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No one will feel sorry for Exxon Mobil

Exxon Mobil Corp. (NYSE: XOM), whose huge profits have made it one of the most vilified companies in America, was brought down to earth today after posting disappointing earnings.

Net income at the world's largest oil company rose 17% to $10.9 billion, or $2.03 per share, from $9.3 billion, or $1.62 per share, a year earlier. Revenue rose 34% to $116.9 billion. Analysts had expected profit of $2.13 on revenue of $124.4 billion, according to Thomson Financial. Shares of the company fell.

Just because oil prices remain above $100 per barrel doesn't necessarily mean everything is going Exxon's way. For one thing, high oil prices resulted in "significantly lower" refining margins, which pushed down downstream earnings by $746 million to $1.16 billion. Lower margins also pushed down profit in Exxon's chemical business by $208 million to $1.03 billion. Moreover, spending on capital and exploration projects soared 30% to $5.5 billion "as we continued to actively invest in projects to bring additional crude oil, natural gas and finished products to market."

The problem is that's proving to be difficult. For one thing, production at the company's oil wells dropped as did natural gas production in the Middle East, The U.S., Canada, South America and Asia. This is happening as surging demand from the developing world is keeping oil prices at record levels. Exxon is "having trouble raising production, and that's not a good sign,'' Leeb Capital Management's Stephen Leeb told Bloomberg News.

It's doubtful that many people are going to shed a tear for Exxon as the company had cash flow from operations and asset sales of $21.8 billion. It also bought $9 billion worth of stock in the first quarter. The company has become a lightening rod for people's anger over rising gas prices.

Democratic presidential candidate Hillary Clinton has accused oil companies of manipulating energy markets to drive up the price of oil. She also advocates a windfall profits tax on oil companies and a temporary suspension of the gasoline tax, ideas which economists have rightly denounced.

If people want to hurt Exxon, all they have to do is drive less and turn down their thermostats in the winter. It's that simple and that complicated.

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Last updated: July 24, 2008: 05:43 PM

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