HOUSTON As giant oil companies like Exxon Mobil and ConocoPhillips get set to report what will probably be another round of eye-popping quarterly profits, just where is all that money going?
The companies insist they're trying to find new oil that might help bring down gas prices, but the money they spend on exploration is nothing compared with what they spend on stock buybacks and dividends.
It's good news for shareholders, including mutual funds and retirement plans for millions of Americans, but no help to drivers already making drastic cutbacks to offset the high cost of fuel.
The five biggest international oil companies plowed about 55 percent of the cash they made from their businesses into stock buybacks and dividends last year, up from 30 percent in 2000 and just 1 percent in 1993, according to Rice University's James A. Baker III Institute for Public Policy.
The percentage they spend to find new deposits of fossil fuels has remained flat for years, in the mid-single digits.
The issue has become more sensitive as lawmakers and Americans frustrated by high gas prices have balked at gaudy reports of oil-industry profits. ConocoPhillips is scheduled to kick off the latest round of Big Oil earnings reports Wednesday.
Oil prices are set on the open market, not by the oil industry. But that hasn't stopped public protests, a series of congressional grillings for top oil executives, and a failed attempt by lawmakers to slap Big Oil with a windfall profits tax.
In the first three months of this year, Exxon Mobil Corp., the world's biggest publicly traded oil company, shelled out $8.8 billion on stock buybacks alone, compared with $5.5 billion on exploration and other capital projects.
ConocoPhillips has already told investors that its stock buybacks for April to June of this year will come to about $2.5 billion nine times what it spent on exploration.
Stock buybacks are common throughout corporate America, not just for Big Oil. They shrink the amount of stock on the open market, essentially increasing its value and giving individual shareholders a bigger stake in the company.
But some critics say Big Oil focuses too much on boosting stock prices, in an industry that sometimes ties executive pay to stock price.
And in focusing on buybacks and dividends over exploring for new oil, some critics say, oil companies jeopardize its already dwindling share of world supply.
"If you're not spending your money finding and developing new oil, then there's no new oil," said Amy Myers Jaffe, an energy expert at Rice University who has studied spending patterns of the major oil companies.
Investor-owned companies like Exxon Mobil and Chevron hold less than 10 percent of global oil and gas reserves, way down from past decades. And finding new oil has become harder and more expensive.
State-run oil companies, like those in Saudi Arabia and Venezuela, control about 80 percent of oil reserves and at today's prices, it's not surprising they're keeping a tight grip on what they have. Scarce equipment and hard-to-find labor also pose problems.
No one questions that Big Oil is rolling in cash. The cash the biggest oil companies bring in from running their businesses, or operating cash flow, is four times what it was in the early 1990s.
At ConocoPhillips, the capital spending budget for 2008, which includes exploration and production, is $15.3 billion, more than double the spending of five years ago.
"Could we spend $20 billion or $25 billion? Absolutely," spokesman Gary Russell said. "Could we do it effectively, in a way that provides ultimate value to our shareholders? Probably not."
In Washington, one Democratic proposal would impose a 25 percent tax on "unreasonable" profits of the top five oil companies, which together made more than $120 billion in 2007, and put the money toward a trust fund for investment in alternative energy sources. Republicans say it's a gimmick that won't help at the pump and will discourage domestic oil production.
But Sen. Charles Schumer, D-N.Y., said the fervor for stock buybacks is a clear sign Big Oil isn't interested in new production or alternative energy.
"When you hear that," he said, "it screams out for a windfall profits tax."