Leading Oil Companies

Leading Oil Companies: Differential Profits
Each bar in the figure measures the difference between the rate of return on equity of these companies and the average rate of return on equity of the Fortune 500 benchmark (with the result expressed as a percent of the Fortune 500 average). The grey bars show years of differential accumulation; that is, years in which the leading oil companies beat the average with a higher rate of return. The black bars show periods of differential decumulation; that is, years in which the leading oil companies trailed the average. For reasons that will become apparent in a moment, these latter periods signal “danger” in the Middle East . Finally, the explosion signs show “energy conflicts” – namely, conflicts that were related, directly or indirectly, to oil.7 The figure exhibits three related patterns, all remarkable in their persistence:
• First, every energy conflict in the Middle East was preceded by a danger zone, in which the oil companies suffered differential decumulation.
• Second, every energy conflict was followed by a period during which the oil companies beat the average.
• And, third, with only one exception in 1996-1997, the oil companies never managed to beat the average without an Energy Conflict first taking place.8
Furthermore, this pattern fits into the larger processes of breadth and depth. The figure points to three distinct periods, each characterized by a different regime of differential accumulation, and each led by a different faction within dominant capital.

Market Rising Expectations
The fundamentals of supply and demand not only led to higher crude oil prices but also fed expectations that world demand will continue to grow faster than supply. The result is escalated price expectations, which show up in futures markets. The anticipated price for 2011 crude oil has moved steadily upward—from around $60 in January 2007 to more than $120 in the first week of May 2008 (Chart 4).