More big profits for Big Oil

This is off The New York Times:

HOUSTON, Feb. 1 — Exxon Mobil reported a record annual profit on Thursday but a modest decline in fourth-quarter earnings because of falling oil and gas prices. Meanwhile, its competitor Royal Dutch Shell reported an unexpected rise in quarterly earnings, a sign that the industry is still going strong.

The results followed reports by other energy companies in recent days that said easing commodity prices, declining refining and chemical earnings, rising steel and labor costs and higher royalties and taxes had hurt their bottom lines somewhat.

But the shortfalls at all the major companies, including Occidental, ConocoPhillips and Hess, have come after record or near-record previous quarters. With oil and gas prices on the upswing again in recent days, few analysts think the bonanza of profits that energy companies have enjoyed in recent years will end anytime soon.

Exxon, the world’s largest publicly traded oil company, reported profit of $10.3 billion in the fourth quarter. That represented a decline of 4.3 percent from its record profit in the fourth quarter of 2005 and was Exxon’s first quarterly decline in almost three years.

But for the year, Exxon’s profit rose 9 percent from 2005 results to a record of $39.5 billion, the largest annual profit ever for an American company.

Oil prices for the quarter ranged between $55 and $63 a barrel, averaging just shy of $60. That represented a 15 percent decline from the third quarter and was less than 1 percent lower than the fourth quarter of 2005.

Oh dear! There were some shortfalls among Big Oil earnings caused by "easing commodity prices, declining refining and chemical earnings, rising steel and labor costs and higher royalties and taxes had hurt their bottom lines." Can't let the big profits for Big Oil fall even further--perhaps President Bush needs to start a new war in Iran to increase those oil prices? I apologize if this sounds rather cynical, but I am. I thought I would go in and look at the stock prices for Big Oil over the past five years--just a little comparison here. I've pulled the five-year stock price charts off of Marketwatch.

So let's start with Exxon-Mobile's five-year stock price trend:

Exxon's five year stock price trend. From Marketwatch

And now for some comparisons. Here is Chevron's five-year stock price trend:

Chevron's five-year stock price trend. From Marketwatch.

Here is Conoco-Phillips five-year stock price trend:

Conoco-Phillips five-year stock price trend. From Marketwatch.

Here is Occidental's five-year stock price trend:

Occidental's five-year stock price trend. From Marketwatch.

And finally, here is Royal Dutch Shell's two-year stock price trend. According to the Marketwatch company profile, "Royal Dutch Shell was incorporated in England and Wales on February 5, 2002, as a private Company under the Companies Act of England and Wales 1985, as amended. On October 27, 2004, Royal Dutch Shell was re-registered as a public Company limited by shares and changed its name from Forthdeal Limited to Royal Dutch Shell." There are actually two classes of shares for Royal Dutch Shell--Class A shares and Class B shares. The stock quote and chart is for Class A shares. You can find the stock quote and chart for Royal Dutch Shell Class B shares here.

Here is the two-year stock price trend for Class A shares of Royal Dutch Shell:

Royal Dutch Shell's Class A shares two-year stock price trend. From Marketwatch.

So what does all this mean? The interesting trend here is that as President Bush started his war in Iraq, the stock prices of Big Oil companies have risen dramatically--increasing two or three times the value of what they were five years ago. The Iraq war has certainly made Big Oil very rich, as we can see with both the NY Times story on Exxon's profits, and the trends in the Big Oil stock price charts. But now let's continue into the Times story:

Oil prices in 2006 averaged $66, $10 higher than the year before, according to a recent Citigroup report on the energy industry. Oil prices reached a high of $77 in July, but they have declined to the low-to-mid $50s due to generally warm weather and the perception of easing tensions in much of Middle East since then.

The Times story is reporting that oil prices have leveled off, due to warmer weather and the perception of easing tensions in the Middle East. This leveling of oil prices has caused a drop in quarterly earnings for Exxon, and perhaps the rest of Big Oil. The "perception of easing tensions in much of the Middle East" could be a result of oil traders factoring the U.S. war in Iraq into oil prices. What bothers me is that we're seeing tensions increase again--this time between the Bush administration and Iran. President Bush has authorized U.S. troops to kill suspected Iranians inside of Iraq, he has sent another carrier battle group into the Persian Gulf, and attacked an Iranian consulate in Northern Iraq. And finally, there are reports coming out that the PNAC neocons have been planning a U.S. attack against Iran for the past six years. If the United States does go to war with Iran, what is going to happen to the price of oil? What will happen to the price of gas here? What will happen to Big Oil's profits and stock prices over the next two years, if the Bush administration is embroiled into both a war in Iraq and Iran?