Banks, oil companies and arms manufacturers. The three sectors make up the holy trinity that is making more cash in these turbulent times of war in Europe, a war that has decisively contributed to spurring the energy crisis, the inflationary spiral and interest rates, closely related phenomena that help explain the stratospheric results obtained last year by the three sectors while the majority of society was impoverished. Among the world’s six largest private oil companies alone, their profits will approach 200 billion euros by 2022, a figure never seen before thanks to the effect of the Ukraine war on gas and oil prices, as well as the upturn in demand after the worst years of the pandemic.
The British BP was the last to make public its accounts for last year, which were settled with a record profit of 25.8 billion euros, more than double that of 2021. A trend shared by its competitors. The also British Shell announced a few days ago the best results in 115 years of existence: it won 37,000 million euros. Like Exxon, the number one hydrocarbon company in the United States and the second largest in capitalization in the world behind Saudi Aramco. Exxon pocketed a profit of more than 52 billion, 142% more than the previous year. “We have clearly benefited from a favorable market,” CEO Darren Woods told investors.
Stratospheric prices
In the case of Chevron, the profit touched 34,000 million euros, while in that of ConocoPhillips, also American, it exceeded 16,000 million, the highest for the company in a decade. TotalEnergies, which completes the sextet of what in English is called “Big Oil” – a group in which some also include the Italian Eni -, also achieved the most important profits in its history last year, 19,000 million. “The energy crisis resulting from the war in Ukraine has resulted in stratospheric prices, especially for gas, but also for oil, which explains these results,” says Carlos Torres Díaz, chief analyst for the gas markets and ‘electricity from the Norwegian consultancy Rystad.
European companies in particular have concentrated their business in recent times on gas, considered by the European Union as a “transitional fuel” towards renewables, less polluting than oil. Both in production and export, particularly of liquefied natural gas (LNG), which is transported in methane ships and has become the main alternative to Russian gas arriving in Europe by pipeline. These gas prices, driven by competition between European and Asian buyers, have reached 10 times higher than normal.
The war has had an unquestionable effect on prices, according to the Rystad analyst. “Prices began to rise in 2021 because Russia began to reduce supply to Europe, but everything was exacerbated by the explosion at Nordstream 1 and the sanctions to punish the invasion,” says Torres Díaz. “All this has coincided with a lower production than expected in the French nuclear reactors and the hydroelectric plants of the continent due to the scarcity of water, which has contributed to increasing the prices of hydrocarbons”, he adds.
Petition to raise taxes
The obscene profits of the oil companies have led to renewed voices in the United States urging them to tax their “extraordinary profits”, a subject still pending even though Joe Biden has gone so far as to suggest it, referring to the few taxes that the big oil companies pay the country. In the UK they do get paid, after the Conservative government of former Prime Minister Boris Johnson imposed a 25% levy on these windfalls. But it did so only to those derived from its gas and oil production in the North Sea, almost unimportant to the business of its global companies.
The most worrying thing, in any case, is that in the face of the current bonanza some seem to be rethinking their commitments to reduce carbon dioxide emissions. BP recently announced that it plans to take things more slowly. Instead of cutting its fossil fuel production by 40% by 2030, it now promises to cut it by just 25%. And all this while increasing investment in hydrocarbon projects. It remains to be seen whether others will follow in his wake. “At the moment it is not a trend in the sector, at least in Europe”, says Mariano Marzo, member of the Repsol Board of Directors.