Big Oil has a lot more to worry about than fighting the biofuels industry over the Renewable Fuel Standard. Fourth quarter 2013 earning reports show that major oil companies haven't been as profitable lately as they used to be.

Exxon Mobil, the largest US oil company, had its worst fourth-quarter earnings in four years in 2013 with a 27-percent drop in profits. Europe's largest oil company, Royal Dutch Shell, reported an even larger fall – profits tumbled 48 percent in the fourth quarter. Chevron has not reported earnings yet but it's anticipated that the news won't be too good given the cost of maintaining its production levels. Conoco Phillips had great numbers: a 74-percent jump in fourth quarter earnings. But that number is deceiving, since the earnings came from unloading "non-core" assets recently and production was well below where it was a year earlier.

"The world's cheap, easy-to-find reserves are basically gone" - Matthew Phillips

What's behind this trend? While the "peak oil" theory was discredited by many analysts, the truth is that oil companies need to spend more and are still producing less oil lately. "The world's cheap, easy-to-find reserves are basically gone; the low-hanging fruit was picked decades ago," Businessweek's Matthew Phillips wrote. "Not only is the new stuff harder to find, but the older stuff is running out faster and faster."

Oil companies are trying to catch up on market developments including the booming shale fields in the US. Exxon Mobil took a hit after buying natural gas producer XTO Energy in 2010 for $41 billion right before gas prices crashed. And Shell has taken a loss on its "monster ship," the Prelude, which has been estimated to cost the oil company $12 billion to enter the liquefied natural gas (LNG) market. Horizontal drilling methods, including hydraulic fracturing ("fracking") have allowed smaller independent companies to cash in on booming oil and gas markets within North America, and come with their own problems. Big Oil doesn't have it as easy as it used to, and you can find more details over in Businessweek.


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    • 1 Second Ago
  • 58 Comments
      Letstakeawalk
      • 1 Year Ago
      "And Shell has taken a loss on its "monster ship," the Prelude, which has been estimated to cost the oil company $12 billion to enter the liquefied natural gas (LNG) market." $12 Billion, for a single piece of infrastructure. That would build 6000 hydrogen refueling stations, at $2 million a pop. Pennies in the world of Big Energy.
        paulwesterberg
        • 1 Year Ago
        @Letstakeawalk
        so tell us again why they need taxpayers to pay for their new hydrogen stations?
          2 wheeled menace
          • 1 Year Ago
          @paulwesterberg
          Anything is too expensive when there is no profit case involved. FCVs and hydrogen fuel are not going to make anyone a profit for a looooooooong time; if ever.
          Letstakeawalk
          • 1 Year Ago
          @paulwesterberg
          I did sell them off, as planned. It's about time to get back in though... ;) I own shares in a variety of alt-energy companies and industries, as should everyone.
          Letstakeawalk
          • 1 Year Ago
          @paulwesterberg
          I've never suggested such a thing. I've always maintained that the hydrogen providers could easily afford to build HRI when and where they need to, in accordance with a planned roll out of FCVs. On the contrary, it is generally those who are opposed to FCVs that attempt to claim that building the HRI would be too expensive.
          Spec
          • 1 Year Ago
          @paulwesterberg
          Boom! PaulWesterberg with the devastating zinger!
          2 wheeled menace
          • 1 Year Ago
          @paulwesterberg
          I'm sure you're laughing your way to the bank with your hydrogen-related stock investments. I forget if you dumped those or not tho..
          Letstakeawalk
          • 1 Year Ago
          @paulwesterberg
          I disagree. I think there's a fair profit to be made in supplying hydrogen for FCVs.
      2 wheeled menace
      • 1 Year Ago
      Peak oil will not be a crash, as environmentalists predicted in the 2000's, but a very slow, very drawn out death.
        Ryan
        • 1 Year Ago
        @2 wheeled menace
        I disagree. We can extract oil, tar sands and frack at a very high rate. In most places in the world that have oil (arctic excluded do to impossible weather). I'm not sure what will happen when demand far outpaces supply. And if the supply is limited by wells that empty everything out of the ground at a faster rate. Without tar sands and fracking, this would be happening now. But they got 30 years or so extra now. But, I worry that it will be a cliff at the end, not a gradual slope down.
          Letstakeawalk
          • 1 Year Ago
          @Ryan
          Then we start going after the methane hydrate deposits, and turn that into gaseous and liquid fuels...
        Spec
        • 1 Year Ago
        @2 wheeled menace
        It is very hard to know how it will play out. I agree that it will largely be a slow motion problem. But I imagine there will be some crazy volatility if the market finally feels that oil production is on its way down. However, with natural gas, electrics, biofuels, public transport, and even fuel cell vehicles, I think we have a lot of technical alternatives such that it won't at all be a doomer scenario like the peak oil doomsday preppers think it will be.
        Vlad
        • 1 Year Ago
        @2 wheeled menace
        To be fair, it was a pretty colorful coalition. Environmentalists, some economists that realized that infinite growth may not happen, but did not work out all the math yet, and then people who needed another excuse to buy more guns and gold.
      paulwesterberg
      • 1 Year Ago
      Man that must suck when the most profitable industry in the history of mankind is merely very profitable. On the bright side this will help to reduce the very small amount of corporate income taxes they pay to almost nothing.
        sirvixisvexed
        • 1 Year Ago
        @paulwesterberg
        Cheap sunglasses, phone accessories, and many other things are marked up 500% or more. But oil is more profitable? Most auto companies have their profit margins around 5ish precent? Maybe 10% at absolute best? Do you know what the oil industry's net margins are?
          Spec
          • 1 Year Ago
          @sirvixisvexed
          The margins on the IOCs are now getting thinner because they don't have good places to drill. However the margins for the NOCs (National oil companies) in Saudia Arabia, Kuwait, UAE, etc. are MASSIVE.
          paulwesterberg
          • 1 Year Ago
          @sirvixisvexed
          Exxon, worlds most profitable company in 2011: http://money.cnn.com/galleries/2012/fortune/1205/gallery.500-most-profitable.fortune/ Exxon, worlds most profitable company in 2012: http://money.cnn.com/gallery/magazines/fortune/2013/07/08/global-500-most-profitable.fortune/ Saudi Aramco makes $1B per day: http://www.forbes.com/pictures/mef45ggld/1-saudi-aramco-12-5-million-barrels-per-day/
          Letstakeawalk
          • 1 Year Ago
          @sirvixisvexed
          Statistics can be used to prove whatever point you'd like to make. Oil companies make large profits with high volume on a low margin. Other companies can make large profits with low volume and high margin.
          sirvixisvexed
          • 1 Year Ago
          @sirvixisvexed
          My question was about margins and net (after tax) profit MARGINS. "Most profitable" means profit margins, not companies that are simply the biggest
      Koenigsegg
      • 1 Year Ago
      Elon > Exxon
      • 1 Year Ago
      Yet another reason to build the XL pipeline.
        Grendal
        • 1 Year Ago
        It's a double edged sword. The danger will be having a horrific spill. I'm sure no one ever thought there'd be a problem in the Gulf either. I'm personally tired of this entire game which is why I plan on going electric. Solar panels + electric car = true freedom and never shelling out money at a gas station ever again.
          Marco Polo
          • 1 Year Ago
          @Grendal
          @ Grendal There's always a danger of spills. It's inherent in exploration, extraction, transportation and refining of oil and gas. (Spills even occur naturally). Spills can't be totally avoided, only ever managed, minimised and mitigated. Oil spills look spectacular, but are not all that environmentally harmful. The pollution created in the Gulf of Mexico by US ethanol production, is far greater than all the oil industry activity in that region. Even the Russian and PRC oil companies, don't want oil spills. Perhaps they don't care about the environment, but spills are economically wasteful. Pipelines are a better method of transporting fuel than rail and road. Each has it own share of potential hazards, but at least pipelines have the advantage of efficiency. Your ambition of personal freedom from gas stations, is great, but in comparison to much of the world, you live in a very small, privileged situation, with ready access to alternate energy. Everyday you use thousands of oil industry products to support your affluent lifestyle. That's unavoidable, since the oil industry is the basis of all advanced industrial societies. IMO, the best argument for reducing a dependence on fossil fuels for transport and energy generation, is the growing depletion of the world fertiliser resources. Despite years of research, and billion of dollars, fossil fuels currently remain the only large scale alternative viable alternative to naturally occurring fertilizer deposits. Jon LeSage attempts to link normal commercial overheads, and profit swings, being experienced by some oil companies, to bolster a belief in the failed concept of 'peak oil' . He ignores more relevant factors such as the emergence of other major oil companies, (especially PRC) challenging the 5 'sisters' for resources, preferring to invoke the spectre of "peak oil" .
      dovegraybird
      • 1 Year Ago
      Love how they talk "Big Oil" and then list a bunch of companies that aren't even in the top 10. Yes, I know "Big Oil" is a tagline more or less to the oil industry in general, but I do hope you all realize that the companies mentioned are "Little Oil".
        Spec
        • 1 Year Ago
        @dovegraybird
        Exxon-Mobil, Royal Dutch Shell, and Conoco-Phillips are not big oil? What planet do you live on?
          DaveMart
          • 1 Year Ago
          @Spec
          The one where it is Aramco and other national oil companies which control much of the oil.
          Spec
          • 1 Year Ago
          @Spec
          Yes, Dave, relative to the NOCs, the IOCs have become small. However, when a person in the USA refers to "big oil" they are referring to Exxon, Shell, Conoco, BP, etc.
      m_2012
      • 1 Year Ago
      I thought the world had so much oil we didnt know what to do with it? You mean its not renewable? wwhhhaaattttt?!!?!!?!?
      Dave D
      • 1 Year Ago
      Is this supposed to be a surprise to anyone? Peak oil isn't here, but cheap oil has all been sucked dry.
        CoolWaters
        • 1 Year Ago
        @Dave D
        That's the DEFINITION of peak oil: When the Cheap Oil is GONE. Not when we've used up every last drop.
          Actionable Mango
          • 1 Year Ago
          @CoolWaters
          Maybe that's your own pet definition, but the generally accepted definition of peak oil is that moment in time where the world's oil extraction is at its highest level.
        Actionable Mango
        • 1 Year Ago
        @Dave D
        It's not surprising, but I feel like I've been told that easy oil is over for about 10 years now. So either they are repeatedly wrong, this is really ancient news, or the definition of "easy" keeps changing as technology evolves.
          Spec
          • 1 Year Ago
          @Actionable Mango
          Mango, the answer is your third guess. The definition of 'easy' changes. As the new (and expensive) technology increases what was difficult becomes easier. But that technology usually comes at a higher cost. You start with onshore conventional. Then offshore conventional. Then water injection. Then deeper water conventional. Then fracking. Then oil sands processing. As the price goes up, new technology comes in the bring out more oil. We haven't hit peak oil yet . . . but we have apparently passed peak conventional oil. (Conventional liquid oil excluding fracked oil, tar sands, ultradeepwater, polar, etc.)
          2 wheeled menace
          • 1 Year Ago
          @Actionable Mango
          Easy oil has been over for a long time. Now you have to launch a war on a foreign government, cripple them with sanctions, or install a dummy president into their country otherwise just to get their easy oil! because they're so selfish and want to use their resource to benefit their own economy! Either that or you have to do what Canada/northern midwest USA is doing: squeeze oil out of a rock or mud! What a pain ;)
        Spec
        • 1 Year Ago
        @Dave D
        Yep. There is still a little cheap oil left but it is largely in places with unstable governments, controlled by the national oil company, or in contested regions (such as perhaps the south China sea). The international oil companies are struggling because their options are largely down to expensive fracking, expensive tar sands processing, expensive ultradeepwater drilling, or expensive polar oil.
        Ryan
        • 1 Year Ago
        @Dave D
        I'm surprised prices are still as low as they are. Yes, they are still making money, and EVs and alternatives start becoming more popular at $4/gal. But, still, the numbers just aren't adding up if you look at what they claim to have in reserve, the production numbers, and how much is consumed by the US and other countries. I'm not sure which way would be the best to see gas prices go though. A flood of cheap oil and less demand would hurt the oil companies, but really high prices would also hurt demand and how much they could sell.
        2 wheeled menace
        • 1 Year Ago
        @Dave D
        ^--truth.
      CoolWaters
      • 1 Year Ago
      Tillerson: Because An incompetent Right wing Nut is running the company into the ground. Because propaganda doesn't change the REAL WORLD. - He should have had a LEADERSHIP position in Solar and Wind, he should have Transitioned his Company to Solar. Instead he's managing the company into Bankruptcy.
        2 wheeled menace
        • 1 Year Ago
        @CoolWaters
        Oh yes; those right wing people running the oil companies have done such an awful job. I mean; 100+ years of continuous high profits. Is that really the best you can do, conservative oil overlords?
      Koenigsegg
      • 1 Year Ago
      i hope im alive the day when gas basically runs out and all across the world there's no gas at the gas stations and no one can fill up their gas cars and everyone is screwed while all of us EV owners are passing by LOL
        Actionable Mango
        • 1 Year Ago
        @Koenigsegg
        That's great! You'll be able to drive around watching the world collapse.
        leong
        • 1 Year Ago
        @Koenigsegg
        lol... if that happens you will see a black out every other day~
          2 wheeled menace
          • 1 Year Ago
          @leong
          I'm sure that power plants will not be built in response. I mean ya know, they build oil infrastructure, gas stations, and drill in response to demand. But electricity is just so different.
          Ryan
          • 1 Year Ago
          @leong
          Not at my house.
        Edge
        • 1 Year Ago
        @Koenigsegg
        The world economy will crash. EV drivers being unemployed will not be too happy.
        Marco Polo
        • 1 Year Ago
        @Koenigsegg
        @ Tesla Fan If oil runs out, you won't be driving anywhere very long ! EV's need tyres, plastics, insulation, lubrication, batteries, even the black-top you drive on, all these are just some of the thousands of oil industry products.
      HVH20
      • 1 Year Ago
      More EV's and PHEV's are fine by me.
      Levine Levine
      • 1 Year Ago
      Another form of "Peak Oil" propaganda from Big Oil to scare people into paying high crude prices.
        2 wheeled menace
        • 1 Year Ago
        @Levine Levine
        Oh, the SEC and our financial regulations do such a great job to protect us against those evil capitalists. I mean, this sector of government was repeatedly warned by MANY economists about ponzi schemes, credit default swaps, and a housing bubble being deflated and decimating the economy from 2000-2008. They did such a great job protecting us from oil speculation which drove up gas prices about 50% higher than what they should have been. And stealing our tax monies to bail out banks and printing a couple trillion dollars over a decade, deflating the value of our money was great too. God bless 'murica for having all these great checks and balances. No worries. Everything is fine.
          Dave D
          • 1 Year Ago
          @2 wheeled menace
          @Ryan, of course they're not being punished. In fact, they're rewarded by their friends in Congress who pass laws to make this income "Capital Gains" so they don't have to pay as much in taxes as middle class people who actually work for a living.
          Ryan
          • 1 Year Ago
          @2 wheeled menace
          And yet the people who are committing these scams aren't being punished.
          2 wheeled menace
          • 1 Year Ago
          @2 wheeled menace
          Of course not. They are also protected by government; by nature of being a certain kind of fictional legal identity, and being able to bribe everyone sitting in the white house to do their bidding. Mussolini referred to this type of economic system as 'fascism'.
        Spec
        • 1 Year Ago
        @Levine Levine
        LOL! Man, the right wing's paranoid conspiracy wing has really taken over the movement. Yeah, the books of all the public international oil companies are some grand conspiracy! It is not like there is an SEC, the threat of shareholder class action suits, or Sarbanes-Oxley, to scare them into being honest. And all of the IOCs are in on the conspiracy! LOL.
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