The windfall comes as consumers around the world continue to feel the pain of decades-high inflation and a cost-of-living crisis that is especially painful at the gas pump. Crude oil prices rose above $120 a barrel in March before falling again in June and up 34 percent from a year earlier. AAA reported that the national average gas price in the United States jumped $5 a gallon for the first time, though prices are now on the decline.
President Biden has warned the industry that he is considering all options to curb their profits if gas prices rise. The president and other Democrats have consistently railed against oil industry earnings at a time when drivers are struggling to cover the cost of filling up.
While Biden’s tools are limited — he doesn’t have enough congressional support to advance his plan for a windfall profit tax — that could change if he declares a “climate emergency,” which the administration has said is possible. If gas prices start to rise again, as energy analysts predict, Biden could use his presidential power to advocate for more government regulation of domestic oil and gas producers.
Oil executives have pushed back on criticism from the Biden administration that pumping more oil is the only way to remedy the imbalance of supply and demand in global oil markets.
“I want to make it clear that Chevron shares your concern about the high prices Americans are experiencing,” Chevron Chief Executive Mike Wirth told Biden in an open letter. “And I can assure you that Chevron is doing its part to meet these challenges. Increasing capital spending to $18 billion in 2022, more than 50% over last year.
Pump Shock: Why Gas Prices Are High
BP’s second-quarter results, up from $6.2 billion in the first quarter, were driven by strong refining margins, “exceptional oil business performance” and higher fuel prices, the company said in a statement. A surge in global demand and the war in Ukraine are key to the rise in prices, directly increasing the company’s profits.
“Today’s results demonstrate that BP will continue to operate while transforming,” CEO Bernard Looney said in a statement. “We will do this by providing the oil and gas the world needs today – while, at the same time, investing in accelerating the energy transition.”
As a result of the higher profit, the company said it would increase dividend payments by 10 percent, to 6.006 cents per common share, higher than previously expected. “This increase reflects the underlying performance and cash generation of the business,” the company said.
BP said oil and gas prices would remain higher in the third quarter due to “ongoing disruption to Russian supply” and “low levels of spare capacity”. The geopolitical outlook has led to a shortage of European gas supplies that are “highly dependent on Russian pipeline flows”, which is expected to “raise” prices.
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Russia’s aggression against Ukraine has sent global energy markets soaring as the West seeks to punish Moscow by cutting its energy sales. Prices have skyrocketed as there is less oil and gas in the market. Prolonged disruptions from the coronavirus pandemic have led to rising costs and higher profits for fossil fuel companies.
“BP expects higher oil prices to continue into the third quarter and this is not only good news for customers already struggling with high energy and petrol prices, but good news for cash flows,” Matt Britzman, equity analyst at financial services company Hargreaves Lansdown, said in a statement. “Markets reacted favorably to a set of results that beat estimates on all metrics.”
Headquartered in London, BP referred to its offshore work in Brazil, Indonesia and Canada as part of its “recovery hydrocarbons” operations.
“BP continues to build a track record of delivery against its disciplined financial framework,” chief financial officer Murray Auchinclose said in the report. “We are investing disciplinedly to advance our strategy; And we’re delivering on our commitment to shareholder returns – increasing our dividend by 10% and announcing a further $3.5 billion in share buybacks.
Blockbuster profits for the second quarter were reported last week by oil giants Shell, Chevron and ExxonMobil, which combined with BP’s results brought the profits of major Western oil and gas companies to around $60 billion, Reuters reported.
Exxon, Chevron post blockbuster gains on oil price boom
President Biden has accused US oil giants of taking advantage of tight circumstances. Speaking at the Port of Los Angeles in June, he said, “Exxon has made more money than God this year.” The company pushed back, warning his administration to “criticize and sometimes abuse our industry” as oil companies deny allegations that their policies are keeping prices artificially high.
In May, Britain’s government announced a 25 percent windfall tax on oil and gas firms’ profits, which would be used to help low-income families cope with a sharp rise in the cost of living. US Legislators A similar tax has been considered, but it is unlikely to pass in an evenly divided Senate.
British lawmaker and opposition finance minister Rachel Reeves criticized BP’s profits, Tweeting: “People are worried about energy prices rising again in the fall, but once again we’ll see good returns for oil and gas producers.”
Anger is expected in parts of the United States as consumers experience price hikes across the board, including food, gas, rent and medical care. Economic headwinds lead to an uncertain outlook for millions of families, financial analysts warn, making big corporate profits like BP hard to swallow for many.
Left-wing politicians and advocacy groups in both the US and the UK have called for additional taxes on oil companies’ windfall profits.
Greenpeace UK He tweeted “It’s been particularly obscene and cruel this winter for gas companies like Shell and BP to make record profits while consumers struggle to stay warm.”
Rep. Rosa De Lauro (D-Conn.) He tweeted “Corporate monopolies are overriding their market power, hurting families at the pump and driving up inflation,” later adding: “Americans don’t deserve price hikes at the pump.”