NEW YORK — The swift rise in oil prices should produce a windfall for the petroleum industry in the first quarter and set up its best year since 2008.
ConocoPhillips got the ball rolling Wednesday by reporting its first-quarter earnings rose 43 percent, from $2.1 billion to $3 billion, because of a jump in oil prices.
With Exxon Mobil and Chevron also reporting earnings this week, the three big oil companies are expected to report a combined $18.2 billion in first-quarter earnings, according to FactSet. That's a 40 percent increase from a year ago and just short of the $20.2 billion they earned in the first three months of 2008.
Bigger profits will certainly benefit oil company shareholders, including millions of people owning 401(k)s and pension plans. But for businesses and consumers, the increased cost of petroleum means rising prices for unleaded gas and diesel, as well as food, airline fares, shipping costs and other things.
This has stoked frustrations about the sluggish pace of oil exploration in the United States while adding weight to efforts by President Barack Obama to end the $4 billion in subsidies that taxpayers give to oil companies every year.
While oil companies enjoy big profits, "you're paying near-record prices at the pump," Obama said in his weekly radio address Saturday. Last week he appointed a task force to look into manipulation of oil and gas prices.
In 2008, Exxon established quarterly and annual profit records for a public company — $14.83 billion in the third quarter and $45.22 billion for the year. Wall Street is calling for the company to make $40.71 billion this year, about $1 billion more than it made in 2007. Analysts currently expect Chevron to top its 2008 profit of $23.93 billion by about $840 million.
Oil hit a high of $147 per barrel in 2008. It settled Wednesday at $112.76, up about 23 percent for the year.
Experts say oil is rising for reasons beyond the companies' control. Reports show that global oil consumption rose to 88.02 million barrels per day in the first quarter, above pre-recession levels. That, and the loss of production in Libya, is making global supplies tighter.
A weak U.S. dollar is also part of the problem. The Federal Reserve has kept interest rates low while pumping billions of dollars into the economy, effectively weakening the dollar vs. other major currencies. Oil, which is traded in dollars, tends to rise as a falling dollar makes the oil cheaper for investors holding foreign currencies.
John Felmy. chief economist for the American Petroleum Institute, the chief lobbying group for the oil industry, said "China and other developing countries," are also contributing to higher oil prices.