Marketplace has a new podcast for kids, "Million Bazillion!" EPISODE OUT NOW

Where big oil profits are going

Amy Scott Jul 28, 2008
HTML EMBED:
COPY

Where big oil profits are going

Amy Scott Jul 28, 2008
HTML EMBED:
COPY

TEXT OF STORY

Scott Jagow: It’s amazing what $4 or $5 a gallon will do to your wallet — and your behavior. The Transportation Department comes out with a report today on driving. It shows that Americans have dramatically cut back this year.

In May, driving was down almost 4 percent compared to 2007. That’s a significant change. And it’s the main reason oil prices have dropped 16 percent in two weeks. This morning, gas is below $4 a gallon for the first time in quite a while.

But these recent developments will not show up in the second-quarter profit reports from the big oil companies. Amy Scott reports.


Amy Scott: Analysts say most of the big oil companies will turn in record profits this week. No surprise there — the price of oil averaged more than $120 a barrel between April and June. That’s almost double prices the year before.

Analyst Phil Weiss follows the business for Argus Research. He says he’s hoping to learn a bit more this week about how the oil companies plan to use that money. They’ve come under fire for spending more buying stock back from investors than finding new oil.

Weiss: From a long-term perspective, I’d rather see them put it into projects, than put it into stock buybacks. Because if they buy back stock, then they’re not really growing the company.

And they’re not helping relieve high prices. But buybacks do please shareholders. They boost the value of the stock. And oil shares have fallen recently. Analysts say that’s because oil company stocks track oil prices, which have come down from their summer highs.

In New York, I’m Amy Scott for Marketplace.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.