Five big oil companies; BP, Shell, Chevron, ExxonMobil, and Total have made $281 billion profits since the invasion of Ukraine in Feb 22.
War equals instability which leads to higher oil prices and bumper profits for these companies.
BP and Shell made $94 billion in profits and the other three made $187 billion. This has rewarded their investors with $104 billion in 2022 and about $100 billion in 2023 in dividends and buybacks.
This brings two problems:
1. Raising Inflation: These profits coincide with the tough times that households are facing. In several countries, the rate of inflation is in double digits, and it is skyrocketing. The big oil companies are nevertheless profitable, and this contributes to inflation.
2. Climate goal set back: Oil industry accounts for 15% of total emissions, the biggest cause of climate change. Even though they are making inventors extremely wealthy and happy, they are also negatively affecting the climate.
Most big oil companies are going back to default. Last year, Shell cut 330 positions in its low-carbon business operations. In 2023, a new CEO took over, declaring that the production of oil and gas should come first.
BP had promised to cut emissions by around 35% to 40% by the end of the decade. BP has now acknowledged that it is not feasible and has established a new goal of 20–30%.
Big Oil Rollercoaster: From Pandemic Plunge to War Windfalls
Oil prices have shot up in the last few years. The pandemic year is a tough year for big oil companies. Most factories were shut, cars were locked, so the demand was very low.
The price of oil dropped to its lowest point of $32 per barrel in 2020. It then began to rise in 2021 and eventually reached $67 per barrel.
The Russian-Ukrainian War breaks out in 2022. Prices had topped $112 per barrel by the middle of 2022. Big oil firms have started minting money again.
Oil prices then increased once more in late 2023 amid the Israel-Hamas War, and they are currently about $82 per barrel.
Big Oil has discovered a way to silence investors by doling out cash. Shell rewards its investors with $23 billion in 2023, six times their investment in renewable energy. While BP had pledged to increase dividends by 4% annually, the real increase in 2023 was 10%. The investors are therefore more than pleased to bestow their blessings.
Activists try to put pressure on them. Some have disrupted investors’ meetings, but nothing seems to be effective.
What’s’ the solution:
Government policy: There have been talks on imposing wind fall taxes or green cess on big oil companies. It requires more action than talks. The government must incentivize big oil companies to invest in green energy, since these businesses are made to be profitable, and investors are naturally inclined to want to make money.
