Gulf Oil Spill Abandoned Wells

Big Oil has a lot more to worry about than fighting the biofuels industry over the Renewable Fuel Standard. Fourth quarter 2013 earning reports show that major oil companies haven't been as profitable lately as they used to be.

Exxon Mobil, the largest US oil company, had its worst fourth-quarter earnings in four years in 2013 with a 27-percent drop in profits. Europe's largest oil company, Royal Dutch Shell, reported an even larger fall – profits tumbled 48 percent in the fourth quarter. Chevron has not reported earnings yet but it's anticipated that the news won't be too good given the cost of maintaining its production levels. Conoco Phillips had great numbers: a 74-percent jump in fourth quarter earnings. But that number is deceiving, since the earnings came from unloading "non-core" assets recently and production was well below where it was a year earlier.

"The world's cheap, easy-to-find reserves are basically gone" - Matthew Phillips

What's behind this trend? While the "peak oil" theory was discredited by many analysts, the truth is that oil companies need to spend more and are still producing less oil lately. "The world's cheap, easy-to-find reserves are basically gone; the low-hanging fruit was picked decades ago," Businessweek's Matthew Phillips wrote. "Not only is the new stuff harder to find, but the older stuff is running out faster and faster."

Oil companies are trying to catch up on market developments including the booming shale fields in the US. Exxon Mobil took a hit after buying natural gas producer XTO Energy in 2010 for $41 billion right before gas prices crashed. And Shell has taken a loss on its "monster ship," the Prelude, which has been estimated to cost the oil company $12 billion to enter the liquefied natural gas (LNG) market. Horizontal drilling methods, including hydraulic fracturing ("fracking") have allowed smaller independent companies to cash in on booming oil and gas markets within North America, and come with their own problems. Big Oil doesn't have it as easy as it used to, and you can find more details over in Businessweek.