobil Corp., and Warren Buffett apparently octupled his money not long ago by betting on PetroChina.
Of the dozen or so biggest oil companies in the world, in fact, most are state-owned, and many of those governments are either hostile to the United States or could easily become so in not that long of a time.
Saudi Aramco always can be found at or near the top of the list, with the government-run oil behemoths of Islamofascist Iran and Hugo Chavez's Venezuela never too far behind.
"Black gold" should not be thought of as a kind of cartoonish buried treasure, baubles serving no purpose other than amusing the idle rich. Oil and gas are the world economy's most valuable commodities. Most Americans couldn't get to work, shop, send their kids to school, mow their lawn or be warm in the winter without them.
What our non-state-owned oil companies do with their profits is the furthest thing from idle. That's why it's bad news for all to see Exxon's quarterly profit down by over a billion dollars, or 10%, from a year ago. Chevron's profit was down by $1.3 billion, or 26%. Sunoco's profit was down 38%.
Funny to see Big Bad Oil take such a hit when the global price of crude is pushing $100 a barrel. The drop in profits is happening because of prices having gone down at the pump thanks to their allowing too much gasoline on the market, as well as because of refinery expenses.
Since the omnipotent oil firms are supposed to be so good at colluding with each other to gouge the consumer at the pump, how could they have let so much money slip out of their pockets?
What private oil companies do with their profits are things that governments cannot do, like invest the billions needed to discover and implement new technologies that find oil and gas in places that were unreachable only a few years ago.
Last year, for instance, a Chevron production test in the Gulf of Mexico, 270 miles southwest of New Orleans, set a world record with a crude flow rate of over 6,000 barrels a day. At more than 28,000 feet, it was the deepest successful well test in Gulf history. Such massive undertakings cost a fortune in capital expenditure.
One of Chevron's projects in South Korea entails two parallel drilling operations and an expanded high-pressure mud-pump system, to drill wells up to 40,000 feet in depth. Though designed to save time and money in deep-water well construction, it still will cost $650 million.
U.S. oil firms are using their profits for massive investment in finding new domestic sources of energy. Drilling in the U.S. for the third quarter of 2007 is twice the level of the 1990s, and the highest since 1985. More than 4,500 oil wells were completed in the third quarter of 2007, the highest third quarter drilling activity since 1985, with over 81 million feet drilled.
Yet we have had three decades without a new U.S. oil refinery being built — as if we were still living in the 1970s. Politicians mull punishing oil firms with new taxes.
Our national security and our economic security depend on being self-sufficient in energy. That means letting our energy firms do what they have proven they do best.