ExxonMobil Achieve Record Profits

This is good news, in spite of the wailing and moaning on the left.

This insightful op-ed by John Tamny from the National Review Online points out the greater economic picture of the recent spike in oil prices. Yeah, yeah I know "the man" is sticking it to us. But it turns out that when oil companies are able to operate profitably, they are able to invest more resources in getting more oil ! !

" . . . Back in 1980, in the midst of the last era of expensive oil, oil companies represented 28 percent of the S&P 500’s value. This investment boom stimulated exploration and led to an oil “glut” in the 1980s and ’90s. In this new environment, cheaper oil and lower oil-company profits meant that investment moved elsewhere, and with this asset redeployment, oil-company share of the S&P 500 fell to 7 percent . . . "

Tamny also reports that as more oil companies report better earnings their market valuation will increase from the current 10% share of the S&P 500. As they do oil will get cheaper.

" . . . record profits attract imitators and innovators. Canadian oil company Suncor Energy is an example of innovation at work. It has devised a way to extract crude from oil sands, and the consensus is that this process will greatly expand the amount of proven reserves around the world. Happily, investors have rewarded Suncor; its stock is up 400 percent over the last five years, a timeframe in which the Dow has been flat while the S&P500 and Nasdaq have been down. . . "

This process whereby oil is extracted from tar sands is more expensive than pumping it out of the ground in Saudi Arabia, and would not have come about without capital investment. Record oil company profits are a good thing, and should be celebrated instead of castigated -SpinDaddy