the idea that lower oil prices due to OPEC's 'letting them fall' (their ...
Suggestion by Just an observation on 2007-11-04 08:06:59
the idea that lower oil prices is negative for XOM due to OPEC's 'letting them fall' (their ability to affect world pricing in the current global environment is another disscussion altogether) is flawed from the view that XOM is a net IMPORTER of crude due to thier downstream refining business. In reality, XOM gets over 90% of it's revenues from refining business. XOM in reality does not sell oil on the open market. It sells it to ITSELF and as a feedstock for it's huge refining operations. Obviously a higher or lower price for crude itself affects the nominal value of XOM's upstream business from the view that the value of their proven crude assets rise and fall. But XOM is an 'integrated major.' The biggest in fact. So it seems at the very least the idea that that XOM's refining business suffers from higher oil prices (note recent EPS report) should also be pointed out as a major bear argument. And a more accurate description of how OPEC's ability (?) to affect world crude prices is a negetive for XOM should be to note that from a cash flow point of view, XOM's largest cash flow business (refining) SUFFERS from HIGHER crude. The biggest negative from lower oil prices in the barrel as opposed to at the pump (refining) is for guys like APA, APC. Large refiners like XOM suffer most when oil stays high, and demand at the pump for refined products declines, thus contracting the CRCK spread. This appears to have happened in recent weeks....For years, I have come to view XOM as a refiner more than an 'oil company' which the public likes to bash in times like these. A cursory look though at XOM's balance sheet shows what they really do as a company. They provide a public service. After they refine all the crude they have access to, they BUY crude daily from others to meet the demand for refined products...So XOM would like nothing better than to see OPEC lower the cost their feedstock to a more reasonable level.. just an 'observation'.....pat......
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Good point about Exxon's revenues from refining.
