Deer graze beyond the gates of the Exxon Mobil Joliet Refinery on the Des Plaines River. Exxon Mobil’s $56 billion haul in 2022 marked an all-time high for the western oil industry.
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The West’s five largest oil companies reported combined profits of nearly $200 billion in 2022, ramping up calls for governments to impose tougher windfall taxes.
French oil giant TotalEnergies on Wednesday reported full-year profit of $36.2 billion, doubling last year’s full-year profit, as fossil fuel prices soared following Russia’s massive invasion of Ukraine.
The results show TotalEnergies, along with supermajors Exxon Mobil, Chevron, BP and Shell, is posting a massive rise in annual profits after Exxon’s 2022 earnings of $56 billion marked an all-time high for the western oil industry.
Overall, the big five oil companies reported a combined profit of $196.3 billion last year, more than the economic output of most countries.
The cashless energy giants have used their record earnings to reward shareholders with bigger dividends and share buybacks.
“You may have noticed that Big Oil just reported record profits,” US President Joe Biden said in his State of the Union address on Tuesday. “Last year they made $200 billion amid a global energy crisis. It’s unheard of.”
Biden said US oil majors invested “too little of that profit” to boost domestic production to keep gas prices down. “Instead, they used those record earnings to buy back their own stock and reward their CEOs and shareholders.”
Biden proposed quadrupling the tax on company share buybacks to encourage long-term investment, insisting the supermajors would still make a “sizable” profit.
Greenpeace activists set up a mock petrol station price board outside the company’s headquarters in London on February 2, 2023, showing Shell’s net profit for 2022.
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Agnès Callamard, secretary-general of human rights group Amnesty International, described Big Oil’s huge profits as “manifestly unjustifiable” and “an absolute disaster”.
“The billions of dollars in profits generated by these oil companies need to be taxed appropriately so that governments can effectively address the rising cost of living of the most vulnerable populations and better protect human rights in the face of multiple global crises,” Callamard said in a statement.
Big Oil executives have tried to defend their soaring profits amid a barrage of criticism from activists, who typically emphasize the importance of energy security in the transition to renewable energy and suggest that higher taxes could deter investment.
“Ultimately, taxes are a matter for governments. We are naturally committed and offer perspectives, and the key perspective we try to provide is context around the fact that companies like us need to invest billions of dollars to support them. The energy transition requires a safe and stable investment climate,” Shell CEO Wael Sawan said on Thursday.
His comments came shortly after Shell reported its highest-ever annual profit of nearly $40 billion, surpassing its previous record of $28.4 billion set in 2008.
“For example, windfall taxes or price caps just erode confidence in that investment stability, and that’s why I’m concerned about some of the steps that are being taken,” Sawan said. “I think a different approach needs to be taken, which is to really attract investment capital at a time when we need to be able to embed energy security into the broader energy system here in Europe.”
The CEO of Saudi Aramco, the world’s largest energy company, has previously warned of the dangers of pressuring oil companies with higher taxes.
When asked by CNBC’s Hadley Gamble last month if an unexpected tax on oil profits was a bad idea, Saudi Aramco’s Amin Nasser replied: “I would say it’s not helpful to them [in order] to have additional investments. They have to invest in the sector, they have to grow the business, in alternative and conventional energy, and they have to be helped.”
Nasser said the transition to renewable technologies will require significant investment and this will likely suffer if companies face higher taxation.
Nonetheless, advocacy group Global Witness says people are right to be outraged by Big Oil’s extraordinary profits and is calling for an increase in the windfall tax.
“Given that we are entering a global recession and most of us know people who are struggling, we all need to denounce such profiteering,” Alice Harrison, Global Witness’s fossil fuel campaign manager, told CNBC via email .
“An increased windfall tax to help those struggling to pay their bills, along with a significant increase in renewable energy and home insulation, would end the fossil fuel era, so bad for both people and the planet.” hurts badly,” Harrison said.
“People see the injustice”
“People see the injustice of paying staggering energy bills while big oil and gas companies rake in billions,” said Sana Yusuf, climate activist at Friends of the Earth.
“Taxing their excess profits fairly could help fund a nationwide program to insulate and promote renewable energy that would cut bills, keep homes warmer and reduce harmful carbon emissions,” Yusuf said.
BP CEO Bernard Looney tried to shield the company from criticism on Tuesday after reporting record profits of $27.7 billion for 2022, saying the British energy major was “leaning on” its strategy to take the world by storm supply the energy it needs. BP, which was one of the first energy giants to announce a goal of net-zero emissions by 2050, would have promised emissions would be 35% to 40% lower by the end of the decade.
However, it said on Tuesday it is now targeting a 20% to 30% cut and said it needs to keep investing in oil and gas to meet demand.
“We are leaning towards our strategy today,” said Looney of BP. “We announce additional investments of up to $8 billion in energy transition this decade and up to $8 billion more in oil and gas to support energy security and energy affordability in this decade.”
The activist investor group Follow This sharply criticized the move.
“If the bulk of your investments remain tied to fossil fuels and you even plan to increase those investments, then you cannot look to Paris because you will not achieve large-scale emission reductions by 2030,” said Mark van Baal. Founder of Follow This.
— CNBC’s Natasha Turak contributed to this report.
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