In the face of an energy crisis, fossil fuel companies Exxon Mobil, Shell, and British Petroleum (BP) all doubled their 2021 profits in 2022. On January 31, Exxon Mobil announced that it had made $55.7 billion (€52 billion) in 2022. On Thursday last week, Shell joined Exxon in reporting record profits: $39.9 billion (€37.3 billion). This morning, BP reported its fourth quarter results of 2022, culminating in $28 billion (€26.1 billion) for the year, while Total Energies is expected to release its fourth quarter results on Wednesday morning.
Each of these results is record-breaking. Exxon created a new record, not only for the company, but for the Western oil industry as a whole. Meanwhile, both Shell and BP made the highest profit in their respective 115- and 114-year histories.
Despite record profits, Exxon is currently suing the European Union (EU) over a $1.3 billion (€1.2 billion) windfall tax (a tax levied on unforeseen mass profit, that is not due to the company’s actions).
These profits, which the White House deemed “outrageous,” have come ostensibly as a result of the Russian-Ukraine war. As countries have put levies on exports of Russian gas, countries have turned to other suppliers, increasing demand for companies like Exxon, Shell, and BP.
Demand for energy also rose considerably following the ending of pandemic restrictions, although higher energy prices reduced it slightly in the EU in 2022.
Fossil fuel companies and the energy crisis
Although the energy crisis has pushed Europe to accelerate its transition to clean energy, in the final three months of 2022 Exxon was producing 3.8 million barrels per day – 100,000 more barrels per day than the previous quarter.
Many European governments have also subsidised energy prices for consumers since the start of the Russian-Ukraine war.
From October to December in 2022, the UK government spent £16 billion (€17.9 billion) subsidising energy price caps. The price cap is £2500 (€2800) annually for an average household, although in April this will rise to £3000 (€3359).
The Italian government earmarked €14 billion in September in order to combat the energy crisis, as well as a further €3.3 billion in handouts for 22 million workers and pensioners with an annual income of under €20,000.
This was in addition to €52 billion budgeted between January and September 2022 to fight the cost-of-living crisis.
France announced a budget of €45 billion to offset rising energy prices through an energy bill cap of 15% for French households, meaning the average household energy bill would cost €20-25 extra per month as opposed to €180 – €200. The country is also working to fully nationalise EDF, the country’s main energy supplier.
As a body, the EU agreed a provisional gas price cap on December 19, if prices on the Dutch Title Transfer Facility (TTF), the main European gas exchange, rise higher than €180 for one megawatt-hour for three consecutive working days.
Through its windfall tax, announced in September, the EU hoped to raise €140 billion from the profits of energy companies.
However, one must remember that the subsidies governments have paid to ease household energy bills are coming directly from taxpayer money, while energy giants have more than doubled their profits, despite any windfall taxes.
If the energy companies are making this much money, it is difficult to imagine any genuine reason for energy prices to have been as high as they were in 2022.
Are energy giants investing in renewables?
Exxon is planning to invest around $2.8 billion (€2.6 billion) per year in “lower greenhouse gas emissions initiatives” over the next six years. This is only 5% of the energy giant’s 2022 profits.
These initiatives mostly focus on carbon capture and storage, hydrogen and biofuels. They are also keenly concerned with curbing emissions from existing gas and oil operations, and sequestering carbon.
This is on trend for the many fossil fuel companies that are aiming to be the last fossil fuel company standing as the world moves to renewables. Many understand that, in order to achieve this, they need to be the “greenest” fossil fuel company possible.
At the same time though, they also intend to raise oil and gas production to 4.2 million barrels of oil per day by the end of 2027.
We’re committed to meeting the goals of the Paris Agreement using various approaches. Learn more about how we’re advocating to reach #netzero emissions by 2050. 👇 https://t.co/95CS8q0tim pic.twitter.com/OVBJU8ocRI
— ExxonMobil (@exxonmobil) February 7, 2023
Meanwhile, BP has cut environmental targets following its profit release. The company was previously one of the first fossil fuel giants to pledge to cut emissions by 2050, aiming for a 35-40% decrease in emissions. However, following this latest financial report, BP is now reducing these aims to 20-30%, claiming the need to continue investing in gas and oil to meet current demands.
Meanwhile, on February 1, the activist group Global Witness urged the US Securities and Exchange Commission to launch an investigation into Shell, alleging that Shell has overstated investment in renewable projects.
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Shell stated in its 2021 annual report that 12% of its capital expenditure was put into its Renewables and Energy Solutions division, which advertises itself as investing in “wind, solar, electric vehicle charging, hydrogen, and more.”
However, Global Witness argues that just 1.5% of Shell’s capital expenditure has been used to develop genuine renewables such as wind or solar; the rest of the 10.5%, it seems, has been devoted to gas.
In 2022, we delivered strong results.
As we look to 2023, we will put our #PoweringProgress strategy into action, providing the energy the world needs today and in the future.
— Shell (@Shell) February 2, 2023
Governments have also been investing in fossil fuels, where they could have invested in renewables, with G20 spending $693 billion (€648 billion) on fossil fuels in 2021.
How soon is the renewable energy future?
In 2022, the EU responded to the energy crisis by accelerating its transition to renewable energies, and solar and wind power overtook gas for the first time.
What’s more, to tackle the energy crisis, the Belgian government subsidised installing domestic solar panels, with rooftop solar now making up 66% of the EU’s solar energy quota.
Governments need to continue scaling up renewable energy quotas and targets to fulfil countries’ potentials.
Poland could deliver TWICE the renewables capacity compared to draft targets.
— Ember (@EmberClimate) February 7, 2023
However, while introducing renewable energy is one thing, phasing out fossil fuels quickly, justly, and effectively is far more difficult.
At COP27, the UN’s climate conference, only one reference was made to phasing out coal in the final agreement, with no mention of gas or oil. Even that commitment was frustratingly vague, containing no concrete targets.
COP26 first saw record numbers of fossil fuel lobbyists present at 500. These increased at COP27 to more than 600; a record number that may have been reflected in the final agreement.
For this year’s COP28, the president-designate, Dr Sultan Al Jaber, is the CEO of the Abu Dhabi state oil company. He was elected on the basis of his many climate achievements, spearheading renewable energy initiatives on behalf of the UAE.
However, the blurring of lines between renewable initiatives and fossil fuel companies in this way, only serves to benefit oil companies and prolong the usage of fossil fuels.
While the transition to renewables is recognised as inevitable, the fossil fuel companies stand to benefit from the longest transition possible, while competing to make the use of fossil fuels appear as green as possible as consumers are consistently misled.
In a year of energy crisis, the record profits of the oil companies is shameful, as taxpayers have taken on the additional cost that is disproportionate to the supply available.
Waiting for the fossil fuel companies to reform and begin investing in and moving towards renewables is a losing game, because they profit so much from fossil fuels, and renewable energy stands to be much cheaper.
The better mode is to reduce dependence on fossil fuels, investing in green energy drives, because eventually, the fossil fuel industry will hopefully have to choose between falling in line, taking on renewable energy instead, or perish.
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — In the Featured Photo: Retired oil rigs at Cromarty Firth, UK. Featured Photo Credit: Ben Wicks.