The oil business rarely has been so good. Crude prices closed at a new high last week, and gasoline-refining profits are more than double what they were a few years ago.

It was no surprise, then, that last week’s earnings reports showed that the cash had been rolling in at Exxon Mobil Corp., Chevron Corp. and overseas giants BP and Royal Dutch Shell. To some, the surprise is where that cash has been going. With the world thirsty for more oil and cleaner fuels, Exxon Mobil and other oil companies have been spending billions of dollars to buy back their shares.

The top four oil companies booked a combined $57.5 billion in profits in the first half of the year and devoted $22.9 billion – 40 percent of their total earnings – to share repurchasing.

‘Minuscule investments’

Industry critics have pounced on the buybacks as proof that Big Oil isn’t interested in upsetting the lucrative status quo by greatly expanding production or refining capacity or in exploring alternative energy projects.

Oil companies are “making minuscule investments in new clean energy while making major investments in buying back their stock, which only enriches the top CEOs and shareholders,” said Daniel J. Weiss, a senior fellow and director of climate strategy at the Center for American Progress in Washington.

John Felmy, chief economist for the American Petroleum Institute, a trade group, said he was “stunned at the criticism” and called it “utter nonsense.”

“The critics seem to completely miss the point that the companies are not owned by space aliens,” he said. “Joe and Martha own these companies” and buybacks are what companies do “to stimulate the value of the shares of the owners.”

Share buybacks are popular because they lift a stock’s price. When companies take a chunk of their shares out of circulation, the ownership pool shrinks and the shares still outstanding become more valuable. What’s more, a smaller number of shares on the market allows a company to boast higher per-share earnings even if its profit is flat.

That may explain why buybacks across all industries hit a record-high $117.7 billion in the first quarter of 2007, with nearly 23 percent of the action coming from Microsoft Corp. and other information technology companies. Share repurchases by energy companies amounted to less than 11 percent of the total among S&P 500 companies.

Buyback bonanza

Exxon Mobil, the biggest player in the oil buyback binge, bought $14 billion worth of its shares during the first six months of the year – paying $2.8 billion in dividends – while investing $9.3 billion in capital equipment and exploration projects.

But in another example, San Ramon, Calif.-based Chevron bought a combined $10 billion worth of its stock in 2005 and 2006 and spent more than double that on capital projects in those years. Last week, Chevron said it would finish another $5 billion buyback by the end of September and expected the board to approve more repurchases this year.

For its part, Exxon Mobil has defended its buyback strategy. A spokesman told reporters when the company’s earnings were released last week that it had invested more than it had earned over the last 20 years, putting $280 billion toward capital investments while recording $267 billion in profits.

Critics such as Weiss aren’t mollified. Weiss helped write a report at the Center for American Progress that compared stock buyback spending with investments in renewable fuels such as ethanol and biodiesel. The report said that despite being “awash in cash,” Exxon Mobil, Shell, BP, Chevron and ConocoPhillips had spent what the report said was a paltry $2.6 billion on renewable energy projects from 1999 through 2006.

In Congress, the industry is under pressure, with some lawmakers pushing for a windfall profits tax on oil companies and others in favor of rolling back tax breaks, arguing that the companies are enriching shareholders instead of pushing production.