Dont Waste Your Money On Exxon
Can you believe its almost summertime? Kids are nearly out of school for the year. Temperatures are heating up across the country. Swimming pools are getting more and more crowded.
And of course gasoline prices are going through the roof!
Now, to be fair, theres a lot more than just warmer temperatures causing gas prices to climb. In fact, most experts believe the Middle East crisis is whats really driving up prices. Violent revolutions in the worlds top oil producing countries arent exactly price stabilizing events.
One look at the recent action in the oil market shows just how destabilizing these events can be.
When fighting in the Middle East began, the price of crude oil shot to the moon. It even crested $110 a barrel in April. Thats the highest crudes been since the commodity boom of 2008.
You know what I find interesting?
Americans collectively agree on very few things. But one topic gets everyones blood boiling rising gas prices. $4.00 per gallon gas is a surefire way to generate anger and resentment across the country.
Typically, gas price anger is directed toward the big oil companies. And you know what they deserve it.
Let me explain
Big oil doesnt deserve our ire because they make money on oil. After all, theyre in business to make a profit. As a capitalist, I dont have any problems with a business earning lots of money.
No, what really irks me (and plenty of others Im sure) is something else entirely. Its how these ridiculously profitable oil companies claim they arent earning higher profits off surging oil prices.
Huh? Is that some kind of joke?
The worlds largest company, Exxon Mobil (XOM) with an astronomically high market cap over $400 billion isnt making money off higher oil prices? Were supposed to believe that?
In other news, Exxon plans to replace all gas burning vehicles with flying unicorns.
Seriously though, what exactly are the executives at Exxon (and other Big Oil companies) thinking?
According to Exxon management, their poor, misunderstood company makes a mere $0.07 in profits per gallon of gas. And turning crude oil into gas supposedly makes up a miniscule 6% of the companys earnings.
Heres what I think
- Americans consume roughly 400 million barrels of gas a day, so $0.07 is still a big deal
- Theres no way Exxons making such a small amount given the profits theyre posting
Exxon made $11 billion in profits this past quarter. $11 billion. Thats more than the market caps of most American public companies!
More importantly, the companys top performing quarters always coincide with high gas prices. In 2008, crude oil topped $145 a barrel an all time record high. And right around that time, Exxon pulled in a record $14.8 billion in profits.
But Im sure its just a coincidence, right Exxon?
As if thats not enough, heres more evidence of Exxons endless greed
The oil giant recently said they dont want to limit the amount of speculation in the oil markets. They claim speculators are an integral part of a healthy crude oil market.
To some extent, thats true.
But, speculators also tend to push oil prices higher than what the fundamentals suggest. And lately, speculators have been on an oil buying rampage. They come out in droves whenever theres some kind of global crisis.
Hmm so more speculators equals more money for Exxon. What a shock that Exxon doesnt want to curb rampant speculation!
Heres the thing
I can bash Big Oil all day long. But, whether we like it or not, gasolines a part of our lives.
Eventually, other forms of energy will become prominent whether its electric cars, solar power, or something we havent even thought of yet. But its not going to happen overnight. And its probably going to take years to truly make a lasting change.
For now, we need to figure out how to cash in on rising oil prices. Quite simply, we dont want to miss out on an opportunity to make our own huge profits.
Fortunately, you dont have to invest in expensive, huge companies like Exxon to make money in the industry. There are plenty of ways to cash in on the explosive potential of the oil industry without supporting Big Oil.
My favorite method investing in small cap energy companies.
There are over 70 small penny stocks in the oil exploration and drilling space alone. Most of these companies are still in the early development stage. So, there’s an opportunity to pick them up at dirt cheap levels before their prices skyrocket.
Yours in profit,
Gordon Lewis
Category: Energy Stocks, Oil Stocks
