Christophe de Margerie, Chief Executive of France’s Total, warned that if crude does continue to rise, upward trends on taxes and production costs could worsen. "Coupled with an increasing reliance on lower-margin natural gas to meet production goals, and on new oilfield contracts that limit the upside from high oil prices, $100/bbl oil could prove a disappointment," according to Reuters.
"Equity markets increasingly run the risk of misinterpreting the value impact of high oil prices," said Citigroup in a research note.
Reuters make that additional point that "profit growth will lag oil prices anyway because natural gas accounts for a large and growing part of output — around 30-40 percent for the companies named above — and gas prices have not risen as much as oil."
In other words, buying Exxon (XOM) on $100 crude may not be a bonaza.
Douglas A. McIntyre
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