Big Oil’s Profits May Decline

Big oil companies’ profits may be reduced in coming years as more countries that produce oil demand higher shares of the revenues, the Wall Street Journal reported Tuesday.

Some new deals essentially treat big Western oil firms like service companies, leaving little room for the big profits seen in the past two years as prices have soared, the Journal said in a front-page story.

In the past, oil companies generated profits by taking risks in searching for and extracting new fields of oil, but today, oil-producing countries are increasingly under the control of state-owned companies, and oil companies have to accept less generous terms to drill the reserves, the Journal reported.

Severe supply disruptions could send oil to more than $100 a barrel, the paper said. That compares with the $77.03 closing-price record set on the New York Mercantile Exchange last July.

Oil futures dropped $2.77 to close at $61.51 a barrel on Monday, on potentially strong inventories, Bloomberg reported.