Why the energy crisis is keeping oil companies cold

One of the main causes of the energy crisis: Shell and BP in the UK, Exxon Mobil and Chevron in the USA, Total in France – thanks to the sharp rise in oil and gas prices as a result of the war with Ukraine, the “Big Five” heavyweights in the Industry are making high profits.

Many people are angered that the oil and raw materials sector is swimming in money in times of high inflation and rising interest rates, as well as global warming and climate crises. Critics demand higher investments from companies in subsidized projects and renewable energies.

Exxon, the largest U.S. oil company, posted a net profit of about $56 billion alone in 2022—about 140 percent more than the previous year and the highest result in the company’s more than 140-year history.

Experts estimate that Exxon, Chevron, BP, Shell and Total made a combined profit of about $190 billion last year.

The decisive factor was the increase in energy prices. The price shock from Russia’s war against Ukraine made crude oil more expensive in the spring than it had been in more than a decade. A barrel of North Sea Brent (159 liters) sometimes costs almost $140. It has since dropped again. The last barrel was around $80.

German economist Isabella Weber of the University of Massachusetts explained that high prices are not the only reason for megaprofits. Low production costs are also an important factor.

In October, US President Joe Biden described companies like Exxon as “war profiteers” who failed to meet their social responsibilities. Biden announced that he will examine options to hold the oil industry accountable.

In September, the EU decided to impose a so-called excess profit tax on extraordinary profits made by energy companies. The money will be used to finance aid for citizens and companies.

Individual companies often produce too little to have a major impact on global oil supply. First of all, the oil alliance Opec+ has pricing power. The influence of the cartel, led by major producer Saudi Arabia and expanded in 2016 to include ten non-OPEC countries, including Russia, is substantial, with a global market share of around 40 percent.

A common accusation is that companies don’t spend more to provide more energy during times of scarcity and high prices.

Chevron recently announced that it will distribute large-scale dividends to its shareholders. Shares worth $75 billion will be repurchased as of April. In addition, Chevron is willing to pay shareholders a quarterly dividend of $1.51 per share—six percent more than in the previous three months.

Chevron’s earnings payouts took a leap given volume, but the rest of the industry isn’t neglecting their shareholders either.

According to the American Petroleum Institute lobby group, the oil and gas industry is a powerful driver of the U.S. economy – millions of households benefit from it directly through stock ownership, shares in mutual funds, retirement plans or other financial products.

According to economist Weber, the real winners of the oil boom are primarily wealthy investors, Wall Street financiers and wealth managers. The losers are poor people, companies and governments suffering from high energy prices.