ExxonMobil just recently reported they made over $10 billion in profits last quarter, over $40 billion last year. Their cash flow was even higher at $52 billion. So how can I say that they are going out of business?

They can’t find attractive new sites to drill for more oil. They bought back $32 billion of their own stock last year while spending $21 billion on capital expenditures. Their oil and gas production fell 5.6% (Link).  They are not alone among the big oil producers in being unable to find enough new reserves to maintain production. At the rate they are buying back stock, they will buy back all of their stock in about 15 years.

Foreign countries are restricting access to possible exploration areas or making it financially unattractive to take the risk of exploring for marginal fields. Most of the worlds large oil fields are being depleted and production is dropping. (Link) 

If Exxon does eventually stop being an oil producer, who are we going to buy our gasoline from? What will the price be?

This has become a political issue (Link).  Some of our politicians want to put windfall profit taxes on our oil companies. I don’t see how putting more taxes on our oil companies will put more gasoline in our cars. Maybe they should consider letting our big oil companies use their expertise to find and develop domestic oil sources by opening areas that are currently closed to exploration. 85% of our offshore areas are closed to exploration. When you are filling up your car, think about where your next tank of gasoline is going to come from and how much it is going to cost.

While I do not believe we are running out of hydrocarbons, the easy and accessible oil is running out. What should Exxon do?

The Rockefeller family, who are some of the original shareholders from the predecessor company Standard Oil from 1870, have called on ExxonMobil to make more investments in renewable energy:

Neva Rockefeller Goodwin Part 1:

Neva Rockefeller Goodwin Part 2:

I do not agree with them. They want the company to remain viable in the long term, but the capital could also be transferred to a new generation of companies with new products and a new vision. ExxonMobil is doing the right thing; returning cash to their shareholders. They have a lithium battery business (Link) that is trying to build batteries for electric cars, but it is a very small part of their business. The people who work at ExxonMobil are basically oil men. They know how to explore, develop, transport, refine and distribute petroleum products. Why should they invest in alternative energy when it is not their area of expertise? What about the return on investment to their shareholders? They should return the money they can’t invest to their shareholders and let their shareholders invest in alternative energy.

The situation with ExxonMobil not being able to replace their reserves is an indicator that we are entering a new energy age. The age of oil is coming to a close and the new energy age is emerging. Is ExxonMobil going to be part of the new energy future? I don’t know. It will really be up to their board of directors and shareholders to determine if they liquidate the company over time or make investments in new energy. They could make large investments in technologies like coal to diesel, but I don’t think that is the energy of the future because it releases tremendous amounts of CO2. Better that they just buy back stock. To take the risk out of future investments, we should have a national energy policy so they can make better decisions on funding new projects and delivering the fuel we need.

I am a small shareholder in ExxonMobil and would like to see the company invest in the new energy age. There is one fuel source that they should consider. It plays to their strengths of refining, transportation, distribution and would require large capital investment. It does not add carbon to our atmosphere so it is environmentally clean. What is it? More on it in the next article.