Exxon Records Biggest Profit in US History, on Eve of Possible Recession

The Olympics are coming up, and excepting the host country—China—for risking the reputation of hosting the 2008 Genocide Olympics, all kinds of records will be set. Today, other accomplishments are gaining headlines. ExxonMobil, the world's largest corporation reported the biggest profit in the history of the United States: $11.06 billion.

That is tough to top, in any regard. The first, and obvious question: why, then, are gas prices still high? Click the image to the right to watch Jim Lehrer ask Chevron Corporation's Peter Robertson exactly that question. Chevron, while it fell short of ExxonMobil's record this quarter, itself set a company profit record.

"Over the last five years, we've earned $53 billion. And we've invested $53 billion," Robertson said. "Now, the precise number is a coincidence, but it's a fact. So, we invest. And, prices are going up. That tells us the market is saying we need more investment. We need more supply. Prices go up, we have more money to invest, we invest it, and hopefully that will bring on the supply over time."

Often, the word used to describe you or I at the short end of the pump, conveniently left out of Robertson's explanation here, is gouged. In general, the only people making more money in the United States than the oilmen are big-time bankers. Energy and money are the ones across the country making the windfall.

Only, this simple picture may soon grow far more complicated when you look at them both at the same time. As it turns out, Wall Street bankers have stuck a whole lot of wrenches in the country's economic gears. Subprime mortgages could be dragging the country into a recession. Say, for a moment, that the developing world doesn't keep US growth afloat. Americans lose houses, savings, and the extra wallet cash that makes $3.05 a gallon doable.

Oil companies do as they may—government doesn't regulate gas prices, after all, it taxes them, yes? At the same time, then, let the tens of billions go into, as Mr. Robertson explains it, reinvestment into the oil industry. Because, looking further down the line into the latter half of the 21st century, surely there's a future in driving around gas-guzzling vehicles with the passenger and back two seats empty, right?

"Supply over time," as Robertson says, may be a goal, but he knows, as we do too, at least according to the federal Government Accountability Office, that time is running out.

The last five years of ExxonMobil's stock price, roughly the time of the Iraq war:

(Chart from Yahoo!.)

There Will Be Blood . . . that comes from Oil!

Paul Thomas Anderson's There Will Be Blood, by a horse length the best film of the year, is based—loosely, somewhat, halfway—on a 1927 novel by American writer and public intellectual Upton Sinclair called Oil!, with the exclamation point. Sinclair was a socialist novelist (the crass qualification!) whose most famous work, The Jungle, described the revolting reality of work in the Chicago stockyards, circa early-20th century. The novel stabbed the meat industry in its side; sales fell. To placate the capitalists, and to the benefit of American workers, Congress passed the Pure Food and Drug Act in 1906. It led to the establishment of the Food and Drug Administration.

Will the Oscar-worthy movie spur government to action? Doubtful, extremely. But it will say something about Oil! (Or, is that oil!) Why Anderson decided to change  the name of the book, well, likely because he only used half of it. In a interview, he said, "So with There Will Be Blood, I didn't even really feel like I was adapting a book. I was just desperate to find stuff to write. I can remember the way that my desk looked, with so many different scraps of paper and books about the oil industry in the early 20th century, mixed in with pieces of other scripts that I'd written. Everything was coming from so many different sources. But the book was a great stepping-stone . . . The book is so long that it's only the first couple hundred pages that we ended up using, because there is a certain point where he strays really far from what the original story is. We were really unfaithful to the book. [Laughs.] That's not to say I didn't really like the book; I loved it."

The story of an oil baron in the textured American west, heartbreakingly shot in sandy tans and brumblebush greens, colored by a nihilistic and loudmouthed preacher and a baby, whiskey-drinking infant, and then deaf and angry son—when you think about it, there are all kinds of cheap metaphors to be drawn. That's what happens with great movies, they stand out like real life: you quote them, you worry about them, and you turn your weary eye to the future.

If you haven't seen the movie yet, little sympathy. Don't read any further. The last scene, shot in the Doheny mansion, a glorious California abode regularly shopped out to Hollywood, bears witness to the murder of the preacher on the left lane of a bowling alley in the house. Oil killing religion? No, hardly. How the scene narrows your view of what's to come is that the long room can't be any wider than 15 feet. Successful, and mad, oil prospector Daniel Plainview has bought this palace, more than anything anyone could ever need, and what has put him there, his luxuriously lucrative grounddredging, ultimately funneled his unfulfilled rage into a narrow tunnel. There's nowhere to go but down the bloody alley of murder.

Killing for oil (!), that sounds more familiar. But, after all, it's just a movie based on a book from a long time ago.  Mr. Anderson, that is all you were thinking, right? The rest of us, take note.

From Houston to Luanda, First Class Oil

The demand in Luanda, Angola, for oil and gas lawyers is apparently on the up and up. Despite the fact that it is 7,644 miles from Houston to the capital on the southeastern coast of Africa, according to a report by Mary Flood in the Houston Chronicle, oilmen are now being accompanied three times a week on a direct flight.

Angola, a country of 16 million, had been ruled by the Portuguese since the 15th century and was left in shambles when the Europeans went running home after a socialist-inspired coup toppled the government in 1975. The country's long coastline could have been a valuable asset to the freed Angolans, but war ravaged the country. Only lately has the economy begun to grow, spurred by two unsurprising developments.

First, the country has oil reserves. It joined OPEC in 2006 and currently outputs about a 1.5 million barrels a day. That is expected to rise to 2 million. Second, China, as it has in much of Africa, in 2004 invested $2 billion to build the country's infrastructure. As usual, the money came as a line of credit, to be paid with future oil deliveries.

There is plenty of room for development: UNICEF reports that life expectancy in 2005 was just 41 years.

Return your seats to their full and upright position. The flight is run by World Airways and Angola's Sonair. Tickets come by invite only. According to Flood's report, traveling from Texas would otherwise take more than two days. 15-hours nonstop is a nice perk.

In fact, just today Houston-based Marathon Oil Corporation announced a deep water discovery off the coast.

Here's a suggestion for the oil industry workers and lawyers hopping on that flight. Ditch the in-flight magazine and read up on how the oil industry mucked up the Nigerian delta. Private flights don't seem that big a deal, but if anyone remembers the wretched history of Shell oil in Nigeria, bad business doesn't make for good industry, and the Chinese laboring away on roads and bridges may have the upper hand in this one.

(Image from Robert P. Byrne's flickr.)