James K. Glassman asks, Who’s He Kidding?:
Next, the President chided the companies that actually produce the energy. “We expect there to be strong re-investment [of] cash flows” in more energy production. Just what does he think these companies have been doing? Over the past 10 years, the large integrated oil companies have made capital expenditures roughly equal to their net earnings. In fact, between 1991 and 2005, ExxonMobil’s cumulative capital and exploration expenditures (some $210 billion) actually exceeded the company’s earnings. Chevron spent $11 billion last year alone.Those expenditures involve enormous risk and long lead times. ExxonMobil, for example, spent 17 years and $3.5 billion on a deepwater development project in Angola. In 1988, when the company began its work, oil was about $15 a barrel.
But the oil price bounces up and down. Only a few years ago, it was less than $10 a barrel. It could be again. (In 2002, as the price of oil fell, Chevron’s sales dropped by $5 billion and its earnings by nearly $3 billion — in one year!)
Or politicians could decide to tax away profits, or further favor uneconomic fuels.