15 September 2008

Oil Revenue

I think I should do a little research on this one and produce a more comprehensive post on the following little fact.

Over the past 12 months ExxonMobil’s revenues—$404 billion—exceeded the GDPs of more than 160 countries.

I wonder what the executive pay packets at Exxon looked like with base salaries and bonuses all tallied up and together?

The question that springs to my mind is why some oil producing countries like Nigeria, Iran, and Iraq, to name but a few, are in such dire straits with regards to human development? Obviously the trickle-down effect does not work in the oil markets.

14 comments:

tere616 said...

Oh, please, don't make me keeps imagining of their executives pay check :-(

I think (not based on research :-)) because the money is not going to the owner of the oil, e.g. Nigeria, or Iran. And Exxon don't see their selves as the country which have the responsibility to develop the people where they get the privilege of the country's treasure. Exxon made the payment to Nigeria or Iran. It depends on Iran/Nigeria to return the money to their people.

People development is CSR program, and it's a nice to have program, and that was their thinking, am guessing.

Similar with Freeport and Newmont, Irian and Teluk Buyat ?

Rob Baiton said...

Tere...

I wasn't saying that Exxon necessarily had the responsibility although with profits like that I am sure they could do more.

Business is business and Exxon is sure to claim that its primary responsibility is to its shareholders and not the citizens of any country where they operate.

I would reckon if you asked people about Freeport and Newmont in Indonesia most would say that the government was too generous in the way the contracts were drafted.

My point was that with profits the size of Exxon's this must mean that there is a lot of money floating around in the oil markets. If this is the case why does this not trickle down to the citizens on the ground?

Anonymous said...

you are out of your depth here. But by all means do some more research. but do watch your terms, and, compare apples with apples.

Rob Baiton said...

Anonymous...

It is always nice to be out of my depth with someone who goes by the name anonymous.

Which terms compare apples to say oranges?

The original post merely states the profits of ExxonMobil, then wonders what base salary and bonuses of ExxonMobil executives look like, poses a question about human development and the lack thereof in some places, and finally whether there is a trickle down effect.

This is hardly comparing apples and oranges.

In my response to Tere's post I state that ExxonMobil could probably do more. I did not say that it has a moral obligation or anything else to do more.

I then say business is business and identify that the primary obligation of business is to return profits to shareholders (the assumption was that they were complying with the law).

The statement on Newmont and Freeport is based in part on anecdotal evidence I have gathered by talking to people, it is what I do after all. Yet, anecdotal does not cut the mustard as far as I am concerned hence the point of doing more research as noted in the original post.

I conclude my response to Tere with the idea that profits that size are indicative of a lot of money being available in the oil market and wondering why if this is the case that at the very local level citizens are not seeing this money in the form of development.

So, once again, which terms are you referring to where you think I am comparing apples and oranges (or some other fruit)?

Why not identify yourself so that I know you are in fact in your depth? Or perhaps more qualified than I or any other to comment on this issue?

I would be surprised if you do, identify yourself that is, but feel free to do so. We can carry on the conversation via email if you prefer rob[dot]baiton[at]gmail[dot]com this is assuming you are inclined to do so.

Enjoy your day though.

Anonymous said...

well for a start revenue is not profit. and revenue of a company is not simply compared to GDP of a country. There's lots of stuff on the net that looks at this sort of comparison. Im just saying analysis needs to be very qualified before one begins to compare. You have done well to answer all your own questions, or issues - mostly correctly - so i wonder why u wonder why there is much more research to do (except on the technical side)

I really appreciate your offer to continue dialog. Im afraid I cannot find the time, but i am very happy to read what u come up with, on this topic and others.

Your point on Indonesia not making sound contracts is very topical - I also wonder why they get screwed. Too polite??

Rob Baiton said...

Anonymous...

Point taken on profits and revenues. I jumped too loosely from large revenue to the assumption that this would translate to large profits (not always the case) in my comment reply to Tere.

tere616 said...

"My point was that with profits the size of Exxon's this must mean that there is a lot of money floating around in the oil markets. If this is the case why does this not trickle down to the citizens on the ground?"

My question to your comment. Who is the owner of that lot of money in the oil market ? The government ? The company ?

And why it doesn't trickle down to the citizens on the ground ?

To answer your question of why it doesn't trickle down on the ground, you have to answer my 1st question, of who is the owner of that lot of money.

Business is business. Exxon with the size of the company, their main goal is to gain a profit. Same as others.

Refer to Bill Gates, before he elected as the richest in the world, the purpose of his business is to gain profit; not trickle down the money. Later on, when his kingdom is ready then he, as a person not as the owner, start to do something to the people on the ground.

Nigeria, or Iran, or Indonesia, I always belief that all of the developing country, were to generous when they drafted the contract.

You can't bring the business issue together with humanitarian issue on the same table.

Exxon as a company don't see the humanitarian issue as their main goal nor their thousand objective, that's my thinking process.

tere616 said...
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tere616 said...
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pjbali said...

Just think of what exxon used to make way back before the saudis nationalized aramco. Actually I not sure if exxon even operates in iraq or iran - the industry there is nationalised. In terms or trickle down I would challenge your statement that it dosen't exist in oil markets.On any given drilling operation the oil company personnel on site will normally be about 2-3 out of 100. The rest are contractors (some multinational contractors to be sure but mostly national workforces). There are also suppliers for materials and chemicals, catering etc... which all contribute to the local economy. You may instead want to look at how govenments in nigeria (and indonesia for that matter) have (mis)spent their oil revenues.

pjbali said...
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Rob Baiton said...

Tere...

I was not thinking of ownership of the cash per se and was also not specifically thinking of ExxonMobil as the owner of the cash either in the sense of the point I was trying to make.

Perhaps I was aiming more along the lines of what PJB has come up with in terms of percentage of multinational workforce vs. local contractors,and also the idea of how countries have misspent any oil revenues they have earned.

I would suggest that Microsoft is still about making money. The Bill and Melinda Gates Foundation is from his personal wealth and not company (although admittedly his wealth is from the success of his company).

Nevertheless, let's assume that ExxonMobil is the owner of the cash (whether it be revenue or profit). Simply, ExxonMobil's obligation is to the shareholders and this is why it does not trickle down from ExxonMobil. I was never really talking about CSR.

To think that the revenues of this company matches the GDP of more than 100 countries is interesting but not necessarily all that relevant unless you are trying to highlight either the size of the company or the fact that there are a lot of poor countries out in the world at large.

To answer your second question. I was alluding to the fact that if ExxonMobil can make this much in revenue then there must be a lot of money in the oil markets. If so, then the countries where ExxonMobil operates in theory should be pulling in some of this cash as revenue as well. If so, why does it not trickle down?


PJB...

A voice of reason...Agreed that there is local involvement and that this in some way contributes to the local economy.

I guess I need to take more time to ensure that I am a little more explicit in my writings. I was probably looking more generally at human development throughout a State rather than exclusively at a single local economy. I was probably also looking a bit beyond community development programs and CSR at the local level.

I used to do some contract work on Bangka Island (with a tin miner) so I am somewhat familiar with community development and CSR and the idea of putting back into the community.

All...

Thanks for your comments.

treespotter said...

Apart from the obvious complexities and corruption in those countries, many countries under economic sanctions are limited in their oil trade - a lot of them ending up locked up in oil-for-food (or whatever items approved) so the overall transaction in the open market doesn't really reflect production.

An oil cartel doesn't help for transparency of the market - despite oil being such an important commodity - daily production (the measure for potential GDP) don't really reflect the commercial trading value of oil. Companies like Exxon and those gigantic ones hedge their risk and manage their revenue across the industry - horizontal and vertical as well as geographical in order to achieve the expected growth for its shareholders.

Their ups and downs don't go in sync with the economics of the oil producing countries.

Add on top the madness of oil policies in these countries where it's often interlinked with their politics then things don't really add up, yes.

Just saw a debate among the prez candidates on Tangguh LNG contract, i might just do a post for the case in Indonesia.

sorry for the length.

the writer said...
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