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Monday, 31 December, 2001, 10:16 GMT
Tide turns against the oil firms
by BBC News Online's Briony Hale
It may not seem entirely obvious that 2001 has been a terrible year for oil firms.
It's easier to remember that, during the first half of the year, the oil giants were raking in profits at the rate of about a million pounds an hour.
Nevertheless, 2001 has seen those mighty oil giants grow increasingly powerless - even helpless - in the face of steadily sliding oil prices.
It was the year when not even the combination of a bitter war, ongoing unrest in the Middle East and supply slashed to the bone could stop the cost of crude dropping below $20 per barrel.
And it was the year when the oil cartel Opec - once accused of holding the West to ransom - itself admitted that it too had become powerless to stop the downward trend.
Down, down, down
Oil companies are utterly dependent on the price of crude oil in the international marketplace.
During the third quarter of the year, ExxonMobil's profits fell 23%, BP's profits were 20% down and Shell's were 17% lower.
It was already widely known that the average price of crude oil had fallen about 20% during that period, and that profits would therefore follow suit.
A long way to fall
Admittedly, this year's fall in the oil price has occurred from a strong starting point.
The average price of London crude oil during 2001 is going to come in at about $25 per barrel.
In 1998, the average oil price was less than half that amount.
But 1998 was perceived as a 'disaster year' and triggered a concerted effort from both oil companies and the oil cartel Opec.
Those efforts succeeded to drag the oil price back from a low of $9.64 per barrel at the end of 1998 to a high of $26 per barrel in December 1999.
The oil cartel sprang back into action, and stuck by its promise to reduce supply.
Meanwhile, the oil companies were determined to boost profits by cutting costs, and embarked on a rapid and intense period of consolidation.
This time round, the slide has proved much more difficult to halt.
Prices have fallen from a high of $29.91 to a low of $17.68 during the course of the year, before sturggling to end the year at about $20 per barrel.
When Opec implements its promised 1.5 million barrels per day in January, it will have reduced total exports by one fifth during the course of the year.
And yet prices have still failed to recover the strength seen the previous year.
The cartel's leaders have themselves admitted that they no longer possess the power to control prices, and have called on support from non-member countries - Russia, Mexico and Norway in particular.
So far, they have won that support. But analysts are sceptical as to whether the promised cuts will materialise.
And many Opec states have already said that they are no longer prepared to cut their own exports, if other countries merrily pump away and meet the demand thus created in the marketplace.
What makes matters worse is that the global economic slowdown has triggered a slump in demand which has met over-supply in the oil market head on.
And even war - which normally sends prices through the roof due to the additional need for jet fuel - could only create a temporary surge.
While the shock of the devastating terrorist attacks caused the oil price to briefly flirt with $30 per barrel, prices had fallen way back to $22 per barrel within just ten trading days.
Military orders of jet fuel have soared as the US pummels Afghanistan, but the tragic terrorist attacks simultaneously caused a slump in the number of passenger jets in the skies.
At the beginning of the year the former Saudi oil minister and internationally renown price-hawk, Sheikh Ahmad Zaki Yamani, warned that the long-term outlook for oil producing countries was "disturbing".
Since then, a whole host of analysts have jumped in and predicted a return to the dire levels of $10 a barrel, the point at which it is hardly worth the cost of pumping the oil out of the ground.
If those gloomy predictions come true there is little the oil companies can do to help themselves this time round.
There's hardly any consolidation left to happen.
The name BP Amoco Arco Burmah Castrol shows the extent of one oil giant's merger activity, before it wisely chose to rename itself BP.
And a host of other unwieldy names such as ExxonMobil and TotalFinaElf are a clear reminder that the arena is already consolidated out.
Meanwhile, Opec has cut supply repeatedly but eventually admitted the oil price is being controlled by countries which are not members of the cartel.
It's only hope is in politely persuading other countries to mirror its own behaviour, the success of which will be played out during 2002.
The millennium year will be remembered as the year when oil firms raked in some of the biggest profits in corporate history.
2001 was the year when, still reaping vast amounts of money, the tide seemed to turn against them.
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