The manna comes as consumers around the world are feeling the effects of the highest inflation in decades and a particularly painful cost of living crisis at the gas pump. The price of crude oil jumped above $120 a barrel in March and again in June before falling back, and it remains up 34% from a year ago. The average national gas price in the United States jumped in tandem, to more than $5 a gallon for the first time, AAA reported, although prices are now falling.
President Biden has warned the industry that he is considering all options to cut profits if gas prices remain high. The president and other Democrats have consistently railed against oil industry revenue at a time when drivers are struggling to cover the cost of fueling up.
While Biden’s tools are limited — there isn’t enough congressional support to push forward his windfall tax bill — that could change if he declares a “climate emergency,” as has been reported. said the administration, it is possible. Energy analysts predict that if gas prices begin to soar again, Biden could use his presidential powers to assert more government control over domestic oil and gas producers.
Oil executives have pushed back against criticism of the Biden administration, saying the only way to address the imbalance of supply and demand in global oil markets is to pump more oil.
“I want to be clear that Chevron shares your concerns about the rising prices Americans are experiencing,” Chevron Chief Executive Mike Wirth told Biden in an open letter. “And I assure you that Chevron is doing its part to help address these challenges by increasing capital spending to $18 billion in 2022, more than 50% more than last year.”
Analysts also note that the oil market is intensely cyclical. The industry suffered during the 2008-2009 financial crisis, again between 2014 and 2016, and more recently during the first two years of the coronavirus pandemic, said Pavel Molchanov of investment bank Raymond James.
“The industry is currently enjoying record levels of profitability, but two years ago the covid-related commodity crash was an epic debacle,” Molchanov said in an email.
Pump Shock: Why Gas Prices Are So High
BP’s second-quarter earnings, up from $6.2 billion in the first quarter, were driven by strong refining margins, ‘continued stellar performance in oil trading’ and higher prices fuel, the company said in a statement. A surge in global demand and the war in Ukraine were key to higher prices, directly boosting company profits.
“Today’s results show that bp continues to perform while transforming,” CEO Bernard Looney said in a statement. “We do this by providing the oil and gas the world needs today, while investing to accelerate the energy transition.”
Due to strong earnings, the company said it would increase dividend payments by 10%, to 6.006 cents per common share, more than it had previously expected. “This increase reflects the underlying performance and cash generation of the business,” the company said.
BP, formerly British Petroleum, said it expects oil and gas prices to remain high in the third quarter “due to the continued disruption of Russian supply” and “reduced oil levels”. reserve capacity”. The geopolitical outlook has also led to a lack of European gas supply which is “heavily dependent on Russian gas pipeline flows”, which should keep prices “high”.
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Shell announced even larger share buybacks totaling $6 billion, while Exxon said it had distributed $7.6 billion to shareholders when dividends are included.
Patrick De Haan, head of oil analysis at GasBuddy, said the big oil companies seem to be investing in increasing their supply. But in the short term, their focus appears to be shareholder value, he said.
Exxon and Chevron post spectacular profits on soaring oil prices
Biden accused the American oil giants of capitalizing on the difficult circumstances. Speaking at the Port of Los Angeles in June, he said: “Exxon has made more money than God this year.” The company hit back, chastising its administration for attempts to “criticize, and sometimes vilify, our industry.” Oil companies deny accusations that their policies are keeping prices artificially high.
In May, the UK government announced a windfall tax of 25% on the profits of oil and gas companies – revenue that would be used to help low-income households struggling with a steep rise in the cost of living. WE legislators have considered a similar tax, but it is unlikely to pass an evenly divided Senate.
British lawmaker and opposition finance minister Rachel Reeves has criticized BP’s profits, Tweeter : “People are worried about the further rise in energy prices in the fall, but again we’re seeing eye-popping profits for oil and gas producers.”
Left-leaning politicians and lobby groups in the United States and Britain have called for additional taxes on the windfall profits of oil companies.
Greenpeace United Kingdom tweeted“There is something particularly obscene and cruel about gas companies like Shell and BP making record profits as consumers struggle to warm up this winter.”
Rep. Rosa DeLauro (D-Conn.) wrote on Twitter“Monopoly companies oversize their market power, hurt families at the pumps and drive up inflation. …Americans don’t deserve to be abused at the pumps.