Expansion should be the top strategic move for oil companies

IIPM PUBLICATION
What happens to companies that make their customers sob and wail? They simply flourish! Surprised? Well, take a look at the congregate of ‘well-oiled’ corporate Cyclops and you would believe it. The top five oil companies (including ExxonMobil, British Petroleum, ConocoPhillips, Chevron & Royal Dutch Shell) reported a staggering 36% rise in profits (reaching $34.6 billion) for the quarter ending June 2006 over the corresponding period last year. Jim Mulwa, CEO and Chairman, ConcoPhillips thumped, “We are pleased with the earnings.” But shockingly, the raison d’être that caused this merry-making is where the real danger signals lie!

Undoubtedly, greater margins through soaring oil-prices have been responsible for igniting this industry-wide blaze. But not to forget that the OECD has warned that growth in supply would ultimately outrun the growth in demand, as more expansion of operations takes place. The report also cautioned that oil prices, which are currently hovering at their all time highs, would stabilise at a lowly $40 per barrel.

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Source : IIPM Editorial, 2006, Editor - Prof. Arindam Chaudhuri

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