The record has gone. The largest ever annual corporate profit was made by Exxon Mobil last year.
For much of the year, and frankly, at the tail end of 2004 too, many were saying the high price of oil is just a temporary phenomenon, that there’s a $10 terror premium built into the price, and that normal service and prices will be resumed soon. But this temporary blip has lasted over 18 months now, and as of this morning, the dollar price per barrel is only a couple of dollars below last year’s all time high.
Combine the high price of oil, with the fact that Exxon Mobil is the most profitable oil company, and all of a sudden we have a record breaker. The company made a total profit of $36.1bn for the year, or $33.9bn after excluding special items. Its performance in the last quarter was a record too, making £10.7bn for the three-month period.
The annual results smashed the record set by the same company a year ago, when it made $25.9bn,
At $371bn, its turnover was larger than the GDP of Indonesia, an OPEC member with a population of almost a quarter of a billon.
But some question how long it will last. While the company is currently benefiting from the fact that demand is growing faster than supply, some fear that in the year ahead it will struggle to supply oil in sufficient quantities to keep the profits up.
In the past, the oil price cycle has been characterised by oil companies cutting back on exploration when the price is low, which leads to a shortage and to a higher price, an increase in exploration follows, causing a glut of oil, leading to a fall in price, and the beginning of a new cycle.
And true to cyclical form, the company is investing heavily right now. But this time, maybe it will be different; maybe this time demand is rising so fast that no amount of further exploration will be enough.
Only time will tell whether this is just another cycle, or the beginning of a new era. One thing though is for sure, we will run out of oil eventually; the oil cycle will not last forever.
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