War Profiteering Oil Companies Report Record Profits; President Biden Proposes A Windfall Profits Tax

CBS News reports, Oil giants rake in record profits as energy prices remain high (excerpt):

Oil companies are reporting surging profits as energy prices remain elevated.

Exxon Mobil broke records with its profits in the third quarter, raking in $19.7 billion in net income, a nearly $2 billion increase from its second quarter. The Irving, Texas, company said Friday that it booked $112 billion in quarterly revenue, more than double what it brought in during the year-ago period.

In August, President Joe Biden said “Exxon made more money than God this year.” [And he knows God personally!] The president’s rebuke came a month before Exxon Mobil booked what was then an unprecedented $17.8 billion profit in the second quarter.

In its most recent quarter Chevron notched a record $11.2 billion in profits on revenue of $66.6 billion.

A trade publication reports, BP announces profit of $8.2bn; Aramco and Phillips also up:

British oil and gas company BP has announced that underlying profits more than doubled to $8.2bn in the third quarter of 2022, making it one of the company’s most profitable year ever.

BP generated $3.5bn in surplus cash flow in Q3, with plans to execute a $2.5bn share buyback before reporting its fourth-quarter results. This would bring its total announced share buybacks using surplus cash flow to $8.5bn. This is equivalent to 60% of 2022’s year-to-date surplus cash flow.

At the same time, Philips 66 reported $5.4bn in earnings, compared to earnings of $3.2bn in the second quarter. The company’s adjusted earnings in the third quarter were $3.1bn, which recorded $200m less than in the second quarter.

Saudi Aramco joined the big profit pool with net income increasing to $42.4bn. This compares to $30.4bn over the same period in the previous year. According to Reuters, the profit beat the forecasts by 39% in the Q3 net income.

The New York Times reports, Shell and Total, Oil Giants, Report Huge Profits on High Energy Prices (excerpt):

Gargantuan profits continue to roll in at Europe’s energy giants. London-based Shell reported adjusted earnings of $9.45 billion for the third quarter, its second-highest profit on record. On the same day, Paris-based TotalEnergies reported a profit of $9.9 billion.

For both companies, the profits were more than double what they earned in the same period a year ago.

Shell and Total, like other energy companies this year, are benefiting from high oil and natural gas prices partly stoked by the war in Ukraine, as Russia squeezes gas flows to Europe.

Shell is returning a large chunk of this bounty to shareholders. The company said that it planned to increase its dividend to shareholders for the fourth quarter by 15 percent, to about 29 cents a share. The company also pledged to buy back $4 billion worth of its shares, bringing total buybacks announced this year to $18.5 billion, or 10 percent of the company’s share capital.

[In] what may provoke a political storm in Britain, Shell said it had not yet been obliged to pay the “windfall” tax on oil and gas profits enacted earlier this year by the British government. The tax allows companies to deduct capital expenditures.

The British government approved a windfall tax on oil and gas producers in July:

British lawmakers approved a 25% windfall tax on oil and gas producers in the British North Sea on Monday, which the government says will raise 5 billion pounds ($5.95 billion) in one year to help people struggling with soaring energy bills.

The Energy Profits Levy will target profits made from a spike in oil and gas prices as energy demand is going up after pandemic lockdowns ended and the Russia-Ukraine conflict started.

On Tuesday, the New York Times reports, Biden Accuses Oil Companies of ‘War Profiteering’ and Threatens Windfall Tax:

President Biden threatened on Monday to seek a new windfall profits tax on major oil and gas companies unless they ramp up production to curb the price of gasoline at the pump, an escalation of his battle with the energy industry just a week before the midterm elections.

Remarks by President Biden on Recent Reports of Major Oil Companies Making Record-Setting Profits.

The president lashed out against the giant firms as several of them reported the latest surge in profits, which he called an “outrageous” bonanza stemming from Russia’s war on Ukraine. He warned them to use the money to expand oil supplies or return it to consumers in the form of price reductions.

“If they don’t, they’re going to pay a higher tax on their excess profits and face other restrictions,” Mr. Biden told reporters at the White House. “My team will work with Congress to look at these options that are available to us and others. It’s time for these companies to stop war profiteering, meet their responsibilities to this country, give the American people a break and still do very well.”

[W]hile the price at the pump has fallen significantly since topping out just above $5 a gallon in the summer, it is still much higher than when Mr. Biden took office [at the height of the Pandemic Recession when the global economy was still largely shut down, and demand was low] and contributes to the overall inflation rate, which remains near a four-decade high.

The president framed his case against the oil companies in terms that seemed clearly aimed at next week’s vote. “The American people are going to judge who is standing with them and who is only looking out for their own bottom line,” he said. “I know where I stand.”

The oil giants and their lickspittle lackeys in the Republican Party who do their bidding were critical, as one would imagine. “Pshaw! There shall be no windfall profits tax!” 

[Mr.] Biden’s statement came just days after the oil giants reported another three months of flush coffers. Exxon Mobil brought in a record of nearly $20 billion in profits for the third quarter of the year, 10 percent higher than the previous quarter and its fourth consecutive quarter of robust earnings. Chevron reported $11.2 billion in profits, just below the record it set the quarter before. The European-based Shell and Total Energies companies similarly reported that profits more than doubled from the same period a year ago.

The five biggest oil companies generated more than $50 billion in profits in the second quarter, and the International Energy Agency has reported that total net income for the world’s oil and gas producers will double this year from last to a record $4 trillion. “Today’s high fossil fuel prices have generated an unprecedented windfall for producers,” the agency said.

A half-dozen of the largest firms earned more in profit over the past six months than in all of last year and more than two and a half times what they earned in the same quarters of 2021, White House officials said. Mr. Biden said if the industry simply earned the same level of profits it has for 20 years, consumers would pay 50 cents less per gallon.

The firms have used their profits in some cases for dividend increases and stock buybacks rather than increased production, which could bring down the price of oil and therefore trim their profits. Exxon Mobil raised its dividend on Friday, citing a commitment to “return excess cash” to shareholders.

Because the investor class aka the predator class demands high returns on their investments, and the public good – and the nation – be damned. I always imagine Randolph and Mortimer Duke in Trading Places (1983) as the public face of the predator class.

[T]he current national average of $3.76 a gallon is about three pennies less than it was a month ago and about $1.25 below the June peak, but still far above the $2.39 it was when Mr. Biden took office, according to AAA.

[A] windfall profits tax would impose an excise levy on the output of domestic oil producers. Congress would establish the tax rate, which could differ between independent producers and the biggest companies. It would be the first windfall profits tax in the United States in more than three decades, but since earlier this year, 15 European countries have proposed or enacted such levies, including Britain, Italy and Spain, according to the Tax Foundation.

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Industry executives said Mr. Biden’s proposal to revive the windfall profits tax would not increase supplies. “It’s a horrible idea, small thinking,” said Patrick Montalban, the president of Montalban Oil and Gas, a producer in North Dakota and Montana. “It’s going to take away from exploration and production of domestic oil and gas. It’s that simple. Total politics.”

Democrats who have pressed Mr. Biden to consider such a tax applauded his statement. “It’s time for Congress to stand up to Big Oil and bring relief to consumers, instead of corporate stock buybacks and bonuses,” said Senator Sheldon Whitehouse of Rhode Island, who has introduced windfall profits tax legislation.

But some liberals were unhappy that Mr. Biden was using the threat to leverage production increases. “Drilling more won’t lower prices for U.S. consumers,” said Robert Weissman, the president of Public Citizen, an advocacy group. “More investment in oil drilling will deepen our dependence on fossil fuels.”

Investments in oil and gas exploration remain 17 percent below the 2019 level and half the level in 2014, when the oil business was enjoying a price boom, according to the International Energy Agency. Few new fields have been discovered in recent years, leading to ever-tightening supplies. And Wall Street has shied away from investing in hydrocarbons because of growing concerns about climate change.

American oil production this year is averaging 11.87 million barrels a day, an increase of [only] 4 percent from last year despite urging from the administration that companies drill and produce more. The number of rigs deploying has been increasing this year, although increases have slowed since summer.

Shale oil production, which has been the engine of growth over the last decade, is expected to grow to roughly the level before the Covid-19 pandemic caused the 2020 economic downturn and collapse of oil prices.