Obscene Oil Profits? How About Massive Reinvestment in Potential Assets?

The perpetual boogeyman for the ultra-left and some not-so-sensible politicos in the political spectrum's center is Big Oil, which the Washington Times examines from a more sober perspective than the MSM's customary hostile POV. Contrary to the robber-baron sputterings of the American lefties in academia, the electronic and news media, and the political left, Ernst & Young finds that Big Oil is reinvesting most of its profits in a search for more reserves, which are being fenced-in by some countries, notably Russia and Venezuela, behind ever higher licensing and royalty fees:

The top 20 U.S. and Canadian oil companies actually invested 50 percent more than they earned in the past 10 years in efforts to produce more oil, but adverse geopolitical developments conspired to give them fewer opportunities to expand production while fading oil fields in the U.S. and elsewhere forced them to spend substantially more just to maintain current production

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The costs of finding new oil are burgeoning as large reserve opportunities are being discovering in hard-to-get-to geographic and geologic nooks and crannies.

"Reinvestment is under way, and it's strong," said Charles Swanson, an energy analyst at the firm, but "average costs to find and develop oil and gas reserves have tripled since 1997, while total reserve-replacement costs have more than doubled."
The study found that the top companies -- including Exxon Mobil, ConocoPhillips and Chevron, among others -- took in a mind-numbing $5 trillion in revenue from sales of oil and related products between 1995 and 2005. After subtracting the cost of equipment, leases, labor and other operating expenses, the companies posted whopping profits of $336 billion.
Over the same time span, however, the companies spent even more than they earned -- $550 billion -- on oil exploration and development. Some of them went deeply into debt to finance new ventures, especially during times of lean profits.

For every major field brought on-line, like the Azeri fields offshore in the Caspian where I spent some time in the nineties inspecting the political weather, other fields like the Sakhalin in Russia are having to be written off because Putin's in-house oligarchs are grabbing all the proven gas and oil reserves to buttress Vladimir's grand strategy to employ energy as a tool of international blackmail.

But another handicap to American oil production, aside from its ridiculous political inability to exploit the ANWR fields due to caribou-hugging Democrats, lies in the dearth of new petroleum engineers educated stateside. The high prices for oil now make economically feasible a lot of US reserves which before were too expensive to extract. But developing some of these fields means more oil professionals.

A shortage of petroleum engineers has prevented some companies from expanding production. Worker shortages developed in recent years after drastic job cuts during industry downsizings in the early part of the decade. Moreover, most of the engineers available are baby boomers, with an average age of 49, and are heading toward retirement, said Jeff Johnson, chief executive of Cano Petroleum, an independent oil producer in Fort Worth, Texas.
"There's an urgent need to find a new generation of U.S. petroleum engineers to replace this present one" if the United States is to continue exploiting its dwindling oil fields, he said. "Very few people know there are hundreds of mature oil fields here in the U.S. containing ample amounts of oil and natural gas that was never recovered due to technological limitations" -- a lack of equipment and skilled workers.

The USA can't justify oil wars overseas in almost every and any circumstance. But if the country doesn't develop its own reserves, oil imports will only increase in volume and price, and Americans can only blame themselves for a bleak economic future.