{"id":85277,"date":"2025-02-13T06:18:42","date_gmt":"2025-02-13T06:18:42","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/04-08-21-in-defense-of-exxon-lev-end-of-accounting-blog\/"},"modified":"2025-02-13T06:18:42","modified_gmt":"2025-02-13T06:18:42","slug":"04-08-21-in-defense-of-exxon-lev-end-of-accounting-blog","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=85277","title":{"rendered":"[04\/08\/21] In Defense of Exxon \u2013 Lev End Of Accounting Blog"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div>\n<p>A Google search of terms like \u201cExxon\u2019s Problems\u201d generates an almost endless array of articles and podcasts with scary titles like: \u201cExxon Mobile stock is in trouble due to strange management,\u201d \u201cWhere it all went wrong for Exxon,\u201d \u201cGetting booted from the Dow,\u201d \u201c10 Exxon Mobile lawsuites you should know about,\u201d \u201cWhistleblower accuses Exxon of fraudulent behavior,\u201d or \u201cExxon: An oil giant in crisis.\u201d Judging by the business media and investment pundits, Exxon is doomed, done for, unless it makes an immediate and sharp turn away from fossil fuels, and toward becoming an alternative energy (solar, wind) company.<\/p>\n<p>And yet, looking at facts\u2015stock prices\u2015Exxon\u2019s situation isn\u2019t that bleak: The return on Exxon\u2019s stock during the most recent quarter (January-March, 2021) was an eye-popping 36.8%, against a 5.8% for the S&amp;P 500, and compared with 24.6%, 17.0%, and 8.2% quarterly returns for its major peers, Chevron, BP and Royal Dutch Shell.<\/p>\n<p>What\u2019s going on here? Exxon handily beating its major oil &amp; gas competitors? Wasn\u2019t Exxon declared by the media mortally wounded due to its continued commitment to fossil fuels, and refusal to join the herd of oil companies vowing to become green, by shifting to alternative, sustainable energy sources? Apparently there is still a sizable number of investors who believe that as the world economy recovers from Covid and oil prices rise, a solid demand for oil and gas will persist for decades to come, even as alternative energy sources slowly gain transaction. Perhaps in the <em>very long-term<\/em> (2050? Beyond?) demand for oil and gas will vanish, but didn\u2019t the great economist John Maynard Keynes say: \u201cIn the long term we are all dead\u201d? Meanwhile, a company like Exxon committed to oil &amp; gas may fare well during the foreseeable future. And, mind you, a switch to alternative energy isn\u2019t without risk: governments can change their very generous subsidies to wind, solar, and electrical vehicles, technological changes may make yours obsolete, etc.<\/p>\n<p>And it\u2019s not only Exxon\u2019s performance in the last quarter that should give us a pause. Its long-term past performance (2001-2019) wasn\u2019t too shabby either. For the period 2001-20019, Exxon\u2019s annual average return was 6.5% (S&amp;P 500: 6.4%), against 10.8%, 5.1%, and 6.2% for Chevron, BP and Shell, respectively. Last year, 2020, was particularly bad for Exxon\u2019s Stock (down 35.9%, compared with declines of 25.6%, 40.6%, 40.8%, for Chevron, BP, and Shell, respectively). But much of this damage to Exxon\u2019s stock was compensated for in first quarter of 2021.<\/p>\n<p>But underlying it all is a much more important issue. The main usefulness of capital markets lies in their offering wide <em>choices<\/em> for investors to own stakes in companies pursuing <em>different<\/em> bets on the future and operating diverse business models. What\u2019s the use to investors if, say, all telecom companies were to offer the same investment strategies and mix of products to customers? Same with oil companies. Why should all energy producers pursue vigorously alternative energy sources? Isn\u2019t it better for investors to have the choice of at least one major oil company (Exxon) essentially sticking with fossil fuels? (Exxon still invests in environmental projects, like technologies critical to lowering emission.) So, rather than forcing a strategic change on Exxon\u2019s management\u2015as active investors currently try to do\u2015isn\u2019t it much easier for investors who disagree with Exxon\u2019s strategy to switch to more alternative energy committed companies? Why limit the choice of all investors and their ability to diversity risk by forcing a uniform strategy on all energy companies? Such limitation of investors\u2019 choices doesn\u2019t make any economic sense, or even common sense.<\/p>\n<p>Summarizing, though I doubt it, Exxon\u2019s strategy my turn out foolhardy in the future, but it\u2019s a choice that should be left for management and investors to make.<\/p>\n<p><span id=\"wordads-inline-marker\" style=\"display: none;\"\/>\t\t\t<\/p><\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>A Google search of terms like \u201cExxon\u2019s Problems\u201d generates an almost endless array of articles and podcasts with scary titles like: \u201cExxon Mobile stock is in trouble due to strange management,\u201d \u201cWhere it all went wrong for Exxon,\u201d \u201cGetting booted from the Dow,\u201d \u201c10 Exxon Mobile lawsuites you should know about,\u201d \u201cWhistleblower accuses Exxon of [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":85278,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11759],"tags":[12843,3767,14431,42067,11214],"dealstore":[],"offerexpiration":[],"class_list":["post-85277","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting","tag-accounting","tag-blog","tag-defense","tag-exxon","tag-lev"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - 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