As a result of the Ukraine War, which caused energy prices to surge, the five biggest Western oil companies claimed about $200 billion in profits. Oil demand is anticipated to remain high when China reopens, along with proposals for windfall taxes.

In April 2020, the first time ever, the price of oil turned negative, shocking the financial markets. During the initial COVID lockout, demand for oil fell precipitously, and the key US oil benchmark price dropped to – $30 (minus €28) per barrel.

Some predicted that prices would never rise again. They warned that the era of hydrocarbons was coming to an end and that big oil’s days were numbered. They are right about the general path, but their timing was horribly incorrect.

ExxonMobil, Shell, Chevron, BP, and Total, the same five Western oil firms that suffered significant losses in 2020, have recently revealed a combined annual profit of more than $196 billion, aided by a surge in oil demand brought on by the conflict in Ukraine and the post-pandemic recovery.

The price of oil over $100 for the majority of the first half of last year, and in March, Brent crude reached $139 per barrel. It settled between $70 and $95 for the rest of the year, significantly higher than the $40 to $50 required for oil majors to turn a profit.

Exxon’s earnings in 2022 set a record for the US or European oil giants as well as for the company itself. Shell made more than twice as much money as it did the year before, while BP’s $28 billion profit was the biggest in its 114-year history.

As governments emphasised energy security due to the supply shock produced by rising oil prices, falling debt levels also enabled the oil majors to expand capital spending on the production of fossil fuels.

When BP CEO Bernard Looney said he wanted to “dial back” some of the energy giant’s investments in renewable energies due to the risk of oil and gas supply shortages leading to more price volatility, the green lobby criticised him.

In addition to the urgent push for renewable energy, the public is viscerally outraged over Big Oil’s pronouncements of record profits.

Skyrocketing power costs and the price of fuel have had a significant negative impact on consumers and companies during the past year. Even while many governments have sought to mitigate the harm via subsidies, there is an increasing push for windfall taxes on profits because many people believe Big Oil is taking advantage of the suffering of the public.

Profits from the oil and gas industry are already subject to temporary taxes from the UK and the EU. Unions and politicians have asked for a rise in those. The increased taxes will cost Shell, Total, and BP around $2 billion each, or 5% to 8% of profits, according to their results updates.

ExxonMobil is suing the EU in the meanwhile to force the EU to repeal its new windfall tax. The largest oil company in the US claims that by enforcing the charge, which it claims is typically the responsibility of national governments, Brussels has overstepped its legal bounds.

The tax, according to Exxon spokesperson Casey Norton, would “undermine investor confidence, hinder investment, and increase reliance on imported energy,” in December.

In his State of the Union speech this week, US President Joe Biden demanded a quadrupling of taxes be paid on share buybacks in order to further compress energy corporations.

“A few [energy companies] I spoke with stated, ‘We are scared you are going to shut down all the oil refineries anyway, so why should we invest in them?’ For at least another ten years, we will need oil, Biden told Congress. “Instead, they repurchased their own stock to reward their CEOs and stockholders with those record earnings. The right thing should be done by corporations.

According to a count by the news agency Reuters, the largest Western oil corporations distributed a record $110 billion in dividends and share repurchases to investors in 2022.

The recent US shale oil crisis as well as the devastating pandemic losses have contributed to the oil corporations’ reduction in longer-term investments. Major capital expenditures continue to be cautious due to the future’s ongoing uncertainty brought on by the shift to green energy.

As China reopens after a three-year zero-COVID policy, increasing demand for oil while raising Big Oil’s profits even more, more suffering for people and businesses may be in store.

Although it is unlikely that oil prices will ever again reach their record high of $150 per barrel set in July 2008, some analysts believe they may do so later this year before major countries experience a recession or slowdown that would halt demand.

According to the Oxford Energy Institute’s most recent oil market estimate, which was released on Tuesday, oil prices will rise to $95.7 per barrel, in part due to demand from Asia’s robust economy. According to Goldman Sachs, prices will reach $100 by December.

Russia said this week that it would reduce production by 500,000 barrels per day starting in January. This news caused prices to rise. Moscow attributed the action on Western energy sanctions, including a $60 price cap on Russian crude oil imposed by the European Union. The oil that the Kremlin once sent to Europe has instead been transferred to China and India, although at a 30% discount.

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