Oil companies like to boast that their record-breaking profits are largely invested in infrastructure, exploration for new sources of “Texas tea,” and in exploring “green alternatives.”
But, according to an AP story, the bulk of oil companies’ earnings have gone not into exploration, but to stock buybacks and shareholder dividends. “In the first three months of this year,” wrote the piece’s author, John Poretto, “Exxon Mobil Corp., the world’s biggest publicly traded oil company, shelled out $8.8 billion on stock buybacks alone, compared with $5.5 billion on exploration and other capital projects… The company expects to spend up to $30 billion on capital and exploration projects in each of the next five years. Last year, it spent about $32 billion on share buybacks.”
So what? Stock buybacks are common in U.S. business, a means of shrinking the available pool of stock and increasing shareholder value. And an oil company is a business just like any other, one whose primary responsibility is maximize profits and increase value for shareholders, right?
Well, yes. But selling oil isn’t exactly the same as, say, pushing Right Guard or Twinkies. Oil is the world’s primary source of energy and as such fuels the economies of just about every corner of the globe not still dependent on donkey carts. The price of oil affects the price of everything, from the fuel you buy at the pump to the Right Guard you sprayed under your arms this morning and the Twinkie you snuck at lunch. It is the fundamental engine of our wealth.
Loading ...
