HOUSTON, TX — Another quarter and more record U.S. profits for
Exxon Mobil. Yet even as earnings surged for major producers, there
were signs that Big Oil’s run may be coming to an end.

Need
proof? Shares of Exxon Mobil, the world’s largest publicly traded oil
company, floundered even as it reported third quarter income of $14.83
billion, shattering the U.S. record.

The Irving, Texas-based
company has now reported back-to-back record quarters, following its
$11.68 billion in profits for the April-June period.

The end of
the third quarter coincided with a dramatic plunge in crude oil prices,
but Exxon Mobil’s revenue still climbed 35 percent to $137.7 billion,
slightly higher than the gross domestic product of Algeria. When the
third quarter ended on Sept. 30, benchmark crude prices were still
about $100 a barrel, down 30 percent from summer highs. By the close of
trading Thursday, a barrel of oil cost $65.96.

"Our integrated
business portfolio, strong operational performance and financial
discipline continued to allow us to capture the benefits of the
commodity price environment," Exxon Mobil investor relations chief
David Rosenthal said on a call with analysts. "Despite recent
volatility in the financial, commodity and credit markets, the
fundamentals of Exxon Mobil’s business remain strong."

But investors appear to be growing increasingly anxious about its core business — finding and producing oil and natural gas.

The
company, which produces 3 percent of the world’s oil, said overall
output fell 8 percent in the most-recent period — a disturbing trend in
previous quarters and a blow for a corporation that generates more than
two-thirds of its earnings from oil and gas production.

Part of
the decline was due to disruptions caused by hurricanes Gustav and Ike
this summer. Still, Exxon Mobil’s average daily production of 3.6
million barrels of oil equivalent in the quarter was its lowest since
Exxon merged with Mobil in 1999.

The company says it’s spending
heavily on new projects, as evidenced by a 26 percent increase in
capital and exploration spending that totaled $6.9 billion in the third
quarter.

"I think it’s a big problem for them," said Brian
Youngberg, an analyst with financial services firm Edward Jones.
"Everyone expected huge earnings, but future production remains cloudy."

But this year, the profits have rolled in for oil companies everywhere.

Royal
Dutch Shell PLC, Europe’s largest oil company, said Thursday its
third-quarter net profit jumped 22 percent from a year ago. Marathon
Oil said its third-quarter profit more than doubled.

In the past week or so, BP reported an 83 percent surge in profit and ConocoPhillips said its income jumped 41 percent.

The future, however, is less promising.

An
economic malaise has spread across the globe, driving crude prices down
sharply and raising questions about energy demand at least into 2009.
In the bigger picture, because state-run oil companies like those in
Saudi Arabia and Venezuela control about 80 percent of known global oil
reserves, giants like Exxon and Shell are finding new, substantial
deposits of crude and natural gas increasingly sparse.

In a
report Thursday, UBS Investment Research lowered its oil price forecast
for next year by 43 percent to an average of $60 a barrel. "Oil markets
seem to be pricing for a deep and long recession that will derail
oil-demand growth this year and next," UBS noted.

Investors are worried, too.

Exxon shares traded mostly lower Thursday before closing up 40 cents at $75.05. Their 52-week range is $56.51 to $96.12.

But
a drop in oil prices may not be all bad for big oil companies — or
consumers, who are paying more than $1 less for a gallon of gas than
they were just one month ago.

"I don’t think any of these
companies like prices being above $100," Youngberg said. "It creates
bad press and costs go up. I think what’s more important over time is
getting some relative stability in commodity prices."

If one-time
gains like bankruptcy settlements and spinoffs are stripped away from
other companies, Exxon Mobil owns the record for the top 10
most-profitable quarters for a U.S. company, as well as the largest
annual profit.

Both presidential tickets brought up Exxon profits
Thursday, each charging the other with supporting policies that provide
big oil companies with tax breaks. Top executives of the major oil
companies have been hauled before Congress several times this year,
where they were grilled by lawmakers about how profits are spent.

The
American Petroleum Institute, the industry’s trade association, has
said Big Oil earnings are not out of line compared with earnings in
other industrial sectors. For the second quarter of this year, it says,
oil and natural gas companies earned 6.8 cents for every dollar of
sales — only slightly above the 6.5 percent profit margin for all U.S.
manufactures.

Exxon Mobil said its profit margin was 10.8 percent
— or 10.8 cents on every dollar of revenue in the third quarter. The
amount includes proceeds from the $1.62 billion sale of a natural gas
transportation business in Germany.

Still, the organization
Consumer Watchdog on Thursday named Exxon in its campaign for more
regulation of energy trading markets. The group has said congressional
moves for more market oversight have been blocked by the oil industry’s
powerful lobbying efforts.

"Consumers got credit card debt and
empty wallets, while Exxon got double-digit billions," said Judy Dugan,
Consumer Watchdog’s research director. "Citizens deserve to be mad.
They should demand that government get back in the business of
protecting them from corporate greed."