The tumult of war and climate breakdown has proved lucrative for the world’s leading oil and gas companies, with financial records showing 28 of the largest producers made close to $100bn in combined profits in just the first three months of 2022.
Buoyed by oil commodity prices that soared following the turmoil caused by Russia’s invasion of Ukraine, major fossil fuel businesses enjoyed a bonanza in the first quarter of the year, making $93.3bn in total profits.
Shell made $9.1bn in profit from January to March, almost three times what it made in the same period last year, while Exxon raked in $8.8bn, also a near threefold increase on 2021.
Chevron upped its profits to $6.5bn and BP reveled in its highest first-quarter profits in a decade, making $6.2bn. Coterra Energy, a Texas-based firm, had the largest relative windfall of the 28 companies, with a 449% increase in profits on last year, to $818m.
The rocketing profits, at a time when inflation has surged in many countries, has prompted several of the companies to return billions of dollars to shareholders via share buybacks and dividends.
Ben Van Beurden, chief executive of Shell, said that the company’s performance “has been helped by the macro and the macro has been impacted by the war in Ukraine”. He added that this situation means “we do have a better company, we do have a better performance, and yes indeed our shareholders will benefit from that as well”.
Murray Auchincloss, BP’s chief financial officer, said in February: “Certainly, it’s possible that we’re getting more cash than we know what to do with.”
Climate campaigners, however, have called the profits “obscene” and argued that the provision of fossil fuels would not be so lavishly rewarding if governments had acted properly to confront the escalating climate crisis.
“The greed of these companies is staggering,” said Lori Lodes, executive director of Climate Power, an advocacy group. “We’ve heard their executives bragging about how much the agony of inflation and the tragedy of the war in Ukraine has allowed them to raise prices. These profits are going right into their pockets.”
While the oil companies contend that they do not themselves set the global price of oil, the surge in profits is jarring given scientists’ warnings that the world should be rapidly phasing down its use of fossil fuels if it is to avoid unleashing catastrophic heatwaves, drought, sea level rise and other worsening consequences of the climate emergency.
The wealth of the oil and gas industry also highlights how there is still far more money flowing from the destruction of a livable climate than there is from efforts to maintain it.
The 28 large oil and gas companies made a combined $183.9bn in profits in 2021, a sum that dwarfs several major, but floundering, climate measures. Wealthy countries have promised, but so far failed to deliver, $100bn a year to developing nations to help them cope with climate impacts, while the largest piece of legislation in US history to combat the climate crisis, which would have cost about $55bn a year over the next decade, was scuttled due to opposition from Republicans and the pro-coal Democratic senator Joe Manchin.
The International Energy Agency has said that there can be no new oil or gas fields, or coal mines, if the world is to reach net zero plant-heating emissions by 2050. Nearly two-thirds of all identified oil and gas reserves will have to stay in the ground to avoid the planet breaching a 1.5C temperature rise above pre-industrial times, a threshold beyond which will cause compounding disasters, according to scientists.
A huge tranche of new “carbon bomb” oil and gas projects is in train from industry, however, that risks blowing apart international climate goals, to the dismay of high-profile advocates. “Investing in new fossil fuels infrastructure is moral and economic madness,” António Guterres, secretary general of the United Nations, said in April.
“Climate activists are sometimes depicted as dangerous radicals. But the truly dangerous radicals are the countries that are increasing the production of fossil fuels.”
In the US, the mounting profits have irked Joe Biden, who has complained that gasoline costs faced by drivers have remained elevated despite a recent cooling off in oil prices. The president’s Democratic allies in Congress have proposed a new windfall tax for oil firms that would be used to send payments to Americans affected by rising cost of living expenses.
“Never content to let a crisis go to waste, oil executives are taking advantage of the international situation by using their windfall profits to juice their own pay and pursue share buybacks,” said Sheldon Whitehouse, a Democratic senator who has spearheaded a bill that would impose the tax.
“We should be clawing back big oil’s excessive profits and sending them to the Americans who paid exorbitant prices at the gas pump.”
Most of the large oil companies now have their own climate goals, such as Exxon’s pledge in January to cut its own emissions to net zero by 2050. However, these promises are mostly centered on emissions coming from the operations of drilling and transporting oil and gas, rather than their actual use by consumers, which constitutes the lion’s share of pollution.
Few companies are reporting on their investments in clean energy, such as wind or solar power, or efforts to remove CO2 from the atmosphere. Those firms that do cite these figures reveal that such climate-friendly investments are a very minor sideline, typically just a few percentage points of overall budgets.
“We are seeing investment in these things but the levels aren’t meeting the science-based trajectory we need to be on to align with 1.5C,” said Simon Fischweicher, head of corporations and supply chains at CDP, a non-profit that helps companies disclose their environmental impact.
CDP has estimated that the oil industry would have to invest three-quarters of its capital expenditure into low-carbon technologies if disastrous climate change is to be avoided.
“There is a significant gap between what needs to happen and what is being promised,” said Fischweicher. “We haven’t seen the commitments in renewables that match the ambition required. I just haven’t seen any of these companies commit to net zero for the use of their products. There’s a lot more to do.”