Amount Of Oil Exxon example essay topic

Exxon Mobil is the largest publicly traded oil and gas producing company. Exxon Mobil does business in 200 countries world-wide (1). Some countries are designated for exploring gas and petroleum, and some are designated for manufacturing chemicals, lubricants, and market fuels (1). Exxon Mobil's world-class petroleum portfolio gives access to proven reserves of 21.9 billion oil-equivalent barrels of oil and gas, which is the highest in the industry (1).

The company's discovered resources consist of 72 billion oil equivalent barrels of oil and gas. On average, each day, they produce 2.5 million barrels of oil and 10.5 billion cubic feet of gas (4). Their asset base, includes more than 60,000 production wells in 1,800 fields in 25 countries. With activities in some 40 countries, Exxon Mobil's oil and gas fields extend from West Texas to West Africa and from Australia to Alaska (1).

The company operates in deep seas, arctic ice and deserts in some of the world's most remote regions (1). Exxon Mobil is the world's largest nongovernmental marketer of equity natural gas. The company has access to 56 trillion cubic feet of proven reserves and discovered resources of more than 185 trillion cubic feet. It has gas sales in 25 countries and across five continents (4). Oil is Exxon's primary means of revenue.

In the Oil industry there are competitive forces that function in the industry, but none stronger than the barriers of entry. One of the major barriers to entry is finding a supply of petroleum or gas. The cost of research, discovery, and output of gas and petroleum can easily reach the 100's of millions of dollars. Another problem a new company would face, is receiving permission to develop oil in a foreign country. Because of the amount of money involved in oil, countries tend to produce oil on their own, rather than share the profits. The large investment in capital and the political connections needs to enter the industry, make it almost impossible to start a new oil company.

The second force that affects the oil industry is the bargaining power of suppliers. In the industry, suppliers have all the power. There is no international trade commission, so oil can be dispersed at any pace and be sold at what ever price suppliers want. The inelasticity of oil and the constant fear that oil is on the verge of running out, gives suppliers absolute power in the industry. The lack of a viable substitute, lack of buyer power, and the competition in the industry resembling a cartel, both keeps oil prices high and keeps consumers at bay. Competition in the oil industry is separated by about 10 cents here in the US.

The difference between ARC CO, Shell, Mobil, and Chevron, is between 1 and 10 cents. Oil companies don't compete with each other. With gas prices constantly fluctuating towards the $3 mark, there is little room to raise prices. Consumers will not pay 25 cents more for a gallon of gas.

Although Chevron Texaco and Exxon Mobil make have a slight difference in price at the pump, the will not try to do anything to rock the boat. Chevron Texaco, or Texaco Shell, is the leading competitor to Exxon Mobil. Texaco is in the same areas of business as Exxon. Their petroleum products and lubricants are sold in the same markets, stores, and in many cases opposite street corners from each other. The two companies are very similar, but Exxon's recent petroleum deals in the Middle East and Africa have allowed its stock price to jump ahead for the time being (1).

In the industry, the two companies mainly compete for the ability to negotiate for new production. The competition is not made at the pump or at the local auto store. It seems that it's more important to control oil than it is to sell it quickly. Because oil has so much value and power in the world, the industry is made of semi-friendly companies. Surviving and making as much profit as possible, is more important than trying to put people out of business. Exxon's competitive advantage lies in its vast global network of business.

They do business in 40 countries around the world. It is estimated that Exxon has 22 billion barrels of crude oil in its possession (4). This is far more than any other nongovernmental company. Exxon's ability to create production in foreign countries is the trait that allows them to stay ahead of the competition.

Exxon is currently working deals in West Africa, Qatar, the Caspian, and Russia (1). Overall they hope to have 30 new projects in the next 3 years. The amount of oil Exxon possesses will allow it to out last the competition. With the exception of new oil wells being discovered, Exxon will remain in business much longer and more successfully than the competition. As long as oil is the primary source of fuel in the world, Exxon will be able to keep control of the nongovernmental market.

Exxon is in very good financial shape. Net income in the company went up over $4 billion dollars from 2003 to 2004 (6). Their stock price has also risen from around $40 to $60 during the same period (6). Despite fear around the world that oil prices will hit $80 dollars in the coming months and year, Exxon has continued to show large profit margins. Financially, Exxon is great shape. They make such incredible profits that in 2003, they were able to spend $12 billion on exploration and production of new oil (1).

Taking into account that Exxon earned $14 billion had a return on capital of 30%, it seems the oil industry, and especially Exxon will continue hear rumors or price fixing and collusion (4). The future of Exxon lies in the future of oil as the main source of energy in the world. Exxon controls the largest share of oil of any company, but it is insignificant compared to the growing demand on oil supplies. Exxon will continue to be an extremely profitable company right up to the end of the world's oil supply.

Experts estimate world oil supplies will last anywhere from 20 years to 500 years. It is unclear how long Exxon will stay in business, but they do have a designated end date unless they invest in other forms of energy. Many of their products depend on the automotive industry. With the changes in environmental safety and higher gas mileage, Exxon has an advantageous position to profit during the change. In my opinion, Exxon has both the means and political position to not only make huge profits, but help the entire world. The have more than enough money and resources to work on alternative energy sources.

Whether it is hydrogen or electricity, they can reap both the financial and humanity rewards. For Exxon to end with oil would be a tremendous blunder. Exxon is not a company that needs to worry about competition. In the oil industry it is all about raw materials.

The more a company has the more control they have. Exxon also has no need to be concerned with competition because gas is gas. No one is going to pay a dollar more for Exxon's gas than Texaco. Another factor that eliminates competition from the industry is a unwritten theme that gas prices move together. It is rare to see two gas stations on the same block with significance in price. When oil prices go up, gas prices follow.

Bibliography

1. Exxon Mobil's Official Website 2. Texaco Shell's Official Website 3. Yahoo Finance ExxonMobil stock information and financial reports. Works Cited 4. Exxon Mobil's Official Website Products and Services Subsidiaries and info about. 5. Texaco Shell's Official Website 6. Exxon Mobil stock information and financial reports. Historical Stock Prices.