HOUSTON - The giant oil companies such as Exxon Mobil and Conoco Phillips are preparing to report their second-quarter profits, which likely will be eye-popping in their size.

Just where is all that money going?

The companies insist they're trying to find new oil that might help bring down gas prices, but the money they spend on exploration is small compared with what they spend on stock buybacks and dividends.

It's good news for shareholders, including mutual funds and retirement plans for millions of Americans, but no help to motorists already making drastic cutbacks to offset the high cost of fuel.

In 2007, the five biggest international oil companies plowed about 55 percent of their profit into share repurchases and dividends, up from 30 percent in 2000 and just 1 percent in 1993, according to Rice University's James A. Baker III Institute for Public Policy.

The percentage of profit they spend to find new deposits of fossil fuels has remained flat for years - in the mid-single digits.

The issue has become more sensitive as lawmakers and other Americans frustrated by high gas prices have balked at gaudy reports of oil-industry profit. Conoco Phillips is scheduled to kick off the latest round of Big Oil earnings reports tomorrow.

Oil prices are set on the open market, not by the oil industry. But that hasn't stopped public protests, a series of congressional grillings for top oil executives, and a failed attempt by lawmakers to slap Big Oil with a windfall-profits tax.

In the first three months of this year, Exxon Mobil Corp., the world's biggest publicly traded oil company, shelled out $8.8 billion on stock buybacks alone, compared with $5.5 billion on exploration and other capital projects.

Conoco Phillips already has told investors its stock buybacks for the April to June quarter of this year came to about $2.5 billion - nine times what it spent on oil exploration.

Stock buybacks are common throughout corporate America, not just for Big Oil. They shrink the amount of stock on the open market, essentially increasing its value and giving individual shareholders a bigger stake in the company.

But some critics say Big Oil focuses too much on boosting stock prices, in an industry that sometimes ties executive pay to stock price.

And in focusing on buybacks and dividends over exploring for new oil, some critics say, oil companies jeopardize an already dwindling share of world supply.

"If you're not spending your money finding and developing new oil, then there's no new oil," said Amy Myers Jaffe, an energy expert at Rice University, who has studied spending patterns of the major oil companies.

Investor-owned companies such as Exxon Mobil and Chevron hold less than 10 percent of global oil and gas reserves, down sharply in recent decades. And finding new oil has become harder and more expensive.

So what's Big Oil to do?

The companies say they are doing what they can to find more fossil fuels, but the easy oil is gone. Exploring these days may mean expensive projects in thousands of feet of water in the Gulf of Mexico or costly ventures pulling petroleum from Canada's vast oil-sands deposits.

Oil Gusher

Tables show changes

in annual dividends per share paid by three

big U.S. oil companies since 2004.

Chevron

2004 $1.53

2005 1.75

2006 2.01

2007 2.26

2008* 2.53

Conoco Phillips

2004 $0.895

2005 1.18

2006 1.44

2007 1.64

2008* 1.88

Exxon Mobil

2004 $1.06

2005 1.14

2006 1.28

2007 1.37

2008* 1.55

*Based on current quarterly rate.

SOURCE: Bloomberg News

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