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Topic: What is big oil doing with its big money?
| Author | Message |
| UGoGirl | Posted – 9/26/2007 2:01:47 PM | show profile With the world's thirst for oil unquenchable, and oil selling at near high prices, you would think an oil company might use its huge profits to increase oil production. But what we're seeing is big oil using that profit to buy back its stock. Chevron just announced its buying back $15 billion in stock, a few months ago Conoco Phillips did the same, Exxon is buying back $7 billion EACH QUARTER!!!!! So what's going on? Either they realize there's only so much oil out there (and how much money do you want to spend trying for those last drops) and even if they did it would be counterproductive to the old profit thing. |
| Mag Girl | Posted – 9/26/2007 2:41:05 PM | show profile Well, they already bought the souls of W, Dick Cheney and Co., so they have money to spare now :-P Yeah...me thinks the oil cos. don't need any tax breaks that Congress has given them over the years for exploratory drilling, etc. |
| Newzaroo | Posted – 9/26/2007 2:51:06 PM | show profile The prophets have spoken... They're banking on a democrat as the next president. If any one of them wins the White House, it's only a matter of time until the U.S. loses the Iraq war and turmoil inflames the middle east. Oil prices will double on election day to a predicted 150 dollars a barrel, and stock values will skyrocket every hour through inauguration day, until the end of modern civilization is near. Using insider information, oil executives will cash-in their billions in black gold certificates just before world markets collapse, and then the mega-rich will lear-jet away to far corners of planet. They will inhabit the few uninhabited havens that aren't scorched or still burning. They are the chosen ones, the meek who will inherit and repopulate the earth. You and I will just be screwed. Vote with your head, not your heart. |
| Mag Girl | Posted – 9/26/2007 3:10:15 PM | show profile That's funny, Newzaroo- you really don't see how gas prices have just about tripled during Bush's presidency? You think a Democrat would somehow make that trend even worse? |
| catlondon | Posted – 9/26/2007 3:15:17 PM | show profile Much as I would like to jump on the big-oil conspiracy, stock buybacks are favorite vehicle of all companies these days. Most of my stocks have engaged in buybacks recently. First, they issue more shares to raise money. In Chevron's case, it was to buy another company. Then they start buying their own stock to reduce the amount of shares on the market and up the worth of the stock (Chevron's reason) or to hide some weak finances or protect themselves from takeovers or to cover employee stock options, there's plenty of reasons. But basically, there's been a repurchase frenzy recently among all companies. It's when the Chevron higher ups start dumping their stock all at once in large amounts that you want to worry. But basically, this is about making a lot of money in a short period of time for shareholders |
| UGoGirl | Posted – 9/26/2007 3:20:41 PM | show profile The price oil has tripled under Bush, the dollar has declined in value at a much faster rate than under any other president (in recent history at least). The deficit, what doubled? Tripled? Thousands of Americans and tens of thousands of Iraqis dead thanks to Bush. The world hates us as never before. Come on... I could go on and on... |
| catlondon | Posted – 9/26/2007 3:33:37 PM | show profile I wonder what currency the oil execs will use to cash in their stock to jet away from disaster. If the dollar keeps falling, U.S. stocks will be worthless (seeing as how they would be valued in U.S. money) and waiting to cash them in will make the oil execs seem like the Southern planters who hung on to their Confederate money, sure the South would rise again. |
| UGoGirl | Posted – 9/26/2007 8:58:14 PM | show profile Cat, you may be right that buying back stock is just something that businesses do, and God knows I really don't know all that much about the inner workings of a bigoilopoly. I guess from my perspective, I don't see any conspiracy theories here, I see a problem with supply and demand, and limited access to resources. There is increasingly less oil available to "big oil" as places like the U.K., Norway, US, etc. produce less and less. Most of the oil is controlled by national oil companies (mostly in the middle east). I think they probably realize that they can't put money into infrastructure that they don't have access to. And expect they will continue to sell less and less oil. Fortunately (for them, not us) the price of oil will continue to go up. I don't think it's common knowledge that the world produced the maximum it ever has a couple of years ago. We may be at an "undulating plateau" of global oil production, which could be followed by a steep irreversible decline. This means a lot. I know I go on and on... but I feel a sense of urgency about these issues that isn't shared by many. Luckily (for me) this sense of urgency energizes me and inspires me to help do things that seem productive anyway for a variety of reasons. |
| keltoi | Posted – 9/26/2007 10:38:32 PM | show profile Why, they are reinvesting it into the oil infrastructure to increase supply and refining capacity for the betterment of all Americans, of course! That IS the explanation they gave for the $100 billion profit windfall they took in last year PLUS the $18 billion taxpayer giveaway that the Republican Congress rushed through before the elections. Surely these patriotic red-blooded Amurricans would think of serving their country to the utmost before ever dreaming of lining their own pockets! |
| UGoGirl | Posted – 9/27/2007 9:23:28 AM | show profile Keltoi, I'm no fan of big oil. Some, in particular, are really pretty awful. But I think the fundamentals support the notion that they are buying back their own stock because (1) they have nowhere else to put all that money, and isn't that a shame, and (2) they know that their stock price will go up in the future as oil becomes increasingly scarcer. I believe we need to heavily (and I mean heavily) tax oil ASAP. The "free market" is broken when it comes to oil, at least in the short-term. As the price goes up, this is supposed to bring more supplies online and/or alternatives. This is happening to some degree (particularly alternatives) but the problem is so big and the time to do it so long that the alternatives have no hope of meeting our needs. Look at this graph of global oil production verus price. http://home.entouch.net/dmd/worldcrudeproduction.jpg Prices way up but not oil production. And keep in mind that "big oil" actually accounts for only a very small share of global oil production (and their oil production is in decline). http://www.theoildrum.com/node/3014#more |
| UGoGirl | Posted – 10/3/2007 2:49:24 PM | show profile Liquidation of Big Oil Here's one journalists take on the oil stock buyback. He may have a point...! But note that most are already unable to increase their oil production. ** Slow Liquidation of World Oil Industry ... Buybacks are the rage in the cash-laden oil industry. Exxon Mobil is buying back about $30 billion of its shares each year. If that continues, Exxon will have repurchased all its stock by about 2024. This isn't as absurd as it seems. Oil companies aren't merely catering to a Wall Street enthralled with buybacks. While such repurchases increase the amount of earnings and assets behind the remaining shares in a company, the party for shareholders would end if assets and profits begin to fall. And investor-owned oil companies -- along with government- owned producers outside the Organization of Petroleum Exporting Countries -- are only a few years away from going into decline. ...By 2014, their output will begin a long decline, says Maxwell, who has been involved in the industry for 50 years, mostly as an analyst. ``They'll be in liquidation,'' he says. The industry isn't finding new crude-oil reserves fast enough to keep up with world demand for gasoline and other fuels made from crude. Right or wrong, oil executives hold back on exploration, insisting that the risk of finding and producing more -- even with crude prices of $80 a barrel and more -- is too great. ...While Exxon Mobil will spend $21 billion this year on exploration and plant improvements, that's considerably less than it will spend on buying back its shares. This bodes ill for consuming nations that will become even more dependent on OPEC, many of whose members are politically inimical to them. David Pauly, Bloomberg |
| astrahook | Posted – 10/3/2007 4:24:32 PM | show profile we are winning the war in iraq? |
| catlondon | Posted – 10/3/2007 9:42:28 PM | show profile Big Oil is buying back stock to raise share prices. In a few years, when they truly know the gig is up, they will begin to dump their shares and hope that there will be plenty of gullible people who still think there's money to be made in oil to buy them. I think the buyback is of little importance because it's a short-term windfall for everyone. I would keep an eye on when and how often the board members and senior staff of these companies begin to dump shares. |
