« Question of the Day Marathon – Day 1 | Main | Question of the Day Marathon – Day 2 »
Quit Your Griping About ExxonMobil
By JLP | August 1, 2006
At least that’s what Jim Jubak over at MS Money has to say. I pretty much agree with everything he has to say except the part where he tells readers to get angry at retired CEO Lee Raymond because he made too much money. Although I’m against CEO pay that is overboard, it is the board of directors that is responsible for determining CEO pay. Perhaps people should get angry about corporate boards.
Topics: Miscellaneous | 10 Comments »
August 1st, 2006 at 3:23 pm
Yeah, down with the companies that make money! And … Viva the losers? ExxonMobil and WalMart are now evil ’cause they make money and provide more jobs. Yet GM and Ford are now somehow OK, even after cutting pensions to people already retired, and laying off thousands. The world is upside down!!! What’s wrong with you people?? Go to Cuba, while you can
August 1st, 2006 at 3:25 pm
As for CEO pay … well. People want the govt to regulate minimum wage, wages of executives … so why not just institute same pay for everyone? It worked sooo well in the USSR.
August 1st, 2006 at 4:02 pm
I have no problems with companies trying to make money. However, the only thing that bugs me about the oil companies and their profits is that they have basically been handed a sort of monopoly by the government. I feel that along with that privilege comes some resposibility, but as long as profits ‘are’ being reinvested into the future energy situation, I have no problems.
August 1st, 2006 at 4:07 pm
Adam. I don’t have the stats in front of me, but ExxonMobil has re-invested over 50% of their profit, if I remember the report correctly. They aren’t idiots, nor are they a monopoly. Whoever finds new sources/new ideas for energy, will win in the business world.
August 1st, 2006 at 4:46 pm
Vlad, I’m glad to hear that about the percentage. Technically they aren’t a monopoly. But there is little competition, and new competition just can set up shop in the industry. I am aware they are not idiots, so I am sure they realize they have everything to gain from stectching oil to it’s absolute limit.
August 1st, 2006 at 5:16 pm
Adam,
I’m not sure why you think that Exxon has no competition. Sure they are the largest oil company in the USA, but they compete against national governments in places like Russia, China, Saudi Arabia, Iran, Venezuela, etc. Why we want to attack free enterprise that is competing against often unfriendly national governments is beyond me. Lee Raymond’s pension is peanuts compared to what the Saudi princes are raking in.
If the roads were empty and the busses full, if the sidewalks were clogged with pedestrians and bicyclists, then I might be more sympathetic. But even at $3+ a gallon, people in gas hogs still blast past me on the road at 10 to 20 over. They may gripe about Exxon and the price of gas, but their actions say otherwise.
August 1st, 2006 at 5:52 pm
Sam, I never said anything about Exxon in particular, but rather the whole industry. When it comes to competition, what exists are all selling pretty much the same product out of the same pipes. I also never said anything about attacking free enterprise, or even suggested or implied any type of action, I merely said it bugged me.
The fact you don’t see people changing their behavior just goes to show exactly how much power the oil industry has over the economy. What reason do they have to invest in and use anything more than “just enough” infrastructure to meet demand? With any other product, if you increase supply and lower your prices, theoretically people will buy more. However, if they increase supply, do you think people will start leaving their vehicles and lights running more than usual simply because it’s cheaper? Because there is pretty much a guaranteed demand with little competition, many of the self-regulating factors of the market are removed.
If the technology existed to solve all of our problems and all we had to do was produce it, I wouldn’t have any concerns what so ever. The market would have an option. However, the future is riding on hopes of technology and solutions that as of right now aren’t too feasible. Even the so hyped ethanol takes more energy to produce than we get out of it. So if having some simple concerns over the future of energy makes me look anti-capitalistic or like I support attacking free enterprise, well, then so be it.
August 1st, 2006 at 9:24 pm
Adam, if the oil companies were true monopolies, why did they choose to raise prices now, and not, well, forever? Inflation-adjusted gas prices were at all time lows in the late 1990s – and Lee Raymond was running Exxon at the time.
In truth, the American oil companies are mostly middlemen and distributors, and don’t have much influence over the price of oil, at least as compared with the oil exporting countries themselves. And oil is definitely “demand-pulled”; oil prices were low in the late 1990s because of Asia’s weak economy and China/India not yet becoming big oil importers. China became an oil importer in the late 1990s, started importing bigtime in the 2000s, and has been increasing its imports 30-40% per year for the past couple of years. India has followed the same trajectory.
August 2nd, 2006 at 10:01 am
Foobarista, hence why I said, “Technically they aren’t a monopoly.” I only used the term because of the lack of competition. People will say there’s plenty of competition, but that is like claiming there is plenty of competition in the major telcom industry.
August 22nd, 2006 at 10:32 am
The short interest in ExxonMobil went up this month by 12 million shares to 49 million. For a company that trades 23 million shares a day, that may not seem like much.
But, why lay odds against Exxon at all. Depending on who final numbers come out, it may top the Fortune 500 in revenue. Its market cap is $414 billion. In the last quarter, the company did $99 billion in sales and operating income of $18.6 billion, both substantial increases over the immediately previous quarter.
But, there are a few little issues lurking around Exxon. One is that oil prices may not go up forever. Gas consumption in the US and elsewhere is dropping off due to rising prices. It appears that BP will keep the Alaska pipeline open, at least partially.
There is also a move afoot in Congress. As the Fort Worth Star-Telegram wrote recently: One analyst, Paul Sankey of Deutsche Bank, asked (Exxon CEO) Hubble whether Exxon Mobil was concerned about “negative attention from Washington” in the form of proposals for excess profits taxes. Such a bill was introduced in Congress last year but has yet to receive committee approval.
Although the odds that such a bill would make it into law may be fairly long, if the rise in profits at the big oil companies continues, such an action in Congress is probaly more likely.
ExxonMobil’s stock trades at $70, very near its 52-week high. Two years ago, the stock was at $45. For a company that has one of the largest market caps in the world, that is a real run. And, what goes up, must come down.