While Rome burned, Nero fiddled. Sound familiar. A popular story is that Nero actually started the fires in Rome to clear ground to build his new and improved Rome. The citizenry of Rome were outraged and a scapegoat, the Christians, were conveniently on hand to be given the blame.
Today, with oil prices soaring over $133 a barrel, Congress fiddles and the two Democratic presidential candidates as well as many of the party leaders in Washington have found their convenient scapegoats, American oil companies.
Look at the massive profits they made in the first quarter of 2008. Well, I did look. Everyone should look and see exactly what the Democrats are crying out about. Let’s look at Exxon Mobil as an example:
XOM: Income Statement for EXXON MOBIL CP – Yahoo! Finance
Wait a minute. Where’s that tremendous jump in money that congressional leaders and presidential candidates are crying about? In the first quarter of 2008, Exxon’s total gross revenues are only up by $200 million from fourth quarter 2007 while gross profit is actually down by over $500 million. Since last summer, they’re operating income is up by a little over $2 billion, slightly better than 10% … a respectable increase but not necessarily anything to be upset about or even jubilant about if you own their stock. Since the end of the second quarter of last year their cost of revenue has increased by more than 25% from approximately $55 billion to $70 billion while their total revenue has gone up a little less than 16% from $102 billion to $116 billion.
Exxon Mobile is a BIG corporation:
XOM: Balance Sheet for EXXON MOBIL CP – Yahoo! Finance
It’s total assets at the end of first quarter this year were more than $258 billion. That’s a little over a quarter of a trillion dollars of which nearly half is physical, property and equipment.
Their liabilities or debt is $135 billion leaving net assets of stock holder equity at $123 billion.
The cash flow statement is where Congress plays “gotcha”.
XOM: Cash Flow for EXXON MOBIL CP – Yahoo! Finance
Even though net income has marginally improved from $10, 260,000 at the end of the second quarter last year to $10, 890,000 at the end of first quarter this year, through changes in operating, investing and financing activities, their change in cash and cash equivalents has gone from a loss of over $1 billion to a gain of more than $6.9 billion with it nearly tripling since fourth quarter 2007.
Sure, they’ve increased their stock buy back program from $7 billion to more than $9 billion a quarter … but that’s less than 5% of their total assets. Their change in total cash flow from operating activities seems to have doubled in the past quarter but a close look and removing all of the negatives will reveal that it’s only increased by about $1billion or 5% since the end of fourth quarter of 2007.
Looking back at the Income Statement, on a net income in 2007 of about $70 billion, Exxon Mobil paid income taxes of nearly $30 billion, or about 43% of their net income. What does Congress think is a fair rate for them to pay … 100% … or more?
It’s a fact that these are gargantuan numbers. Exxon Mobil is a gargantuan corporation. Their cash flow and assets are enormous. So are their expenses.
American oil companies are becoming smaller and smaller players in on the world oil scene when it’s looked at in its totality. With the United States being the world’s largest oil products consumer, it’s their job to see that the needs of the American public are met. In doing this, they have to cater to the rules and regulations of the foreign governments that they deal with as well as our own. They have to stay competitive.
OPEC controls the supply of oil from it’s member nations. Couldn’t it be construed as just a little ironic and frankly two-faced that our Congress wants to sue these nations to try to force them to increase their oil output while at the same time, denying access to our own reserves?
Construed nothing … it’s insanity!!!
Barack Obama woos his supporters with promises of solar and wind energy. Where are those solar and wind powered cars and trucks? Solar collecting farms have to be put where there is abundant year round sunlight … yet environmentalists in the 1990’s blocked the connection of a large solar farm in the Arizona desert to southern California power grids to protect the migrating habits of a desert tortoise. The Kennedys don’t want a wind farm in the potentially highly productive area of Nantucket sound.
You can’t put cost effective solar farms in areas where there’s frequent heavy cloud cover and you can’t put cost effective wind farms where there aren’t predictable and sustainable winds.
I’ve written previously that crude oil prices react to news. Yesterday, Boone Pickens said oil would go to $150 a barrel and predictably it’s gone from $128 a barrel yesterday to over $133 a barrel today.
The only predictable thing Congress has done is … nothing!!!
I still believe that some CONSTRUCTIVE action on Congress’ part would have a profound effect on oil prices … and that’s not sticking the oil companies with so-called windfall profit taxes or ludicrously threatening to sue OPEC. That’s about as stupid and juvenile as the snitch threatening, “I’m going to tell your mother!!” Get real!
It’s time for Congress and our presidential candidates to do a reality check … take a look in the mirror … and see where the problem really lies.
Filed under: News | Tagged: Barack Obama, Boone Pickens, crude oil crisis, Exxon Mobil, Nantucket Sound, solar power, wind power | 5 Comments »