The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

Where do oil profits go?

Mar 7, 2005

What did the top four oil companies in the world do with their gigantic profits? They paid out most of the profits to their stockholders, to the tune of 71 billion dollars. They bought up their own shares, which is another way of increasing the profits of stockholders, for 40 billion dollars. And finally they did invest some in the exploration of new oil fields. But they increased investment by only 10% this year, while profits grew by as much as 85% depending on the company. Investments are lower today than they were in 1980 when they are adjusted for inflation.

Oil companies put the emphasis on immediate profit to the detriment of looking for new energy sources. In the same way, they gain more money – and it's a lot easier – through financial manipulations like buying up stock and acquiring companies, than by producing oil.

This situation creates a relative scarcity. And it explains why, when there is even a small increase in demand, the price of oil goes up very rapidly. And the profits go up even faster!