10-9-08 by dugan
It’s almost time for oil companies to tell us how astounding their "earnings" were in the last three months–how, as the economy tumbled deep
into recession and Americans lost their jobs and retirement savings,
oil companies reaped new billions in profits. How’d they do it? As I suspected, they’ll be telling us that even as oil prices started to drop, their profits on refining went up over
the levels of last year.
5pm EDT Update: Chevron, as expected, predicts yet another all-time quarterly record profit, even though its profits on oil sales ("upstream opereations") will dip. Refining profits ("downstream operations") will be up enough to post the new record, says Chevron.
Even as U.S. gasoline consumption dropped
year, and has kept dropping, oil companies are making more money at the pump by
producing less gasoline. And government lets the oil companies draw down a gasoline supplies–key national resource–just to keep profits high. It’s letting Exxon and Chevron decide to skimp on a national security issue.
What might puzzle us ordinary folks is why, if the oil companies are still reaping their record profits, their stock price is dropping as fast as the overall market. From the investor blog 24/7 Wall Street:
"Chevron reported about $8 billion in
cash at the end of the second quarter and Exxon reported about $40
billion. All that cash helps insulate the companies from the credit
market freeze, but analysts and investors worry anyway. The share price
for Chevron is off 32% from its 52-week high, and Exxon is off 34% from
its high."
Yeah, some of it’s the whole market going down, but Bloomberg’s Joe Carroll had a much deeper take recently:
Big Oil’s billions of cash on hand are actually a liability, because
the major companies are not investing in their core business–much less
in any new lines of business like renewable fuels that might brighten
their futures. And ours.