Big oil companies saw profits soar in the third quarter of 2022, continuing a trend of massive industry profits even as Russia’s invasion of Ukraine sends prices skyrocketing for consumers.
Exxon Mobil on Friday morning reported its highest ever profit of $19.7 billion for the quarter, while Shell announced its second highest of $9.5 billion.
Exxon Mobil’s quarterly profit topped $17.9 billion in the second quarter, beating analysts’ forecasts of about $4 billion. The company said on an earnings call that its profits were boosted by record levels of oil and gas production in the Permian Basin, nearly 560,000 barrels per day.
Shell, meanwhile, reported earnings of $9.5 billion for the quarter the day before. Chevron also beat expectations, raking in $11.2 billion in the third quarter, also its highest second quarter ever.
Exxon was able to offset the surge in oil prices largely through exports of liquefied natural gas (LNG). LNG demand increased in Europe after the EU halted imports from Russia. As a result, American companies have seized the opportunity.
News of the surge in profits comes after criticism from Democrats, including President Biden, that companies are gouging consumers at the pumps.
These latest gains are expected to intensify Democratic criticism just weeks before the 2022 midterm elections.
The President’s actual leverage against corporations is limited.
But Biden and congressional Democrats have frequently sought to highlight both the continued prosperity of oil companies and the role of Ukraine’s invasion in high gas prices, as voters, rightly or wrongly , tend to blame the ruling party.
Biden has repeatedly urged the industry to lower consumer prices in response to those earnings, especially since the OPEC+ bloc announced it would cut oil production.
On Thursday, the chairman blasted Shell’s announcement that it would repurchase $4 billion worth of stock over the rest of the year.
“That’s more than double what they earned in the third quarter of last year. And they also increased their dividends, so the profits flow back to their shareholders instead of going to the pumps and lowering prices,” Biden said Thursday in remarks in Syracuse, NY.
The chairman also took aim at Exxon on Twitter after CEO Darren Woods defended the company’s quarterly dividend as returning their profits to customers.
“I can’t believe I have to say this, but giving profits to shareholders is not the same as driving down prices for American families,” Biden said. tweeted presidential account.
Democrats in Congress, meanwhile, called for a windfall tax on big oil companies over the summer, when consumer gas prices soared to all-time highs.
“Not in a legal definition, but in most people’s minds, what happens with refined products, profits and margins is probably seen as a windfall,” said Tom Kloza, global head of the energy analysis at the Oil Price Information Service, to The Hill in an interview. .
“The optics are pretty bad,” added Kloza. “Record profits… aren’t exactly being cheered on by a population that’s saying, hey, we need a break from inflation.”
Also, he said, “if you were to have a virtual map of what’s happened so far in October, which is outside the realm of third quarter earnings, the numbers don’t are not just off the charts, they are off the wall that the cards are on.
Patrick DeHaan, head of oil analysis at GasBuddy, argued that a large part of actual consumer prices are beyond the control of oil companies.
“They can decide whether or not to increase production, and if they increase production, it drives prices down, but for now, oil company profits are a sign of the imbalances that exist in oil markets,” did he declare. “That is, everyone wants oil and refined products and there just isn’t enough for everyone.”
Oil companies may just as well “lose big” in a scenario that depresses demand, such as at the start of the COVID-19 pandemic, he noted.
“When it’s going well, it’s very good, and when it’s going badly, it’s extremely bad,” he said.
Going forward, Kloza predicted, “I think we’re entering a chapter where high gasoline prices, which the White House is laser-focusing on… aren’t necessarily going to come down materially, but they’re going to go out of the way.” first page. ”
In their place, he added, it would likely be the prices of commodities like diesel fuel and heating oil that would winter.
Earlier this year, Energy Secretary Jennifer Granholm called on major oil refiners to limit exports of refined products ahead of hurricane season and winter.
“I urge you to focus in the short term on building inventory in the United States, rather than selling current inventory and increasing exports further,” she said.
In response, however, Exxon CEO Woods pushed back on Granholm’s characterization that limiting exports was good for consumers.
“The continuation of current Gulf Coast exports is critical to effectively rebalancing markets — especially with diverted Russian supplies,” Woods wrote in September, according to the Wall Street Journal. “Reducing global supply by limiting US exports to build up region-specific inventory will only worsen the global supply shortfall.”
Democrats on the party’s progressive wing have called on the administration to take tougher action or sought to take it themselves.
At the height of rising gas prices over the summer, Rep. Ro Khanna (D-California) and Sen. Sheldon Whitehouse (DR.I.) introduced legislation to impose a windfall tax to the oil companies, with the revenues going to the taxpayers. California Gov. Gavin Newsom (D) has called for a similar tax in the Golden State, which typically tops all others when it comes to gasoline prices.
On Friday morning, Khanna introduced another bill that would ban the export of refined gas products during any seven-day period when national average gas prices are $3.12 or higher.
The bill is unlikely to pass, but a ban would go significantly further than the voluntary limitations that Granholm called for in his August letter.
The Hill has contacted Exxon, Shell and Chevron for comment.
Rachel Frazin contributed.
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