Making More With Oil

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What's going on?

ExxonMobil, Americas biggest oil producer, said on Monday that it is spending $20 billion over a ten year period to expand its presence on the US Gulf Coast.

What does this mean?

Interestingly, the investment is going towards chemical and refining facilities, not increased oil production. These are facilities that turn crude oil into gasoline for cars and planes and produce key components for plastics (yes, oil is used to make plastics). Exxon said that the investments began in 2013 and will continue through 2022. In total, its expected to directly create 45,000 relatively high paying jobs in the Gulf Coast region (tweet this) and many more indirect jobs (e.g. more restaurant workers to support more refinery workers).

Why should I care?

The bigger picture: The US oil boom has other economic benefits beyond oil production.

The boom in US oil production over the past fifteen years or so has helped a huge oil-based manufacturing industry grow, e.g. for plastics components (that makes sense: since oil is drilled nearby, its easier to produce products from that oil). This is one reason why the oil price has become so important for the overall US economy. Its worth noting that the products that Exxon produces in the Gulf are targeted mainly towards export markets in Asia and elsewhere so any political plans that threaten trade could also threaten the viability of Exxons investment.


For the markets: Oil companies dont just drill oil.

While it is easy to conceptualize oil companies as simply drillers of oil, virtually all of the major oil companies are involved in other significant operations like refining crude oil into gasoline. The diversification of that business model makes the major oil companies less dependent directly on the oil price (like a smaller oil producer might be) and a somewhat steadier, more balanced investment.

Originally posted as part of the Finimize daily email.

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