Even for Big Oil, the numbers have never been as big as this.
When major U.S. energy companies including Exxon Mobil Corp. and Chevron Corp. announce their third-quarter earnings in the next few days, the results are certain to be staggering.
Pumped up by soaring oil, natural gas and gasoline prices in August and September, Exxon Mobil alone is expected to report quarterly profit of about $8.7 billion. That would be more than such titans as Coca-Cola Co., Intel Corp. and Time Warner Inc. earn in an entire year.
For the energy companies, the record results amount to an embarrassment of riches – an invitation for attack by foes and even some traditional allies.
“The question increasingly is going to be, what is the industry going to do with this money?” said Amy Jaffe, head of the James A. Baker Institute Energy Forum at Rice University in Houston.
On Tuesday, House Speaker Dennis Hastert, R-Ill., called on oil companies to spend more to build and expand refineries, to help “ease the pain” of high gasoline prices.
“It’s time to invest some of those profits,” Hastert said at a news conference in Washington.
Some Democrats in Congress, meanwhile, want a new windfall-profits tax like the one imposed in 1980. And with the price of oil holding above the $60-a-barrel mark, double the level of two years ago, consumer advocates accuse the industry of price-gouging and want a share of the earnings plowed into alternative-energy research.
One thing is certain – oil companies are awash in money. Together, the 29 major oil and gas companies in the Standard & Poor’s 500 stock index are expected to earn $96 billion this year, up from $68 billion last year and $43 billion in 2003.
Yet the industry disputes critics who say it is failing to invest in finding new sources of oil and natural gas.
Energy companies will spend an estimated $86 billion on capital expenditures in the United States alone this year, the American Petroleum Institute says, citing Oil & Gas Industry Journal data.
That’s up from $81 billion in 2004 and $76 billion in 2003.
Exxon Mobil said its total capital and exploration expenditures are projected to be about $17 billion this year, up from $14 billion in 2004.
The company expects to spend $17 billion to $18 billion a year from 2007 through 2010, said spokesman Robert Davis.
Chevron said it is involved in more than 20 exploration projects worldwide that will involve outlays of about $1 billion or more, compared with a handful of such projects a few years ago. The company this month gave the go-ahead to a new deep-water oil drilling project in a Gulf of Mexico field known as Blind Faith, where Chevron believes more than 100 million barrels of oil may lie.
But as gasoline supplies have tightened this year and pump prices have topped $3 a gallon, much of the wrath of industry critics has been focused on the refining business. The last new U.S. refinery was completed in 1976.
Jamie Court, president of the Santa Monica, Calif.-based Foundation for Taxpayer and Consumer Rights, alleges that the industry has “intentionally reduced refining capacity to pump up profits to world record levels.” The industry, however, contends it has been hamstrung by environmental laws and other restrictions.
U.S. refineries have been expanding their capacity by about 1 percent a year for the last decade, mainly by improving existing facilities, said Rayola Dougher, an economist at the American Petroleum Institute.
Meanwhile, energy companies’ owners – their investors – have their own idea of what to do with the avalanche of cash: They’d like much of it paid to them in the form of dividends and stock buybacks.
