If you think Shell's profits are obscene just wait until they stop investing for more oil and gas

Just a little note really. Something about how companies and financial markets work. Something that might be of interest to Greenpeace and the like complaining about “obscene” profits at oil and gas companies like Shell.

If they stop investing in new oil and gas projects their profits will go up.

Which does nicely illuminate this complaint:

Shell has reported profits of just over $5bn (£3.9bn) for the second quarter of the year, prompting outrage among campaigners who called the figures obscene, and a protest at the company’s London headquarters.

Obscenity is one of those undefinables and is really left to the opinion of those who claim to know it when they see it.

But we’d just like to point out that imagine what would happen if Shell did in fact stop exploring for, planning for, investing for, more oil and gas production? Their profits would soar of curse. They’d no longer have to carry the costs of exploring for, planning for, investing for, more oil and gas production. Also, they could fire everyone not specifically producing right now.

Certainly, profits 20 and 40 years out would decline because if there’s no investing now then there won’t be production then. But the effect of not investing now would be that all the returns of the past 20 to 40 years of investing would be available to be paid out to shareholders right now. Instead of some being retained to invest for that future.

Stop spending on the future and there’s more profit now. Profits would truly soar. And then what would Greenpeace have to complain about?