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Shell Rakes in $8.5 Billion in Three Months


By Marianne Lavelle Fri Feb 1, 12:32 PM ET

Royal Dutch Shell, the world's second-largest publicly traded oil company, today reported net income up 60 percent last quarter to a record $8.47 billion, thanks to the same rising crude oil prices that most observers expect will lift the profits of Exxon Mobil and Chevron tomorrow to nearly historic levels


Shell's results were shy of the largest quarterly profit ever for a company in the United States, the record $10.7 billion that rival Exxon earned in the fourth quarter of 2005. But Shell's full-year profit for 2007 of $31.3 billion set a record for a European company. Still, CEO Jeroen van der Veer's muted comment was that the results were "satisfactory," and the company's stock reacted to the news with a downward slide. It wasn't just that Shell's results were in the lower range of expectations. Weighing on the company appeared to be the now apparent fact that Shell is producing less oil and that its performance cannot be sustained if a slowing economy lowers oil prices.

Shell's increase in profits last quarter came despite a 5.7 percent drop in production. Shell's chief financial officer, Peter Voser, also said that 2008 would see a decline in oil and gas production because of woes in Nigeria and the loss of company assets. Most notable: a decreased stake in the huge Sakhalin Island project that Russia forced on the company after it had invested in it heavily for years. This marked the first time that Shell did not announce its reserves figures along with its year-end financial results. Although that puts the company in step with its U.S. competitors, which announce their holdings later in the spring, most analysts viewed it as a sign that the company was losing assets faster than it could replace them.

Another downside to high oil prices for Shell and the other multinational oil companies: Their production-sharing deals with many of the countries in which they operate, most notably in the former Soviet states and Africa, are structured so the oil companies earn less of a share of each barrel's profit with more going to national governments as oil prices rise. Voser also said this contributed to Shell's lower production.

High profits also mean increased political risk for all the oil companies; British labor union leader Tony Woodley immediately called for a windfall tax after Shell's announcement. In the United States, although similar efforts in Congress fizzled last year, the oil industry fears the idea will gain new steam once the full industry profit picture becomes apparent especially with the federal government in deficit and about to hand out billions in an economic stimulus plan.

The portion of the oil industry that could be the bellwether for economic downturn is refining. With gasoline demand down, the profit margins in the business of making gasoline and other fuels have shrunk, leading some analysts to warn that that could weigh on profits. But last week, when the No. 3 U.S. oil company, ConocoPhillips, which has huge refining operations, reported profits up 37 percent in the fourth quarter, Wall Street again began looking for stellar results. "Unless oil prices collapse, companies will probably have another strong year, if not a record year," says Fadel Gheit, oil analyst with Oppenheimer & Co.

Raymond J. Learsy


Huffington post at http://www.huffingtonpost.com/raymond-j-learsy/exxon-rakes-in-record-11_b_84756.html


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Exxon Rakes in Record $11.6 Billion Quarterly Earnings While Cheering OPEC's Readiness to Cut Production

Posted February 4, 2008 | 06:26 AM (EST)

Virtually the same day that Exxon announced their gangbuster record earnings of $11.66 billion the New York Times ("Exxon sets profit record..." 2/2/08) reported that the Organization of Petroleum Exporting Countries (OPEC), having held production levels fast this month, signaled it would be ready to cut production when it meets next month to make up for a seasonal slowdown. "OPEC's actions mean the cartel is determined to keep prices from falling below $80."

Clearly OPEC is Exxon's greatest ally. It has been OPEC's collusionary cuts in oil production that permitted the price of oil to skyrocket. According to a newly awakened New York Times "from a low of around $50 barrel in early 2007 to near $100 barrel by the end of the year -- the biggest jump in oil prices in any one year" (in case you are counting, that $50/bbl difference annualized represents a transfer of wealth from American consumer pocketbooks to oil interests of some $350 billion, or the combined annual budgets for the Army, Air Force, Navy and Marine Corps). The Times finally and for the first time, is laying out the full dimension of the OPEC orchestrated increases, calling it the way it is as this post has done since inception.

Without the OPEC cartel rigging the market Exxon's windfall would not have been possible. President Bush and our Energy Secretary Bodman during their recent visit to Saudi Arabia, the putative leader of the OPEC cartel, pleaded with the Saudis to have their cabal increase production levels. Their pleadings were humiliatingly dismissed out of hand. Certainly Exxon must be cheering in the wings and lobbying to have the president continue his inane threat to veto any legislation that would remove the national sovereignty exemption that makes it impossible to sue OPEC and its national oil companies, such as the Saudi oil entity Aramco, in American courts for restraint of trade and collusion among oil producers. It is the kind of legal action that would be forcefully pursued by our Justice Department against any commercial entity/entities that acted in a manner comparable to that of OPEC and its national oil companies. But that's a long and disheartening story (Please see "Oil: A Defining Moment for Our Political Class and the Press," 07/09/07)

The Exxon earnings are not only obscene they are an outrage in that these are not profits that are earned in a competitive marketplace but simply by tailgating OPEC's manipulation. Exxon barely lifted a finger to earn its additional billions other than go along with prices that were the result of collusion by a cartel, and hardly a reflection of a free and unfettered international marketplace. The oil industry apologists are already lining up. To quote one of the spokesmen for the chief peak oil prankster, and cheerleader for ever higher oil prices, Matt Simmons, "A lot of these larger companies are challenged to grow production. That's one of the reasons that oil prices aren't necessarily expensive at $90 a barrel..." Much like Willy Sutton saying he has to hold up another bank because he needs a new getaway car.

At least one candidate was moved to opine on Exxon's earnings. Barack Obama said Exxon's profits were a sign that the U.S. economy is "out of balance". With that observation he will have in all probability kissed the moneyed oil lobbying kitty goodbye.

With distortions such as these lifted from the pocketbooks of all Americans, where are the tough questions and answers asked of the candidates as to how we as a nation are truly going to come to grips with this issue before we transfer all our wealth to the oil companies and our good friends in Saudi Arabia? (For some questions that might be considered please see "In 2008: A Few Questions On Energy For The Candidate," 12.31.07).

Teddy Roosevelt's advice that, "We must drive the special interests out of politics. The citizens of the United States must effectively control the mighty commercial forces which they have themselves called into being. There can be no effective control of corporations while their political activity remains."