After TotalEnergies, Shell, ExxonMobil and Chevron, it was BP’s turn to report its quarterly results on Tuesday, August 2nd. Like its peers, the British oil major saw its profits soar as hydrocarbon prices soared. In the second quarter of the year, the British giant reported a net profit of $9.26 billion, three times more than a year ago.
On the other hand, for the first six months of the year, BP posted a net loss of $11.13 billion as the group suffered a $24.4 billion after-tax charge in the first quarter following its exit from Russia’s Rosneft in the wake of Russia’s invasion of Ukraine on February 24.
Collectively, the top five companies in the industry have posted $62.46 billion in profits over the past three months. (In ascending order: TotalEnergies 5.7 billion, BP 9.26 billion, Chevron 11.6 billion, ExxonMobil 17.9 billion and Shell 18 billion). For comparison, it is more or less equal to the GDP of Bulgaria in 2020.
In the second quarter of the year, a barrel of New York-listed black gold traded between around $95 and $120. It has been rising for more than a year due to the recovery in demand from businesses and households after the pandemic, and was pushed last spring to levels not seen since 2008 following sanctions against Russia following the Feb. 24 invasion of Ukraine was reached.
Gas, for its part, has been booming again since Russia gradually reduced its supplies to the Twenty-Seven. The war in Ukraine is indeed causing serious energy tensions between westerners and Moscow, which is using gas as a geopolitical weapon, making its natural gas supplies weaker and more uncertain unless they are completely cut off as it was to Poland, Bulgaria or Latvia last Saturday.
This rise in energy prices is a major contributor to inflation, the highest in the old continent and the United States in several decades.
In the US, Joe Biden is attacking the majors
On the other side of the Atlantic, the US government regularly criticizes companies in the industry for making money off the backs of motorists instead of investing in production.
Last June, during a speech on inflation, President Joe Biden squarely criticized oil giant ExxonMobil for not pumping more oil, which could drive prices down, with the simple aim of pushing prices higher. In a joking tone, he then suggested that ExxonMobil would leave “Make More Money Than God” in the second trimester.
For their part, ExxonMobil and Chevron claim to be making efforts. The first specifically argues that its refining capacity will be around 250,000 barrels per day higher in the first quarter of 2023, “Represents the largest capacity expansion in the US since 2012”said its CEO Darren Woods in a press release.
The two American majors are not using this new financial windfall to boost their capital spending. The level of the latter remains lower than before the pandemic. On the other hand, they are taking the opportunity to reduce their debt and spoil their shareholders.
Monster wins that will make you wince
In the old continent, these pharaonic gains have fueled heated debates about imposing a temporary tax on multinational corporations’ “super profits,” while many households have seen the cost of living eroding their spending power. For example, last May London announced the introduction of a special tax on the energy sector to help finance part of the state aid for the most modest of households. Italy has taken a similar approach.
A temporary tax was also introduced in Spain and Portugal. These two countries on the Iberian Peninsula have received an exemption from Brussels to temporarily deviate from the rules of the European electricity market. Objective: to limit the price of gas supplied to gas-fired power plants for one year. The gas producers are compensated and receive the difference between the market price and the capped tariff. This compensation is financed by a tax on the profits collected by the electricity companies.
France rejects the idea of a tax on “superprofits”.
In France, on Tuesday, August 2nd, parliamentarians completely rejected the idea of a “special tax” on the “special profits” of hydrocarbon suppliers, sea transport providers or even motorway concessionaires. This streak, first mentioned last spring, has resurfaced in recent days after TotalEnergies’ second-quarter earnings doubled.
Economy Minister Bruno Le Maire reiterated his rejection “Pavlovian Reflex of Tax”. “A tax has never improved the lives of our compatriots. They need money in their pockets, not in the government’s pockets.”supported the minister.
However, under pressure, TotalEnergies announced a few days ago that it would grant a discount of 20 cents per liter at all petrol stations between September and November, and then 10 cents per liter for the rest of the year.