Oil companies on top, but earn criticisms
Oil – Gas and oil prices increased as a result of Russia’s invasion of Ukraine in 2022.
Gas stations increased their prices in the months that followed, assisting businesses in making substantial profits.
Below is a list of the companies who made $199.3 billion in revenue last year:
- BP (BP
- Chevron {CVX)
- ExxonMobil
- Shell
- TotalEnergies (TOT)
For the first time in the history of the firm, TotalEnergies reported a year profit of $36.2 billion on Wednesday, exceeding revenues for 2021.
The success of the high increase in earnings was also shared by other Western energy behemoths.
In the meanwhile, investors enjoyed huge gains.
However, the infusion of cash hasn’t led to a spike in investments in renewable energy, despite ample evidence that the world has to move more swiftly to address climate issues.
Turnaround
The industry made a spectacular reversal with the big gains after experiencing losses and decreasing shareholder payouts in 2020 as a result of the pandemic lockdowns that lowered energy consumption and increased the price of oil.
The turnaround can be attributed to the skyrocketing oil and gas prices when the economy resumed.
It worsened when Russia invaded Ukraine in February 2022.
Despite the advancements, oil companies are under criticism, mostly over their pricing and investments in alternative energy.
The two situations also prompted European governments to implement windfall taxes.
The money will help families make ends meet as energy prices rise.
Shareholders
The more than $100 billion in dividends given to shareholders by the top five oil and gas businesses in the world’s private sector, however, dwarf the greater tax liabilities and investments in new sources.
Tom Ellacott, senior vice president for corporate research at Wood Mackenzie, emphasized the positive rise.
“It’s been a spectacular year for shareholder distributions,” said Ellacott.
The recent year has seen significant increases in share prices, with TotalEnergies’ price rising by 11% at the bottom and Exxon’s price rising by 39% at the top.
Ellacott stated that higher oil prices would probably be needed to continue the scale of share repurchases seen in 2018, even if she anticipates dividends to stay high until 2023.
Nevertheless, several companies have already announced intentions to sell billions of dollars’ worth of shares in order to buy back their own stock.
The Dow’s best-performing firm in 2022, Chevron, said in January that it would buy over $75 billion worth of its own shares.
The Biden administration didn’t take this problem lightly while reaching its decision.
Abdullah Hasan, the White House press secretary, said:
“For a company that claimed not too long ago that it was ‘working hard’ to increase oil production, handing out $75 billion to executives and wealthy shareholders sure is an odd way to show it.”
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More energy
While stockholders have earned significant dividends, businesses have only made small investments in renewable energy, despite the fact that they have increased their expenditure on oil and gas as demand has climbed and European governments have taken action to replace Russian supplies.
According to Wood Mackenzie, the yearly capital expenditures on oil and gas were around $470 billion (excluding the hunt for new resources).
However positive the numbers may seem, they are still below pre-pandemic levels. The consultant did, however, forecast a rise in 2023.
In 2021, the International Energy Agency said that if the world is to achieve the Paris Climate Agreement’s goal of limiting global warming to 1.5 degrees Celsius above pre-industrial levels, it must stop investing in the supply of new fossil fuels.
Major oil companies continue to invest billions in the search for new sources of oil and gas.
Mark Van Baal established an activist shareholder group named Follow This, claiming in a statement:
“If the bulk of your investments remain tied to fossil fuels, and you even plan to increase those investments, you cannot maintain to be Paris-aligned, because you will not achieve large-scale emissions reductions by 2030.”
Production slash
Three years ago, BP revealed a plan to cut oil and gas production by 40% from 2019 levels by 2030.
On Tuesday, the company departed from the objective and stated that the output in 2030 would now be around 23% lower.
BP now expects to reduce carbon emissions from oil and gas production by 20% to 30% by 2030 as opposed to the anticipated 35% to 40% reduction.
In a statement, BP’s CEO, Bernard Looney, said the following:
“It’s clearer than ever after the past three years that the world wants and needs energy that is secure and affordable, as well as lower-carbon.”
“We need continuing near-term investment into today’s energy system – which depends on oil and gas – to meet today’s demands and to make sure the transition is an orderly one.”
BP maintained its dedication to being a net-zero emissions company by 2050 by investing more than 30% of its $16.3 billion in capital expenditures in “transition” areas last year.
The majority of the funds were used to pay $3 billion for Archaea Energy, a US company that produces natural gas from biological waste.
Shell’s Renewables and Energy Solutions division received $3.5 billion, or 14% of its total capital expenditures, for the following purposes:
- Carbon capture and storage
- Electricity generation
- Hydrogen production
- The trading of carbon credits
One-third of total spending, or nearly $21 billion, was spent on “low- or zero-carbon enterprises,” according to Shell. This figure includes operations.
The world has to make the following changes, according to Shell CEO Wael Sawan, in order to move toward renewable energy more quickly:
- Government policy
- Customer uptake
- Continued investment in gas and oil companies
According to Sawan, Shell is attempting to distribute funds in the right amounts.
