Why Our Oil Companies Won't Drill. Those who oppose new drilling in so-called environmentally sensitive areas often call our attention to the fact that oil companies already have 60+ million acres of leases that they could be exploiting to increase our supply of domestic oil reserves. Why are they spending their capital on buying back their stock instead of exploration and production? Why aren't companies willing to invest more money in order to find more oil to sell at $120+ per barrel? We all know that the cost of locating and producing crude oil has increased dramatically; but surely at these prices it's worth it. Or is it? I recently read an article in The Economist about the potential for oil production in Iraq. Currently they are producing 2.4 million barrels per day with the potential for producing up to 6 million. Their proven reserves are 115 barrels, third largest in the world behind Saudi Arabia and Iran and these are only the proven reserves. They have hundreds of promising geological structures where no wells have been sunk. Only 2300 wells have been drilled in the entire country compared to over a million in Texas alone. The most important feature is the cost of additional production from existing fields. The state owned Iraq National Oil Company estimates that the new production will cost from $1-3 per barrel. Some time ago I called your attention to what happened in the early 80's when the oil producing countries flooded the market with oil and dropped the price by 80% leaving oil companies with a huge inventory of producing wells that could not compete at existing prices. No one worried about their sub-standard profits at that time. I was bombarded with comments calling my attention to the fact that it is different this time. Of course, its different this time because its different every time. Would you be enthusiastic about exploring for oil that costs $15-20 a barrel to produce when you know your competitor can put you out of business with their $1-3 per barrel oil? But our government can solve the problem. How about a windfall profits tax? That should get us a lot more new oil. Right?????????????
I Bet You Wonder Why I Defend These Greedy Oil Companies? Surely I can't defend the fact that Rex Tillerson, CEO of Exxon Mobil makes $11.3 million a year in salary, bonus, and "other" compensation. That's almost 1/4 of what they pay Judge Judy ($45 mil). Maybe some of these observations can explain why Exxon Mobil earned $40+ billion last year only to lose twice that much when the value of their stock dropped from $485 billion to $400 billion.
Economy Better Than We Thought? Our Gross domestic product grew by 3.3% this past quarter. This is much better than anyone anticipated. Perhaps the main reason was an increase in exports by 13% and a decrease in exports of 7.6%. The stock market rebounded some 200+ points. I guess I can't get too excited; however, I have stopped raising cash and am ready to start buying selected conservative issues a little bit at a time.
Fourteen Days At The Hospice. Nothing like 14 days at the hospice to let you know how precious life is. The medical personnel all say they wouldn't work anywhere else. They feel honored to be chosen to help patients and their families at such an important time. They are truly special people.
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