More 100 billion in profits for oil majors

The figure is staggering: it is the amount of destruction caused by Hurricane Katrina in the southern United States. It is also the cost of a year of war in Iraq for the American economy.

Over $ 100 billion! This is the cumulative amount of profits that the five largest oil companies in the world are on the point of making this year, thanks in large part to the explosion in oil prices. The figure is staggering: it is the amount of destruction caused by Hurricane Katrina in the southern United States. It is also the cost of a year of war in Iraq for the American economy.

Never has an industrial sector generated so many profits. Even if, in 2004, the five majors (ExxonMobil, Chevron, Total, BP and Shell) had already broken all records with more than 1 billion dollars in turnover and 150 billion in profits.

These performances are now being swept away after the unprecedented surge in oil prices since the start of the year. Despite several increases in OPEC production, the price of Brent jumped 49% in London in six months and the price of a barrel exceeded 70 dollars in the United States in the aftermath of the cyclone in Louisiana. Suddenly, the majors posted performances in the first half alone, up on average by 30%.
Without this exceptional economic environment, the oil companies' balance sheets would have been less flattering. Total recalled yesterday that the increase of 4,23 billion dollars in its operating income from one half-year to the next, can be explained, to the tune of nearly 3 billion, by the rise in hydrocarbon prices.

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In fact, the staggering figures of the oil industry have hitherto concealed its weaknesses: the saturation of production tools and the depletion of reserves. From there to saying that the multibillion-dollar oil companies are colossi with feet of clay, there is only a step that some do not hesitate to take.

For the International Energy Agency (IEA), it currently lacks 20% of investments to meet global demand for the next twenty-five years. So rather than paying copious dividends to their shareholders or launching ambitious share buyback programs, the specialists explain, the majors would be wiser to invest in prospecting and new production capacities. In other words, if world demand continues to break records, in particular because of the colossal needs of China, companies will have increasingly limited room for maneuver.

Source: Christine Lagoutte (AFP)

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