ExxonMobil Reports Record First-Quarter Profits
MADELEINE BRAND, host:
ExxonMobil made $8.4 billion in profits in the first three months of this year. That is profits, not revenue. Exxon released its first quarter earnings today. It was the biggest first quarter profit ever for the company, eclipsed only by the quarter before where the company made more than $10 billion.
ALEX CHADWICK, host:
Exxon's windfall comes at a time when consumers are paying near records prices for gas. For another take on oil profits and rising gas prices, we go to someone who has followed the industry for many years.
BRAND: Barbara Shook is an analyst with the Energy Intelligence Group and she joins us now from Houston. Welcome to the program.
Ms. BARBARA SHOOK (Analyst, Energy Intelligence Group): Thank you. Always a privilege to be on.
BRAND: Well, people listening to this are going to be pretty angry. Here they are, paying a lot of money at the gas pump these days while the oil companies are raking in billions of dollars. Do you think their anger is justified?
Ms. SHOOK: No, I do not. This is an example of capitalism at work. The market has a huge demand. The companies are working full out to supply that demand. Then you've got other factors that the companies have no control over, which is rising demand by people driving what I call urban assault vehicles that get about seven miles per gallon if the driver has a light foot. So you just have a lot of factors figuring in that I don't believe add up to a windfall or unfair profit. If you read into the text of Exxon's earnings, you'll see that they increased their investment in future oil and gas production projects by about 41 percent over the same quarter last year.
They are out there looking. So are many of the other oil companies. But Exxon does not set oil prices. Conoco-Phillips does not set oil prices. Oil prices are set these days largely by huge institutional funds that, in my opinion, are doing nothing by playing a high-stakes video game on the New York Mercantile Exchange.
BRAND: So you're saying that it's actually traders who are speculating who are driving up these oil prices?
Ms. SHOOK: That is one factor. Another factor that we cannot overlook is what's known as geopolitical influences, or what I heard one expert this week at a conference in Calvary describe it, the fear factor. And their calculations, the dollar figure ranged from as low as $25 of the $75 oil's now trading for, to as much as $40, and that fundamentals in the market, absent the fear factor and the speculatory factor, would be somewhere in the $30 to $40 per barrel range. Those are the prices that would be supported by underlying market fundamentals of supply and demand.
BRAND: Well, still, you've got Congress investigating whether or not oil companies may have been price gauging, investigating whether or not they should roll back some tax advantages. You've got a boycott being called against ExxonMobil. So there is a lot of anger and a lot of frustration being focused on the oil companies.
Ms. SHOOK: Well, it's misplaced. I've been watching Congress go through these kinds of exercises now for more than 30 years, which tells you that I've been able to read for a long time, and we won't go into my specific age. But I have yet to see Congress find a single barrel of oil or gallon of gasoline through all of the verbal exercises that they go through. And a major complaint I have against the President is I have yet to hear the word conservation escape from his lips. And one thing that is true, ever since Adam Smith defined it three hundred years ago about the capitalistic system, is too much supply will reduce the price of the product. Too much demand will raise the price of the product. If people are complaining about having to spend $150-200 to fill up their Hummer's, well, they made a capitalistic decision when they elected to buy a fuel inefficient vehicle.
BRAND: Barbara Shook, thank you.
Ms. SHOOK: You're welcome.
BRAND: Barbara Shook is the Houston Bureau Chief of the Energy Intelligence Group that analyzes the international energy market. And thanks again, Barbara.
Ms. SHOOK: Thanks for the opportunity.
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