Wrapping up a speech at the Port of Los Angeles, President Joe Biden took a swing at oil companies on Friday, blaming them for not doing enough to keep oil prices low.
Biden was asked specifically about ExxonMobil. The President replied, “We’re going to make sure that everybody knows Exxon’s profits. Why don’t you tell them what Exxon’s profits were this year — this quarter? Exxon made more money than God this year.”
“And, by the way, nothing has changed,” Biden continued, “They talk about how we have — they have 9,000 permits to drill. They’re not drilling. Why aren’t they drilling? Because they make more money not producing more oil.”
ExxonMobil immediately responded to the President’s attack in a few different media sources, saying:
We have been in regular contact with the administration, informing them of our planned investments to increase production and expand refining capacity in the United States.
We increased production in the Permian Basin by 70%, or 190,000 barrels per day, between 2019 and 2021. We expect to increase production from the Permian by another 25% this year. We’re spending 50% more in capital expenditures in the Permian in 2022 vs. 2021 and are increasing refining capacity to process U.S. light crude by about 250,000 barrels per day – which is the equivalent of adding a new medium-sized refinery.
We reported losses of more than $20 billion in 2020, and we borrowed more than $30 billion in 2019 and 2020 to support our investments in production around the world. In 2021, total taxes on the company’s income statement were $40.6 billion, an increase of $17.8 billion from 2020.
So… maybe Biden didn’t get that memo? Or maybe the President is lying to rally support for himself? Or maybe he was just mistaken?
Some oil companies are, in fact, holding back investment spending. Diamondback Energy, for one, said in its Q1 earnings announcement early in May, “We do not feel that today is the appropriate time to begin spending dollars that would not equate to additional barrels until multiple quarters from today given the uncertainty and volatility currently in the market.” And Diamondback isn’t the only oil company riding the brakes in the Permian.
Up until very recently, exploration drilling in the Permian basin was booming. A combination of huge reserves and low-cost operations spurred billions in Permian exploration investment, which eventually transformed the United States into the world’s leading supplier of oil.
But now, following the Russian invasion of the Ukraine and inflationary pressures moving oil now beyond $125 per barrel, things have changed. Investors have been pressuring Big Oil to curb growth in favor of cash dividends and stock buyback.
Sooner or later, however, there’s little doubt that activity at the Permian WILL pick back up. And when it does, you can expect the share prices of Permian producers to soar.
Energy Investor director Keith Kohl says, “If this volatility continues into the summer, this energy crisis will make the gas crunch in the 1970s look like a day at the beach. And when summer gasoline demand really starts to kick in, Americans will be paying as much as $7 per gallon at the pump.”
Keith just published a brand-new investment report, in which he reveals three oil stocks that will help investors profit from the flood of U.S. oil that’s on its way. Get access to that report here.
