Big oil companies continued to smash their profit records Thursday, with Shell reporting it made $41.6 billion in 2022. It is the latest in a procession of earnings reports from an industry enjoying massive windfalls while ordinary drivers strain to afford high prices at the pump.
ExxonMobil and Chevron drew the ire of the White House this week when the companies announced their biggest profits ever, $55.7 billion and $36.5 billion, respectively, for the year.
The eye-popping numbers, industry analysts say, were fueled by a variety of factors, largely connected to the war in Ukraine, that drove prices up last year. The sanctions levied on Russian fuel because of the invasion threw the global market out of balance, leaving the supply of energy so tight that prices for crude oil, refined products such as gasoline and diesel, and natural gas all shot up at once.
“All three dials on the slot machine lined up in a way they rarely do,” said Kevin Book, the managing director at ClearView Energy Partners, a research firm. The national average price for a gallon of regular gasoline exceeded $5 at its height in 2022, as available shipments of fuel dropped and refiners struggled to replace Russian products, while the U.S. government tried to blunt the cost surge by releasing millions of barrels of oil from its Strategic Petroleum Reserve.
The profits being posted now are not linked to the current upward swing in gasoline prices, with the average cost of a gallon of regular back up to $3.50, according to AAA, and likely to continue rising in the coming months. But they are giving drivers and politicians much to vent about.
The oil companies are largely ignoring the attacks, with the political fallout not mentioned in Chevron’s earnings call Friday morning. Industry officials have long said the attacks on the profits are misplaced, as oil prices are set by global markets that they say no private business can control. They warn that the windfall profit taxes that Democrats champion would backfire by discouraging companies from investing in production.
Prominent Democrats have argued that oil companies can easily afford to boost production.
“The only thing stopping Big Oil from increasing production is their decision to pay shareholders billions instead of reinvesting profits,” President Biden tweeted Tuesday night. “Instead of demanding accountability, Republican officials are blaming us. I’m doing my part to lower prices, it’s time Big Oil did theirs.”
The White House had earlier expressed outrage at Chevron’s decision to launch a $75 billion stock buyback, a move that will fatten returns for investors.
New windfall profit taxes in some European nations undermine energy stability, ExxonMobil CEO Darren Woods said Tuesday. “My sense is that there will be a lot of unintended negative consequences that come from this,” he said. “And as that manifests itself, a lot less appetite for doing this.”
Gas prices have increased for five consecutive weeks, according to the price-tracking company GasBuddy. It attributes the trend partly to a December cold snap that knocked some refineries offline. Also, some refining facilities have scheduled maintenance that had been put off last spring in response to the surge in prices at that time.
“There appears to be little good news on the gas price front, with prices unlikely to turn around anytime soon,” said Patrick De Haan, the head of petroleum analysis at GasBuddy. Adding to the pressure on prices are China’s reopening of its economy, which is expected to increase energy demand, and a European Union ban on Russian gasoline and diesel that takes effect Feb. 5.
The White House has few levers left to keep prices down. It has used a substantial portion of the strategic reserve, and the chances of windfall taxes on oil profits are slim, now that Republicans control the House.
The House on Friday passed a bill that would prevent the administration from further drawing down the nation’s emergency reserve unless the federal government expanded available leases for oil and gas drilling on federal lands every time the reserve was tapped. The measure is unlikely to advance in the Democratic-controlled Senate.