Oil company earnings skyrocket — again
Oil companies made billions this quarter, they told investors on calls this week.
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they → skyrocket → calls
ExxonMobil earned $15.4 billion, more than doubling its earnings compared to this time last year.
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ExxonMobil → earn → time
Shell nearly doubled its own earnings, at $10.8 billion.
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Shell → double → billion
Together, the three companies pulled in just over $36 billion this quarter.
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companies → pull → billion
As with the soaring profits oil companies recorded last quarter, it's largely due to the war in Iran disrupting the global oil supply.
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it → soar → supply
Less oil is moving through the Middle East, so the oil in other parts of the world has become much more valuable.
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oil → move → world
Brent crude is now trading around $113 a barrel.
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crude → trade → 113
For context, before the war began, it was about $70 a barrel.
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it → begin → context
Meanwhile, demand for oil and refined products like gasoline, diesel and heating oil hasn't changed much.
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demand → change → gasoline
People still need them to heat homes, drive cars, run tractors and truck everything we buy around the country.
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we → need → country
Dan Pickering, founder of the financial services firm Pickering Energy Partners, says that big oil companies are profiting as they meet that demand. "
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they → say → demand
The majors are able to sell their barrels that they produce in the U.S. or Latin America or Europe for much higher prices," he said.
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he → sell → prices
On their earnings calls, oil company executives said a good chunk of their profits were going to their shareholders through dividends and stock buybacks.
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chunk → say → dividends
Exxon announced its highest-ever quarterly dividend.
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Exxon → announce → dividend
But for the most part, Pickering says, these companies are in a wait-and-see stance — they're not really spending that money on things like new drilling projects, because they know they're in an unusual moment.
"
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they → say → moment
This is a period where the high prices are driven more by geopolitical events than anything else," he said.
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he → drive → anything
Since it's hard to predict how long those will last, he continued, "You put the money in the bank and watch to see what happens as we move into 2027."
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we → predict → 2027
Pickering says this makes sense because oil is a cyclical industry — prices move up and down.
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prices → say → sense
Companies want to hold onto their cash when times are good so they can insulate themselves when they're not so good.
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they → want → themselves
A supply shock, amid two ongoing wars
The rising cost of oil has pushed up what drivers pay at the pump.
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drivers → rise → pump
Gasoline now costs about $1.20 more per gallon than it did a year ago, according to AAA.
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it → cost → AAA
Diesel hit a record high in September, and is still close to that high.
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Diesel → hit → high
Exxon CEO Darren Woods was one of the few to directly address the issue on an earnings call, saying, "We recognize the impact high prices have on people's lives and economic growth."
Exxon's solution, he said, is to boost production.
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he → address → production
" With products in short supply, our teams have done everything they can to keep prices down by maximizing production," he said.
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he → do → production
Chevron CEO Mike Wirth made a similar point, telling investors, " What we can do is what we can control, and that's help consumers get as much as they possibly can out of our systems.
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they → make → systems
On these calls, executives from all the companies pointed out that they're dealing with a massive supply shock.
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they → point → shock
The war in Iran, as well as Ukraine's strikes on Russian oil refineries, have taken a lot of global refining capacity offline.
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war → take → capacity
The executives indicated that they don't see the situation changing anytime soon.
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situation → indicate → ?
"If you'd asked me six months ago, would I have thought that oil prices were going to be where they are today — no," Shell CEO Wael Sawan said on his company's call.
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Sawan → ask → call
"Personally, I thought we were at a high there, and we were essentially looking at what was going to be a temporal spike.
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what → think → high
But because the war has gone on this long, global oil reserves are at much lower levels.
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reserves → go → levels
The U.S. Strategic Petroleum Reserve is at low levels; Europe released some of its crude oil and diesel.
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Europe → release → oil
"We're now seeing more and more structural stability in that higher oil price simply because we are seeing that inventory levels are being drawn down very quickly, and it's going to take quite some time to be able to refill that inventory," Sawan continued.
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Sawan → see → inventory
Calls for a windfall tax
Democrats in both chambers of Congress have called for a tax on windfall profits — excess profits that come about because of geopolitical forces outside of their control, not because of innovation.
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that → call → innovation
Bills introduced this spring would return some of those profits to Americans through tax rebates.
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Bills → introduce → rebates
Earlier this year, Senator Sheldon Whitehouse (D-R.I.), who sponsored a windfall tax bill in the Senate, said he hopes it will also spotlight how climate-friendly renewable energy is increasingly more cost-competitive than fossil fuels.
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energy → sponsor → fuels
" Wind, solar, and battery power, they're not raising their prices," Whitehouse told NPR at the time.
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Whitehouse → raise → time
Isabella Weber, an economist at the University of Massachusetts Amherst, has studied how windfall taxes worked in other countries.
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taxes → study → countries
She says windfall taxes are a way to bridge the gap between what the oil companies make and what most people pay for that oil.
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people → say → oil
"The companies that are running this essential sector have been reaping record profits amidst the worst energy supply crisis that we have had in several decades," she said.
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she → run → decades
…and 5 more, not listed.
The Aporia
