Oil companies awash in profits

DALLAS (AP) — Exxon Mobil Corp., the world’s largest publicly traded oil company, posted record profits of $5.79 billion yesterday, and the Royal Dutch/Shell Group of Cos. saw its earnings rise 54 percent as a result of higher prices for oil and natural gas.

The sterling earnings reports, which came on top of strong results from BP and ConocoPhillips, may not sit well with motorists paying about $2 for a gallon of regular unleaded — unless they also happen to be shareholders.

Exxon Mobil, for instance, earned a profit of more than $10 on each barrel of oil it produced, said Pat Mulva, the company’s director of investor relations.

Mark Baxter, director of an energy institute at Southern Methodist University, said pump prices should be even higher, given that crude is hovering near $43 a barrel.

“These profits probably appear gross, and consumers wonder why they’re not lowering the prices,” Mr. Baxter said. “They could do that, but the first time they did, the CEO would get fired.”

He said oil companies need to make such profits to carry them through times of low prices — oil was $10 a barrel a few years ago — and to be able to explore for oil around the world.

Exxon Mobil Chairman and Chief Executive Officer Lee R. Raymond said recently that Exxon Mobil earns no more than 5 cents per gallon for refining and selling gasoline — although he didn’t include profit from producing crude oil.

Analysts cite several reasons for high oil prices, notably that the Organization of the Petroleum Exporting Countries is producing at near capacity, demand continues to grow in the United States, China and other large markets, and fear that events in the Middle East or Russia could curtail supplies and lead to shortages.

Oil prices surged to a record level this week — briefly above $43 a barrel for U.S. light crude — in reaction to new violence in Iraq and reports that Russian oil giant Yukos might be forced to suspend sales, although its production was not interrupted. Both developments were seen as possibly disrupting production in an already tight world market.

Analysts said oil companies aren’t charities, but some faulted the industry for not spending more on finding new sources of oil to meet rising demand.

“Forty-dollar crude is a big gift to the exploration and production sector,” said George Gaspar, an analyst with Robert W. Baird & Co. “They ought to be putting it into the ground, both in the U.S. and overseas. Mr. Consumer is going to be paying $3 and $4 a gallon in 10 years unless something is done to increase oil reserves.”

Irving, Texas-based Exxon Mobil earned $5.79 billion (88 cents per share) in the April-June period, compared with $4.17 billion (62 cents) a year earlier. Revenue jumped 24 percent to $70.69 billion from $57.17 billion, although oil and gas production rose only 1.4 percent.

“They are clicking on all cylinders,” said Fadel Gheit, an analyst for Oppenheimer & Co. “Refining [profit] margins are the best in almost 15 years, oil prices are at record highs and gas prices are near records. It doesn’t get any better than this.”

Profits rose in all three main areas of Exxon Mobil’s business — production, up 36 percent; refining and selling, up about 31 percent to the highest mark in 13 years; and chemicals, up 38 percent to its highest level since 1995.