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Jim Letourneau's Blog

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Rising oil price equals rising profits, right? Wrong

Bill Newman is an energy analyst with Research Capital in Calgary. He drew my attention to a recent article in The Economist. - Over a barrel.



Bill's comments are as follows:



Despite
record high commodity prices, the Major oil companies are making less money due
to rising cost and falling production



  • The Majors are struggling to pump more oil and gas.  On average, the majors produced 9% less oil production in Q3/07 versus the same period last year.
     


  • Countries are changing tax rules which are also eroding profits.
     


  • Labour and equipment shortage is increasing costs faster than
    revenue.

Despite record high
oil prices, world production seems to have plateaued in 2005.  We
don't believe this is an indication of world peak oil production, but more
of a reflection of a dependence on production growth from politically
unstable areas of the world.