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Monday, July 10, 2006

Most Widely Traded 48 Hour Clock: Exxon And The Search For New Energy

247WallSt. has begun coverage of the 36 most widely traded stocks, eighteen each from the NYSE and the NASDAQ. Most of these stocks trade over 50 million shares a week. This new feature will highlight each of the 36 stocks at least every 48 hours giving investors fresh infomation and perspective on the companies whose shares are most likely to move the broader markets.

Stocks: (XOM)

Over the last several days, as the media has pondered the affect of $3 gasoline on the American economy, the issue of using shale as a source for energy has been raised again. Twenty-five years ago, ExxonMobil and several other oil companies created a $5 billion enterprise in Colorado's Green River Basin to create shale. The cost to separate the oil from the compound was too expensive and the project was shuttered.

Of course, the economics of shale have changed. With higher oil prices and a search for replacement resourece, shale may be viewed as a viable alternative, although it will never replace the falling oil reserves in the US.

OPEC production rose only .6% in June, according to Bloomberg, so the output from the consortium that produces 40% of the world's oil is unlikely to increase near term. Exxon's production Erha oil field was a contributor to the tiny increase, but slow production elsewhere kept overall production flat.

ExxonMobil is faced with the likely rise in it profits due to high oil and gas prices, and criticism, that has increased in the last few days, over $3 gas. Whether the government will step in to tax the profits is a subject mentioned more frequently with each passing month.

ExxonMobil's short-term outlook is probably the stuff that dreams are made of, at least for big companies. Billionaire commodity pundit Jim Rogers continues to insist, with support from other experts, that oil prices will top $100 soon, and will stay there. The Wall Street Journal's lead story covered a new process being used in Saudi Arabia to make the recovery of heavy crude more economically attractive.

Reviewing news reports from the last two days, the number of items on gas prices slowing the economy by everything from hurting the profits or truckers to cutting traffic at WalMart has increased significantly.

ExxonMobil and its fellow big oil companies may have to show something beyond huge profits for the second quarter. To avoid a riot over their massive margins, they may have to show that investments in new resources like shale are not just a pipe dream from 25 year past.

Douglas A. McIntyre can be reached at He does not own securities in companies he writes about.

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