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Thesis & Antithesis

A critical perspective on energy, international politics & current affairs

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Location: Washington, D.C.

greekdefaultwatch@gmail.com Natural gas consultant by day, blogger on the Greek economy by night. Trained as an economist and political scientist. I believe in common sense and in data, and my aim is to offer insight written in language that is clear and convincing.

27 July 2006

Oil profits, again

ExxonMobil, British Petroleum, Royal Dutch Shell, and ConocoPhillips released their earning reports for the second quarter of 2006. Here are their results (operating income): Exxon: $10.3bn, BP: $6.1bn, Shell: $6.3bn, COP: $5.2bn. Needless to say that this news will spark anew a debate about corporate profits and the money made by the oil industry; but an equally interesting number is how much these companies invested: Exxon invested $4.9bn in the second quarter, BP $3.7bn, Shell $6.7bn, and Conoco $3.6bn.

It is not just that oil companies are investing so much of what they make in new and existing projects (although part of their problem is that there are fewer and fewer good projects to invest in), but these numbers should remind us that big oil makes big money in part because the investments needed to bring oil and gas to market are huge. Few industries require so much investment to maintain growth, and whenever there is talk of “excess” profits, it is worth remembering that the money is not a windfall that came from the sky but rather the result of large investments made in (usually) inhospitable environments and often in conjunction with governments that have no hesitation to change contract terms years into the life of a project.

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