What's going on?
Data Oil is the new oil: on Thursday, British-Dutch oil major Royal Dutch Shell, leading French oil company Total and US energy firm ConocoPhillips reported bumper increases in second-quarter profits.
What does this mean?
A major part of these companies’ businesses is finding oil around the world and then getting it out of the ground – a process known as “exploration and production”. Companies pay upfront for equipment and staff to journey to the center of the earth for black gold, hoping to sell it at a profit – so when the oil price rises, as it’s done this year, it’s ka-ching for Total and Conoco.
Shell’s results would’ve been all-singing, all-dancing too, if not for rising costs in other parts of its business – where it turns oil into products like diesel, petrol and jet fuel – leading to lighter overall profits than investors expected.
Why should I care?
For markets: When in doubt, buy back shares.
Conoco’s and Total’s stocks rose by 1% on Thursday, likely thanks to those slick profits being higher than expected. Both companies say they’ll produce even more oil than initially planned – and Total says it’ll spend even less than it thought it would this year. Shell’s stock, on the other hand, fell by 4% – but its investors are in line for a $25 billion payday as the company intends to buy back shares over the next two years. Creating high demand for the stock could help boost its price – but in the US this year, that hasn’t been the case so far.
For you, personally: Higher oil prices hit your pocket.
As oil prices rise, all sorts of companies – from manufacturers to utility providers and airlines – will see their energy and fuel costs increase. As a result, they’ll likely put up the prices they charge (you, the consumer) for their products and services. Utility providers like E.ON have already raised prices and some airlines are planning to do so soon.