Big 5 oil companies bank nearly $200 billion of profit in 2022, $22 million per hour
- The West’s five largest oil companies combined to capture $196.3 billion in profits during 2022
- Shareholders have enjoyed chunky dividends & substantial share buybacks as a result of these record earnings
- Record numbers come amid war in Europe & cost of living crisis, as many calling for windfall taxes on profits
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What is that saying about life not being fair?
In a pill that is rather tough for a lot of people to swallow, big oil companies have announced stellar earnings for 2022, a year in which the world faced its toughest challenges in a long time.
The top five Western companies scooped $196.3 billion. That equates to about $22.4 million per hour.
Profits shatter records
The numbers smashed records. If the $196.3 billion were a GDP, it would place 57th in the world.
The numbers came in hot following a year where the oil and energy prices rocketed, following Russia’s invaded Ukraine on February 2022. I have compared the numbers to 2021 on the below chart to show the extent of the jump in earnings this year.
The earnings were significantly above 2008 numbers, too, when oil surged to $142 per barrel, 30% above last year’s average price. Aggressive cost cuts during the pandemic helped increase the number this time around.
In the case of Exxon (NYSE:XOM), Chief Executive said in a statement that “the counter-cyclical investments we made before and during the pandemic provided the energy and products people needed as economies began recovering”.
Overall earnings and cashflow were up pretty significantly year on year. So that came really from a combination of strong markets, strong throughput, strong production, and really good cost controlExxon Chief Financial Officer Kathryn Mikells
Higher taxes demanded
Beyoncé once asked the question “Who Run the World?” before concluding it was “girls”. She was wrong. It’s oil.
The jarring profits, coming at a time when the world economy is reeling and a war is ongoing in Europe, are becoming a political issue. Joe Biden took aim at the juicy profits in his State of the Union address this week:
You may have noticed that Big Oil just reported record profits. Last year, they made $200 billion in the midst of a global energy crisis. It’s outrageous.Joe Biden this week
There have been growing clamours for windfall taxes to be introduced on the stout profits – clamours which will only grow louder following these earning reveals.
Exxon said it incurred a $1.3 billion blow to its fourth-quarter earnings from a European Union windfall tax that was introduced in Q4 of last year, as well as asset impairments. The industry is not taking the windfall tax narrative kindly, however. Exxon is suing the EU, claiming that the level is outside its legal remit.
Share buybacks and dividends increase
A lot of the frustration comes with oil companies failing to ramp up production, instead sending profits to shareholders in the form of dividends or share buybacks. Biden has been particularly critical of this decision.
The US President has argued that “too little of that profit” was used for domestic production increases, with the goal of keeping gas prices down, especially last summer as inflation roared and gas prices soared.
Instead, they used those record profits to buy back their own stock, rewarding their CEOs and shareholders.Joe Biden
A glance at the share prices of such companies shows the effect of such practices. As a benchmark, the S&P 500 index lost nearly 20% of its value in 2022.
Shareholders are happy. Executives are happy. But not many else are.
It’s a sombre way to sum up what has been a pretty tough year for a lot of people.