Recent Trends

One of the biggest obstacles for oil companies today is gaining access to reserves. The decrease in reserves open to public oil companies over the past few decades, coupled with arrival of new Chinese and Indian oil companies have heightened competition for public oil companies. Private companies now compete for fewer available reserves, often in harsher locales than the relatively accessible sites in OPEC nations.

In order to cope with growing challenges that public oil companies face, companies have invested in technologies that will optimize their extraction capability and many have taken part in mergers as a way to cut costs. Average production costs fell to under $6 per barrel last year because of new technologies and mergers.

MERGERS & CORPORATE STRUCTURES
In spite of record profits posted by oil companies, there has been a trend in oil company mergers and consolidations as a way to cut costs. Over the last 25 years alone:

  • Exxon merged with Mobil in 2001-02 (and is now the most profitable company in the world)
  • BP bought Amoco in 1998
  • Gulf was bought by Chevron in 1984
  • Chevron merged with Texaco in 2001-02
  • Unocal and Chevron merged in 2005

All of the mergers and acquisitions that have taken place haven't only boosted public oil company profits. The mergers have also clouded the lines of responsibility. Oil companies argue that they are not presently responsible for the actions or previous owners and management. In order to settle these disputes, groups of people who have suffered abuse at the hands of oil companies are finding ways to hold public oil companies accountable.

POWER SHIFT
A power shift has occurred within the energy industry. While multinational corporations like Exxon Mobile, Royal Dutch Shell, and Chevron continue to reap record setting profits, national oil and gas companies are the most imposing entities in the global oil market. State owned entities now control 77 percent of global supplies. As Michael Hirsh notes in his May 2006 Newsweek article, "The Energy Wars", state owned companies guarantee less efficiency in the exploration, extraction and refinement of oil. In addition, overseeing governments guard the amount discovered and extracted as ”state secrets”. What this means is more instability in the global political and economic relations related to oil.

Leaders in oil-rich countries like Saudi Arabia, Russia, Venezuela and Bolivia have leveraged their countries’ energy reserves into political power and influence on a global level. According to Wall Street analysts, the instability caused by increased power in the hands of very few has added between $10 and $20 to a barrel of oil.