Windfall tax27 Oct 2022 09:12
Despite weaker oil prices during the third quarter, the oil industry is still booking strong financial results. According to some, this is “awkward” because it is happening during a time of economic hardship. Besides being awkward, however, Big Oil’s profits will likely draw more political pressure from desperate governments.
Bloomberg reported this week that, based on data it had compiled, the collective profits of Exxon, Chevron, Shell, BP, and TotalEnergies for the last quarter would come in at $50.7 billion.
This is palpably lower than the record $62 billion the five supermajors reported for the second quarter—drawing the ire of politicians—but it is still a large number and will, in all likelihood, draw more ire and calls for sharing the money.
“It’s definitely awkward,” Abhi Rajendran, a research scholar at Columbia University’s Center on Global Energy Policy, told Bloomberg. “These companies won’t want to be beating their chest over strong business results that are coming at the expense of consumers and a difficult economic environment.”
This is an interesting take, given that in 2020, when Big Tech raked the cash in thanks to the lockdowns—also at the expense of consumers forced to stay at home, nobody really blamed Amazon or Apple, or Microsoft for it.
Yet the oil industry has a special place in the heart of almost every Western politician, with the energy transition still high on the official agenda even as the cost of renewables soars and Europe returns to coal to survive the winter.
Related: Why Russian LNG Exports To Europe Exploded This Summer
The oil industry made a great culprit for the energy crisis when it began unfolding, and record profits helped strengthen the factually flimsy argument. Now, this argument will probably be made again, and we might hear more talk about windfall profit taxes.
It’s not just the five Big Oil majors, either. Based on the first reports coming in this profit season, the industry had another excellent three months. Halliburton, for instance, saw its profits double between July and September to $544 million. Valero booked earnings of $2.8 billion for the period, noting stronger demand for fuels than in 2019.
Indeed, the Biden administration, for one, has been quick to call on oil companies to “to pass through lower energy costs to consumers right away.” Claiming that input costs for refiners are falling while their margins are rising, the White House said in a recent fact sheet that the industry must immediately share its higher profits with consumers by lowering end prices for their products.
Meanwhile, Energy Secretary Jennifer Granholm talked to industry executives this week to try and get them to boost the production of fuels. This sounds incongruous with the allegations made in the fact sheet but reflects a reality where demand for fuels is on the rise while the capacity to produce fuels has declined.
Unfortunately, oil executives appear to have shattered the admin
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