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Some countries are already in the grips of painful economic contractions; for others, including the United States, the prospect of recession seems around the corner. Europe, ensnared by its reliance on Russian gas, is bracing for what’s being billed as a “winter of despair.” Aid agencies and U.N. officials warn of hunger stalking the planet, as price rises push staples out of reach for tens of millions of people. The global macroeconomic maelstrom has already collapsed one debt-ridden, developing economy (Sri Lanka), while other nations (Zambia, Laos and Pakistan, to name a few) find themselves on the brink.
But for major multinational fossil fuel companies, it’s the best of times.
Recent second-quarter earnings reports proffered eye-popping figures: BP posted second-quarter profits worth $8.5 billion, its biggest windfall in 14 years. ExxonMobil went one further — its $17.9 billion in net income was its largest-ever quarterly profit. U.S. company Chevron, London-based Shell and France’s TotalEnergies also recorded blockbuster results. Put together, these five major companies made $55 billion this past quarter, as hundreds of millions of people around the world bore the brunt of surging prices at the pump.
And it’s not just oil and gas — coal, which climate campaigners are desperately seeking to phase out, is surging, too. Glencore, the world’s largest coal shipper, generated record profits in the first half of 2022 and plans to pay out an additional $4.5 billion in dividends and buybacks to shareholders.
The combined profits of the largest energy companies in the first quarter of this year are close to $100 billion.— António Guterres (@antonioguterres) August 4, 2022
This grotesque greed of the fossil fuel industry and their financiers is punishing the poorest and most vulnerable people, while destroying our only home.
United Nations Secretary General António Guterres believes this state of affairs is abhorrent. In remarks made last week, he hammered energy companies for price gouging at a time of global crisis and urged governments to aggressively tax these corporations’ profits.
“It is immoral for oil and gas companies to be making record profits from this energy crisis on the backs of the poorest people and communities, at a massive cost to the climate,” Guterres said, assuming once more his perennial role as the world’s town crier on the threat of climate change and the need for governments to drastically reduce emissions.
“This grotesque greed … is punishing the poorest and most vulnerable people, while destroying our only home,” he added.
A host of countries, especially in Europe, have attempted to raise funds off companies that raked in mammoth profits in the wake of Russia’s invasion of Ukraine. There have been mixed results. Italy’s lame-duck government recently reported that its 25 percent windfall tax on Italian energy companies had so far not yielded what authorities expected, with some companies appearing to snub payment. The funds are expected to be redistributed to help struggling households and businesses.
Last month, Britain’s Conservative government pushed through its own 25 percent windfall tax on companies operating in the North Sea, which officials think will help raise an additional 5 billion pounds ($6 billion) over the next year to help ordinary Britons with their energy costs. The move was cast as insufficient by opposition Labour politicians, who want to see further tax breaks and subsidies to oil companies scrapped.
The Tories’ counterparts across the Atlantic are even more protective of fossil fuel concerns. Democratic legislation that would rein in price gouging and impose a form of windfall tax on U.S. companies face a fundamental roadblock in Congress, with Republicans in the Senate staunchly opposed to imposing such measures on the oil industry.
Oil industry executives have insisted they are reinvesting some of their profits into projects that are part of a broader green energy transition. Some oil experts also contend that profitability in the energy sector is cyclical and subject to the volatility of the market. “The industry is currently enjoying record levels of profitability, but two years ago the covid-related commodity crash was an epic debacle,” Pavel Molchanov of Raymond James investment bank told my colleagues.
Climate campaigners argue that the ballooning profits of the past half-year and the snail’s pace of the energy transition are all part of the plan for fossil fuel corporations, many of which have spent vast sums lobbying Group of 20 major economies on curbing the scale and speed of their decarbonization policies.
“For decades climate policy has been designed based on a theory that we can reduce demand for fossil fuels and increase the price of carbon and that the market — turbocharged by alternatives such as wind and solar that are now cheaper than fossil fuels — will respond by constraining supply,” wrote Tzeporah Berman in the Guardian. “But that’s not happening fast enough because there is currently no mechanism to counteract the tax breaks, fossil fuel subsidies and delay tactics that are distorting the markets.”
Downstream from the boon of oil company shareholders is the mounting hardship faced by hundreds of millions of ordinary people around the world. According to U.N. data, global food prices have risen about 50 percent since December 2019 — that is, before the onset of the pandemic. And since the start of this year, the price of crude oil rose 26 percent and, consequently, global shipping prices surged 22 percent.
Even before the Russian invasion of Ukraine, U.N. agencies estimated that about 828 million people — one-tenth of the global population — went undernourished in 2021. Now, about 50 million people across 45 countries are on the brink of famine, according to the U.N. World Food Program, with conditions expected to worsen by the end of the northern hemispheric summer.
“Household budgets everywhere are feeling the pinch from high food, transport and energy prices, fueled by climate breakdown and war,” Guterres said last week. “This threatens a starvation crisis for the poorest households, and severe cutbacks for those on average incomes.”