Oil Companies Essay Example | Topics and Well Written Essays - 2000 words

Oil Companies - Essay Example According to the report, titled, Hot Profits and Global Warming: How Oil Companies Hurt Consumers and the Environment, the soaring prices are not dampening demand because most families have little leeway to alter their driving habits. Federal government statistics show this summer's gasoline demand up between 1.6 and 1.9 percent from 2005. The increased prices of gasoline have translated into record oil company profits. In the first six months of 2006, the five largest US oil companies posted $59.4 billion in profits. These companies have spent $112 billion since 2005 to buy back their own stock and pay dividends rather than invest in infrastructure or alternative energy sources, according to analysis done by Public Citizen. (Raymond J. Learsy. The Blog Eat The Press Becoming Fearless. The Huffington Post). In this regard, the American government summoned British Petroleum before the House Committee on Energy and Commerce for clarification. It is alleged that the company allowed its Alaska pipelines to deteriorate despite such large profit margins, causing a partial shutdown of oil production in the US's largest oilfield and temporarily driving up global oil prices. Surprisingly it was reported that the officials of British Petroleum responded that the profits and saving secured were adjusted with the losses the company suffered due to the fluctuation of oil prices. The company was able to convince the panel easily, however the later reports indicated that the company in actual manipulated the accounts, and invested the money for the purchases of physical equipments which were off the record. British Petroleum has claimed itself to be renewable energy leader; it invested only $800 million a year in solar, wind, natural gas and hydrogen energy, less than 2 percent of the total amount the company posted in profits, stock buybacks, dividend payments and cash reserves in 2005. "Under the current market framework, oil companies aren't making investments in ways to break our addiction to oil and apparently have no intention of doing so," said Tyson Slocum, director of Public Citizen's energy program and the report's author. "With $1 trillion in assets tied up in extracting, refining and marketing oil, their business model will squeeze the last cent of profit out of that spent capital for as long as possible." (Johnston, 2005) IMPORTANCE OF RESERVES (Why reserves value are so important) It is understandable that fraction of the profits stem from the international rise in the prices of petroleum, the report has mentioned that, large oil company mergers have squelched competition and has created negative impact on US consumers. Recent mergers between giant oil companies such as Exxon and Mobil, Chevron and Texaco, and Conoco and Phillips have resulted in just a few companies controlling a significant amount of gasoline in the US. Since 2005, the largest five control 55 percent of the refining market, and the largest 10 dominate 81.4 percent. The purpose of these exercises was to increase the amount of reserves produced and refined by the merged company. These exercises are further responsible for giving a strong image to the company, on the basis of their production activity. It is to be mentioned that the company's total