Big oil tanks up: Exxon’s pro t nears $ 10B

Record prices may fuel $ 96B earnings year for energy sector

While drivers have been painfully paying up at the pump, oil companies have been racking up eye- popping pro ts.

Thursday, ExxonMobil became the most stark example yet of how much big oil companies bene ted from the huge run- up in oil prices during the third quarter even as two major hurricanes ripped through the industry’s Gulf Coast infrastructure. Exxon reported:

uNet income up 75% to $ 9.92 billion. That is the most a U.S. company has earned from operations in a three- month period and greater than the annual gross domestic product of entire nations including Cameroon and Zimbabwe.

uRevenue up 32% to $ 100.7 billion. That is greater than the annual GDP of all but just 38 of the world’s economies.

Exxon illustrates the energy’s sector’s tremendous pro t amid record- high energy prices. The industry is on pace to earn $96 billion this year -more than what the USA’s industrial and telecom companies will earn, combined, says Standard & Poor’s based on members of the S&P 500 index.

And it’s not just ExxonMobil that’s raking it in. Royal Dutch Shell reported net income up 68% to $9 billion Thursday. Earlier this week, BP reported a $ 6.5 billion third-quarter pro t and ConocoPhillips a $ 3.8 billion pro t. Today, ChevronTexaco is expected to post 53% higher earnings of $ 3.9 billion, says Reuters Estimates.

The massive pro t gains were widely expected giving the soaring price of oil. The price of a barrel of oil hit a rec- ord $70 during the third quarter and, even though it has backed off to $ 60.80 currently is still up 40% in 2005.

It’s not as if the industry didn’t have dif culties with the damage of Hurricanes Katrina and Rita. In fact, ExxonMobil said oil production fell 5% during the third quarter and naturalgas production fell 9%.

But those disruptions had little effect on the @ ow of oil companies’ pro ts.

“ The strong commodity price offset any affect of the hurricane,” says analyst Lysle Brinker at John S. Herold.

That’s because oil companies were selling gasoline to wholesalers at record prices. The pro ts from were more than enough to offset any hit the big oil companies suffered when the price of oil and gas rose faster than they could boost the price of gas sold at their own company-owned stations, says Tina Vital, oil stock analyst at S& P.

Vital says the difference between the price of oil and the price ExxonMobil charges wholesalers hit a record. But, due to public outcry and consumer sticker shock at the pump, Vital says the company charged less than their cost for gasoline during the period.

Meanwhile, the oil industry has tried to soften criticism of its current boom times by pointing out the cyclical nature of its business.

Government data backs that up. The U.S. Energy Information Administration reports that although the 20 big oil companies it tracks earned a combined $ 22.55 billion last quarter, those same 20 companies, together, earned only $ 1.59 billion in the fourth quarter of 2001.

In fact, Big Oil was weathering tough times then, reporting combined quarterly pro ts of less than $10 billion from the third quarter 2001 through the fourth quarter of ’ 02.