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Big Oil

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Chart of the major energy companies dubbed "Big Oil" sorted by latest published revenue

The term supermajor illustrates the six largest, non state-owned energy companies, as seen in popular financial news media around the world.

Trading under various names around the world, they are considered to be:[1]

The supermajors began to appear in the late 1990s, in response to a severe deflation in oil prices. Large petroleum companies began to merge, often in an effort to improve economies of scale, hedge against oil price volatility, and reduce large cash reserves through reinvestment.[2] Exxon and Mobil (1999), BP and Amoco (1998), Total and Petrofina (1999) and subsequently Elf Aquitaine (2000), Chevron and Texaco (2001), and Conoco Inc. and Phillips Petroleum Company (2002) all merged between 1998 and 2002. The result of this trend created some of the largest global corporations as defined by the Forbes Global 2000 ranking, and as of 2007 all are within the top 25.

As of December 1, 2006, ExxonMobil ranks first among the supermajors in terms of size (market capitalization), cash flow (12 months), revenue (12 months), and profits.[3][4]

As a group, the supermajors control about 5% of global oil and gas reserves with largest supermajor, ExxonMobil, ranked 14th. Conversely, 95% of global oil and gas reserves are controlled by state-owned oil companies, primarily located in the middle east.[5]

Big Oil

Petroleum supermajors are sometimes collectively referred to as Big Oil, a pejorative term used to describe the individual and collective economic power of the largest oil and gas producers, and their perceived influence on politics, particularly in the United States. Big Oil is often associated with the Energy Lobby.

Usually used to represent the industry as a whole in a pejorative or derogatory manner, "Big Oil" has come to encompass the enormous impact crude oil exerts over first-world industrial society.[6] The term is also utilized to discuss the consumer relationship with oil production and petroleum use, as consumers in the United States and Europe tend to respond to petroleum price spikes by purchasing vehicles with greater fuel efficiency during these periods. Historically, consumer interest in fuel efficiency and the oil debate wanes significantly as pump prices stabilize.

Controversy

Main article: Oil price increases since 2003

Since 2005, the term Big Oil has been used regularly in the media as the United States pump price for a gallon of regular unleaded gasoline passed $2.00 U.S., then $3.00 U.S. in early autumn. Crude oil peaked at $147 per barrel in July 2008, before dropping in mid summer. The increase has been blamed on a number of factors, including increased demand from developing economies outstripping supply, political instability and nervousness in oil exporting countries such as Iraq, Iran and Nigeria, as well as (at various times) hurricanes off the American gulf coast.

A current issue is whether the petroleum industry has engaged in profiteering during a time of catastrophic weather events and political unrest. The oil industry has responded by pointing out the increase in the cost of gasoline is almost entirely due to increasing crude cost, which the supermajors collectively have limited control over due to their small market share in comparison to the large government owned oil companies. They also point out that their profit margins (profit as a percentage of revenue) as an industry have been significantly lower than other industries, such as pharmaceuticals and banking. They outline their extensive costs, market uncertainties, and public education efforts with regard to industry background, supply and demand, and how the system of commodity futures affects pricing.

Industry supporters have supported the industry as an example of free market economics. Critics have focused on profit reports and outlined allegations that the oil industry has utilized unrest to achieve unjust enrichment. An investigation by the US Federal Trade Commission has found no illegal market manipulation to raise the price of gasoline in the US.[7]

Between 2004 and 2007, the profits of the six supermajors totaled $494.8 billion. [8]

See also

References

  1. ^ "ConocoPhillips: The Making Of An Oil Major". Business Week. December 12, 2005. Retrieved 2006-09-29.
  2. ^ "Slick Deal?". NewsHour with Jim Lehrer. 1998-12-01. Retrieved 2007-08-20. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  3. ^ Reuters, December 2, 2006.
  4. ^ Forbes Global 2000, 2006.
  5. ^ "Will We Rid Ourselves of This Pollution?". Retrieved 2008-04-22.
  6. ^ Inside the Big Oil Game at Time
  7. ^ FTC: 2006 Investigation of Gasoline Price Manipulation
  8. ^ Global 500, Fortune website, accessed Aug. 2008.

Further reading

  • Yergin, Daniel. The Prize: The Epic Quest for Oil, Money & Power. New York: Free Press, 1993. ISBN 0671799320.
  • Blair, John Malcolm The Control of Oil (Hardcover). Publisher: Pantheon Books; 1st edition (January 1, 1976) ISBN 0394494709
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