How styles change. There was a time when successful companies hired public relations experts to tell the world about their soaring profits and their brilliant prospects. Now companies, particularly those in the petroleum business, want you to understand that their earnings are at best modest when viewed in proper perspective, that their outlook is uncertain, and that their profits are hardly increasing faster than those of whichever newspaper most recently raised the question. We are delighted to publish a letter today from Herbert Schmertz of Mobil Oil.
In its latest annual report, Mobil says that its energy earnings per gallon have tripled over the past four years, from 2.1 cents in 1977 to 6.3 cents in 1981. Its net income more than doubled over those four years. As for return on shareholders' equity, to which Mr. Schmertz refers, that's a ratio between two numbers--income and equity. The shareholders' equity in Mobil rose from $8.4 billion in 1977 to $14.7 billion in 1981. The comparison between Mobil's position and The Washington Post's is one that we'll leave to others.
While Mobil has been lucky in recent years, it has compounded that luck by aggressive and skillful management. We mention oil profits here from time to time, not to denounce them, but to draw attention to a deep and, we believe, historic change overtaking the structure of the American economy.
The past decade has dealt harshly with several major industries--steel, cars and rubber are familiar examples--that are sliding to less important positions in the American economy. Conversely, there are industries that have moved up to more important, and prosperous, positions. Some of them are in the broad area of information and communications. But the most spectacular case is the oil business. Ten years ago, in Fortune Magazine's annual list of American industrial corporations, only one oil company, Exxon, was among the largest five. Fortune has just published its list for 1981, and now four out of the largest five are oil companies; Mobil ranks second, ahead of General Motors. Of the 20 biggest industrials, 12 are oil companies--or 13, if you count Dupont with its large new oil subsidiary. Big is not bad, as the Reagan administration likes to say. But big makes a difference. This enormous shift of wealth among American industries is profoundly significant and, apparently, permanent.