Surging gas prices have definitely hurt working people. However, that hasn’t stopped 25 of the world’s biggest fossil fuel corporations from collectively reaping $205 billion in profits in 2021. Record profits resulted from conscious decisions by oil and gas companies to monopolize on soaring prices and savor the financial rewards internally.
It’s not a coincidence that more robust profits came after shareholders pressured fossil fuel corporations to restrict supply in order to drive prices higher.
A new report by the watchdog group Accountable.US points to oil and gas companies providing $35 billion to shareholders through dividend bumps and stock buybacks instead of reinvesting to help lower prices.
The record profits emerged concurrent with steadily rising US average gas prices. By December, 2021, gas had hit $3.40 per gallon, up from $2.10 a year before.
Kyle Herrig, president of Accountable.US, said in a statement that “as Americans encounter higher prices to fill their gas tanks or heat their homes, Big Oil is grasping at straws to explain why they are swimming in unused leases and hundreds of billions of dollars in profits—money they hand over to wealthy oil and gas company executives and shareholders rather than struggling consumers.”
14 firms rewarded shareholders with more than $35 billion, bringing out lots of investors’ smiles.
In the meantime, the fossil capital accolades just keep accumulating.
- Chevron called 2021 one of its “most successful years ever.”
- Shell CEO Ben Van Beurden called 2021 a “momentous year.”
- Coterra CEO Tom Jordan called the high gas prices “good.”
- Equinor CEO Anders Opedal bragged to investors about “capturing value from high prices.”
- Pioneer Natural Resources called 2021 one of the best years for shareholder returns in the shale industry in the past decade.
- Marathon Oil called doubling down on share buybacks the “clear thing for us to do.”
Enormous Profits = Time to Pull-Back on Subsidies, Right? Wrong
The US has supported the development of its oil and gas industry since the early 20th century so that today the US is the world’s top oil and gas producer. Its crude oil and gas production have grown by over 100% and 65% respectively since 2005, largely owing to developments in horizontal drilling and hydraulic fracturing techniques.
An open letter in a 2021 issue of IOP Science traces how numerous subsidies combine to boost profitability and, by extension, production levels of oil and gas. Subsidies make oil and gas cheaper than they otherwise would be, since the subsidies reduce the costs of developing new oil and gas fields and therefore, the market price of these fuels.
Despite repeated pledges to phase out inefficient fossil fuel subsidies, US oil and gas production continues to be subsidized by billions of dollars each year.
Biden said last week that the Russian invasion of Ukraine “should motivate us to accelerate the transition to clean energy.” Isn’t it time for policymakers to chart a schedule of targeted subsidy repeals and regulatory reforms that can contribute to reducing carbon dioxide emissions and achieving other sustainable development goals?
And it’s not just subsidies — other indirect forms of government support can also confer financial benefits to the oil and gas industry. Specifically, oil and gas producers especially gain from not having to pay the full costs of well closure and remediation or those related to proper management and disposal of hazardous wastes generated from their operations.
Instead, these avoided costs are transferred to taxpayers in the direct form of cleanup expenses as well as indirect public health risks.
The economics of industry subsidy dependence also depends on other factors, including the perceived risks of developing new oil and gas fields, whether due to reduced access to capital or due to uncertainty in market demand for oil and gas.
“All this money helps to line the pockets of wealthy oil executives who receive massive chunks of their compensation in company stock,” states the Accountable.US report.
Big Oil Salivates over Russia’s War on Ukraine
US oil and gas costs have soared even higher during the first 3 months of 2022. Since President Joe Biden announced one week ago that the US would ban imports of Russian fossil fuels in response to Moscow’s deadly assault on Ukraine, the average price for a gallon of gas in the US has continued to climb, surpassing $4.24 on 03.28.22.
That’s even though Biden stressed that this is “no time for profiteering or price-gouging.”
Big Oil is exploiting Russia’s war on Ukraine to charge even more at the pump in 2022 and advance its financial interests. Accountable.US exposes how fossil fuel giants responsible for hiking prices have already announced plans to buy back nearly $80 billion in stocks in 2022.
Herrig argued that “it’s time for Big Oil to stop lying about the Biden administration’s public land policies, quit using it as a cover to cash in on inflation and the crisis in Ukraine, and pass the benefits of their massive profits on to consumers.”
Climate activists want to ensure that these corporations pay a penalty when they price gouge. A recent legislative proposal seeks to amend the Internal Revenue Code of 1986 and impose a windfall profits excise tax on crude oil and to rebate the tax collected back to individual taxpayers. The Big Oil Windfall Profits Tax proposal makes transparent the profit-gorging of fossil fuel companies amid Russian President Vladimir Putin’s invasion of Ukraine.
As Common Dreams reports, the measure would hit large fossil fuel companies with a per-barrel tax — whether the oil is domestically produced or imported — equal to 50% of the difference between the current price of a barrel of oil and the average price per barrel between 2015 and 2019. An estimated $45 billion in annual revenue would be redistributed to US households in the form of quarterly rebates.
“Loosening environmental regulations and pulling back clean energy investment… will not lower energy prices for families,” said President Biden. “But transforming our economy to run on electric vehicles powered by clean energy, with tax credits to help American families winterize their homes and use less energy—that will, that will help.”
“If we do what we can,” he added, “it will mean that no one has to worry about prices at the gas pump in the future.”
Maybe the path toward clean energy will be prodded by the new US rule that will require publicly-traded companies to report GHG emissions. ESG lawsuits that contest environmental discrepancies can help, too. Climate activism like this can create optimism about humans’ ability to mitigate climate change.
Of course, reducing oil and gas reliance on government support is being promoted at a time when it’s illegal in Texas to divest from fossil fuels. A prerequisite to collective efficacy is hope that change is possible. There’s still a lot of work to do in this area, starting with the belief that the transition to renewable energy sources is stable, affordable, and economically feasible.
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