Exxon Mobil Corporation

Exxon Mobil is the world's most valuable corporation. With more than $40 billion a year in profits, it is also the most profitable business in history. It would probably surprise most casual observers that Exxon Mobil owes almost all of the attention paid to the company to its tremendous scale. With annual revenues surpassing $400 billion, the company's sub-10% profit margin is hardly awe-inspiring. Even within the context of the global oil business, Exxon Mobil is just a bit player. The company contributes just 3% of the world's oil and 2% of its total energy. Several state petroleum producers are significantly larger than Exxon Mobil. But Exxon Mobil stands alone as the largest American multi-national.

Consequently, Exxon Mobil takes extreme heat in the press for its shady foreign business practices and dodgy human rights record. The Exxon Valdez oil spill still makes headlines years after the US Supreme Court left the company on the hook for $5 billion in punitive damages. Even Exxon Mobil's funding of global warming skeptics needs to be seen in light of the companies American heritage. The state oil monopolies in Saudi Arabia or Venezuela don't need to spend money to alter public opinion, Russia's Gazprom just cuts right through government red tape to open huge new projects. In contrast, Exxon Mobil must fight aggressively just to stay in business.

Yet Exxon Mobil enjoys countervailing advantages that far outweigh these disadvantages. The legal framework in the United States may make doing business difficult, but it also makes it virtually impossible to expropriate profits. For all the concern about a windfall profits tax, Exxon Mobil faces no threat even close to the danger it faces doing business in numerous autocratic nations around the world. Russia and Venezuela simply seize foreign assets at will. At least in the United States, property rights are accorded much more protection.

Exxon Mobil is the world's largest publicly traded oil company. The entire energy sector has been experiencing tremendous growth in recent years and the same regulatory structure that once nearly strangled the industry has now given rise to enormous barriers to increased production. In an ironic twist of fate, current production is now immensely more profitable without any significant increase in the cost of doing business. And regulatory hurdles to new production have made the industry completely impregnable to new competition.

Exxon Mobil is a risky energy play. If any company is going to be held back due to political pressure, that company will surely be Exxon Mobil. Nonetheless, the company stands to profit more than any other company on the planet if current trends continue. Stock symbol XOM is a definite buy. Any investments of fresh capital should be balanced by other investments without significant energy exposure.

Russia's Floating Nuclear Power Plants

Reuters reports that Russia has begun construction of the world's first floating nuclear power plant. The idea is to create a 70 megawatt nuclear reactor that literally floats in the ocean as it produces power and desalinates seawater.

Russian officials are already talking about the potential for export. They say their idea is a good way to power much of the third world without spreading nuclear knowledge.

Anti-Nuclear forces are alarmed. If Russia turns nuclear power into a commodity like commercial airplanes, the potential for accidents like Chernobyl dramatically increases. The notion of a floating reactor is exceedingly alarming in particular. The spectre of a nuclear power plant being hit by an iceberg or capsizing in a fierce storm has been totally unknown until now.

The environmental record of nuclear reactors at sea is surprisingly good. The United States and Russia both employed fleets of nuclear powered submarines without incident. In fact, the Russian sub Kursk suffered an explosion and sank without causing appreciable damage to its reactor. Specialists suggest that the reactor could have been immediately restarted after the disaster.

Nuclear powered icebreakers have also been forging northern sea lanes for years without iceberg troubles.

But the Russian government is likely to move ahead anyway. Look for heavily government influenced companies like Gazprom to be peddling floating nuclear power stations to India and other countries within just a few years.

Will the World's Most Valuable Company be a Wholly Owned Subsidiary of The Kremlin?

General Electric and Exxon Mobil are likely to fend off any hostile bids out of Russia, but according to the IHT, Gazprom plans to be worth more than $1 trillion within a decade. It might seem unlikely for one Russian company to exceed the size of Russia's entire economy for 2006, but Gazprom has the inside track to success.

When Putin took power just a few short years ago, Gazprom was worth only $25 billion and suffered from severe mismanagement. The management of the company didn't get any better, and may in fact have gotten worse due to political meddling in company affairs. But the company achieved a market value of $250 billion because Putin's government essentially outlawed doing business with anyone else in Russia. Shell and other big oil companies played ball because they let the potential of Russia's massive energy reserves blind them, and Gazprom prospered.

It's probably no longer possible to strong arm the West into any more favorable terms of trade, at least over the short term. But Gazprom still has significant room to grow. Gazprom's proven oil reserves in the ground are valued by financial markets at about $5.50 a barrel. In contrast, Exxon Mobil's reserves in the ground are valued at around $20 a barrel. The reason for the big difference is that investors fear the Kremlin will just seize the 50% of the company it does not already own.

If Putin and his eventual successor convince financial markets that Russia won't nationalize the company, it would be a trivial accomplishment for Gazprom to become the world's most valuable company. And even if Putin just outright nationalizes the company, it would still be true that the underlying assets represent the most valuable company on earth.

All those "No More Blood for Oil" folks should take a good long look at Russia. Exxon Mobil is hardly the most innocent company in America, but Gazprom makes America's oil lobby look like a bunch of sissies.