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Quick Hits: Does Big Oil Get a Bad Rap?


Profit inquiries miss the mark.

The easy trade, so to speak, is to harangue big oil for its big profits. But there's another side to every bet.

Executives from Exxon Mobil (XOM), Chevron (CVX), ConocoPhillips (COP) Royal Dutch Shell and BP Ltd. took the stand yesterday in defense of $123 billion in 2007 net income. Opportunistic politicians pried into the rationale for the $18 billion in tax breaks the government allots these highly profitable firms.

Conventional wisdom sees Americans paying record gas prices while politically connected fat cats soak up our hard earned money and cries fowl. Conventional wisdom rarely sees the other side of the story.

With risk comes reward. Few industries are more wrought with risk than that of crude exploration and extraction. Oil companies must plunge into war zones (Africa), dictatorships (Venezuela) and miles beneath turbulent waters (Caspian Sea) to do business. Shouldn't this be a financially rewarding endeavor?

The more important question is why Americans ignore environmental destruction a few thousand miles away for the right to drive a Hummer (GM) to the grocery store. Crude exploration hurts local economies and communities more than it helps, despite industry claims to the contrary. Big oil needs reform, but concerns over a few rich CEOs should be secondary to the devastation caused by our thirst for fuel.

For more on oil prices, check out Hoofy & Boo's always astute report.

No positions in stocks mentioned.

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