Despite the events that affected many countries of the world and their companies, 2022 will remain an exceptional year for the major oil companies, which were able, thanks to the significant rise in prices, as a result of the recovery in demand for oil and gas along with the war in Ukraine, to record record profits, as indicated. All expectations are that it will achieve similar profits in the year 2023 as well.
Four of the five major companies, namely “Shell”, “Chevron”, “Exxon Mobil” and “Total Energy”, achieved strong net profits in 2022, while “BP – BP” recorded strong net profits. record profit $27.7 billion.
The net profits of oil companies reached $151 billion in 2022.
Adjusted earnings, which best reflect profitability by excluding losses from withdrawals from Russia, are close to $200 billion.
And these net profits are enough to anger governments and non-governmental organizations, in the midst of the energy and climate crisis, so that US President Joe Biden spoke Tuesday of “disgraceful” profits.
Companies fully benefited from the rise in oil prices, when the price of a barrel of benchmark Brent crude approached $140 in March 2022, and gas rose to 350 euros (about $377) per megawatt hour last summer in Europe, 15 times higher than the usual price.
Prices have fallen since then, but in 2023 “they could hit new highs because the war in Ukraine is not over yet,” says Adi Imcirovic, a researcher at the Oxford Institute for Energy Studies.
Despite the uncertainty in the global economy, the Organization of the Petroleum Exporting Countries (OPEC) does not expect a decrease in demand, but rather growth in 2023.
The political class in the West finds itself in a difficult situation regarding the rise in the profits of major companies, against the background of the cost of living crisis.
In the old continent, as in the United States, families and companies suffer from high prices of basic materials such as bread or motor fuel.
US President Joe Biden wrote on Twitter last week: “I’m doing my part to lower prices. It’s time for the giant oil companies to do their part.”
In France, Total Energy’s announcement of its $20.5 billion profit fueled the debate about imposing more taxes on these huge profits.
In Britain, in May 2022, the government imposed a tax on exceptional energy profits, just as the European Union did at the end of September, as part of what was called a “temporary solidarity contribution” that Exxon challenged before the courts.
“What we need now is an increase in supply,” said Darren Woods, Exxon’s chief executive. “Instead, a penalty has been imposed on the entire energy sector.”
Expect more profits
After major companies benefited from the recovery in demand following the spread of the Covid epidemic in 2021, prices rose again in 2022 due to the outbreak of the war in Ukraine, Western sanctions targeting Moscow, and the decline in Russian exports.
To be sure, oil companies are investing more and more in solar, wind and other renewables, “but not as much as they’re paying shareholders”, says David Elms, a professor at Warwick Business School, as BP slows its energy transition.
These multinationals have also benefited from betting on “high value-added assets”, such as LNG projects, says Moez Ajami, consultant at Ernst & Young.
“Exorbitant prices fueled by European purchases of LNG also helped to compensate for Russian supplies,” says Adi Imcerovic.
Moez Ajami told “Agence France Presse” that prices will rise due to the oil embargo imposed by the West on Russia, and therefore these companies will achieve profits in 2023 “the value of those they earned in 2022”, especially since these companies will be able to rely on the recovery of demand with China’s abandonment of the zero covid policy.
However, Adi Imcerovic says, this demand for gas and oil remains strong thanks to subsidies amounting to tens of billions to help consumers pay their bills, which “prolongs the crisis”.
He adds that with “the provision of subsidies for fossil fuels, demand continues to grow rather than decline,” while “the best remedy for high prices is high prices.”
He says that EU governments should first be content with helping “the poorest”.