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TODAY Wednesday 23 July 1997 Each weekday. Conn Nugent on what's new in the world, on the site.

 

TODAY IN THE WORLD: Smart Exxon

You've got to hand it Big Oil in general and Exxon in particular: they supply us with what we demand, dependably and at a cheap price, and they provide their shareholders with an excellent return on investment.

Many of the large oil companies, and especially Exxon, now own vast reserves of natural gas as well as petroleum. From an environmental point of view, natural gas is usually preferable to petroleum; when burned as fuel, natural gas releases less carbon dioxide and fewer pollutants into the atmosphere. It used to be that environmentalists could cozy up to natural gas suppliers and seek their support in fights against the oil companies for clean air regulations and gasoline taxes. There are still some large natural gas companies with no petroleum interests to speak of -- Tenneco, Enron -- but more and more Big Oil and Big Gas are becoming interchangeable. From Exxon's point of view, feedstock diversity makes sense the same way that any spreading-of-the-bets distributes one's risk over the long haul.

When the prices for both crude oil and natural gas decline markedly, however, you've got to figure that suppliers of crude oil and natural gas are going to be in for a rough time. That's certainly how it works in agricultural commodities. So it was with interest and wonder that I read yesterday that, in the face of oil and gas prices 10 percent lower than last year, Exxon had reported second quarter earnings 25 percent higher.

What I had missed was the way in which Exxon had expanded vertically as well as horizontally. The big profit centers for the company were in value-added refining and chemical operations which actually benefit from lower prices of crude. And, according to Peter Fritsch in the Wall Street Journal, there were also profits gained from what are called "operating efficiencies" (usually job layoffs). Besides, because Exxon gets less at the wellhead doesn't mean that you pay commensurably less on the Self-Serve line. "Gasoline prices tend to decrease more slowly than crude prices," Mr. Fritsch notes diplomatically.

For the bottom line investor, Exxon and her sisters have succeeded in making themselves attractive so long as the world continues to want to burn gas and oil or buy things made out of them. Fritsch quotes a stock analyst as saying that "the relationship between crude oil prices and changes in share price are insignificant today."

Now that's a brave new world.

TODAY ON THE SITE

Summaries and critiques of intriguing recent enviro articles can be found in the Media Watch feature of our Newsroom section. Just updated two days ago, Media Watch covers those who cover. This week, for example, Jacqueline Volin reviews a provocative piece in Scientific American on the "addiction" to synthetic nitrogen characteristic of high-production agriculture. We tend to overlook the importance of farming and farming methods on climate change, Jackie reports, and it's time for a broad-horizon look at how to feed the world without disturbing it irrevocably.

Recent "Today" columns:

7/22: Climate Chess
7/21: Don't Know Much About Conservation
7/18: All Aboard
7/17: Downward and Outward Mobility
7/16: A Muggy Day on The Hill
7/15: Plug for Planet Ark
7/14: Follow Me
7/11: Blood Sports
7/10: Oil and Taxes
7/09: Mexico

To access more "Today" columns, click "Archives" below.