Manna comes like Consumers around the world are feeling the sting of the highest inflation in decades and a cost-of-living crisis that is particularly painful at the gas pump. The price of crude oil rose above $ 120 a barrel in March and again in June before declining, and remains 34% higher than a year ago. The national average price of gas in the United States jumped in tandem, to over $ 5 a gallon for the first time, AAA reported, although prices are now falling.
President Biden has warned the industry that it is considering all options to curb its profits if gas prices remain high. The president and other Democrats have consistently railed against the oil industry’s earnings at a time when drivers are struggling to cover the cost of fueling.
Although Biden’s tools are limited – there isn’t enough Congressional support to push through his plan for a windfall tax – that could change if he declares a “climate emergency,” as the administration has claimed it is. possible. Energy analysts predict that if gas prices resume rising, Biden could use his presidential powers to assert greater government control over domestic oil and gas producers.
Oil executives have dismissed the Biden administration’s criticism, saying the only way to remedy the supply-demand imbalance in global oil markets is to pump more oil.
“I want to be clear that Chevron shares your concerns about the higher prices Americans are experiencing,” Chevron CEO Mike Wirth told Biden in an open letter. “And I assure you, Chevron is doing its part to help address these challenges by increasing capital expenditures to $ 18 billion in 2022, over 50% more than last year.”
Analysts also note that the oil market is intensely cyclical. The sector 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 the covid-related commodity crash two years ago was an epic debacle,” Molchanov said in an email.
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BP’s second-quarter results, up from $ 6.2 billion in the first quarter, were driven by strong refining margins, “continued outstanding performance in the oil trade,” and higher fuel prices, he said. the company in a note. A surge in global demand and the war in Ukraine were key to rising prices, directly boosting the company’s profits.
“Today’s results show that bp continues to perform as it transforms,” CEO Bernard Looney said in a statement. “We do this by providing the oil and gas the world needs today and, at the same time, we invest to accelerate the energy transition.”
As a result of the high profits, the company said it will increase dividend payments by 10 percent, to 6.006 cents per common share, more than previously anticipated. “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 interruption of Russian supply” and “reduced levels of spare capacity”. The geopolitical outlook has also led to a lack of European gas supply that is “heavily dependent on Russian pipeline flows”, which should keep prices “high”.
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Shell announced even larger share buybacks totaling $ 6 billion, while Exxon reported that it has distributed $ 7.6 billion to shareholders when dividends are included.
Patrick De Haan, head of oil analysis at GasBuddy, said the major oil companies appear to be investing to increase their supply. But in the short term, their focus appears to be on shareholder value, he said.
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Biden accused the US oil giants of exploiting 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 rejected it, admonishing its administration for its attempts to “criticize and, at times, vilify our industry”. Oil companies deny allegations that their policies are keeping prices artificially high.
In May, the UK government announced an unexpected 25% tax on the profits of oil and gas companies, revenue that would be used to help low-income families struggling with a sharp rise in the cost of living. WE legislators they considered a similar tax, but it would hardly go through the Senate equally divided.
British lawmaker and opposition finance minister Rachel Reeves criticized BP’s profits, tweeting: “People are worried about rising energy prices in the fall, but once again we see staggering profits for oil and gas producers.”
Left-wing politicians and advocacy groups in both the US and Britain have demanded additional taxes on the unexpected profits of oil companies.
Greenpeace United Kingdom tweeted“There is something particularly obscene and cruel about gas companies like Shell and BP that are making record profits while consumers will struggle to keep warm this winter.”
Rep. Rosa DeLauro (D-Conn.) wrote on Twitter: “Corporate monopolies are oversizing their market power, hurting households at the pump and driving up inflation. … Americans don’t deserve to be cut at the pump.