Natalie Pace: Trouble for Exxon

My heart goes out to the Arkansas residents affected by the oil spill of Good Friday. As you probably know by now, a pipeline leak occurred in Mayflower, Ark., on Good Friday, March 29, 2013. The cause of the breach is still under investigation, according to a press release by ExxonMobil. At least 22 homes continue to be affected and about 50 claims have already been filed.

The EPA has categorized this sad event as a "major spill," meaning that more than 250 barrels were released. According to Exxon, 12,000 barrels of "oil and water" have already been recovered. That puts the cost of the oil in the low millions, plus the cost of the claims and fines and repairs on top of that.

For a company that earns $482 billion a year in revenues, the monetary "cost" of this spill could be just a drop in the bucket, particularly if Exxon avoids fines and litigation. (The cost of the people affected and the environment is another matter.)

Although we want to blame oil companies for these events, that's like blaming the pusher for our oil addiction. They are only supplying the oil Americans demand to fuel our lives. As I indicated in my article "Should Greenies Own Oil?" while we continue to drive gas-guzzlers, it's a better idea to source our own fuel locally than buy from Saudi Oil. For this reason, I am hopeful that each of us will take the Bike Power Community Challenge during the week of April 15-19, 2013. Garage the car for the week and figure out non-oil ways to get places. If an entire week is impossible, how about one or two days? Get tips on 31 other ways we can make our lives a little greener in my article, "31 Green Tips." Please share the insights you gain from this experience in the comments below and on the Bike Power Facebook page.

For investors worried about the impact of the spill on Exxon's share price, the truth is that there are macro market trends that could impact the price even more than the oil spill. Exxon is trading at an annual high, largely because the Dow has posted an 11 percent gain already in 2013. However, oil prices are far lower than they were in 2011. As a result, Exxon's revenues are trending lower this year, with fourth quarter's earnings 5 percent lower than the year prior. Consensus insider selling was occurring at ExxonMobil even before the spill.

U.S. crude oil production is at a 17-year high, at 6,467 thousand barrels per day. Oil imports are down, from $421 billion in 2011 to $415 billion in 2012, thanks largely to ending the War in Iraq and having a pullout plan for Afghanistan. (Wars are fought with foreign oil -- close to the "theater.") The increase in supply and pullback in domestic demand is helping to keep oil prices under $100/barrel.

Exxon's first quarter earnings call will be Thursday, April 25, 2013 at 10:00 a.m. CST.

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Follow Natalie Pace on Twitter: www.twitter.com/NataliePace

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Source: http://www.huffingtonpost.com/natalie-pace/trouble-for-exxon_b_3002799.html

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