Oil: many profits and few investments?
By zenith2007
@zenith2007 (241)
Italy
February 8, 2008 4:40pm CST
The behavior of big oil companies is suspicious. I read that a study of the consulting firm Mckinsey has calculated that in 2005 the cash flow (the difference between the money received and spent) of these companies was 120 million dollars. Despite this, however, investment in new sources of supply have fallen a lot.
The suspicion is that companies prefer to reward shareholders and not invest. What I do not understand is whether doing this to speculate on the price of oil playing with the rise in prices or if companies are afraid to invest because they have little confidence on finding new oil.
Have you ever had a doubt this or think that I am wrong?
1 response
@echomonster (2225)
• Greenwood, Mississippi
28 Jun 09
Most likely their behavior was designed to cash in on high oil prices -- perhaps there is some level of collusion between the big companies (certainly there is collusion between big oil producing countries -- that's what OPEC is all about!). High prices ought to encourage a boost in supply, but if supply is limited the high prices can last for longer.
I think many of the oil companies are also taking a very shortsighted view of their business. They should be investing more in alternative energy -- the future of energy. Instead, Shell is an example of a company that is actually cutting back its investments in alt energy to focus on their core business. As people shift away from oil, these companies will watch their profits fall and they may become dinosaurs sooner than they think.
