Oil giants are (still) raking in historic profits, but it could be a grand finale as green energy ramps up
Pump it up… Energy powerhouses pulled in ginormous profits last year, continuing a multiyear streak of blockbuster earnings. Last week, Exxon reported a historic $56B profit for 2022, the biggest for any Western oil biz ever. Shell also rang in a slick annual profit, which was $10B higher than its last record, in 2008. Meanwhile, Chevron pulled in a record $35B, but fell short of expectations. Up next: BP, TotalEnergies, and Valvoline report this week.
- Full tank: Rather than ramping up production, oil giants are investing in themselves — and their shareholders. Last week Chevron agreed to buy back a whopping $75B of its shares, and last year Exxon tripled buybacks to $30B.
- Big crank: Western oil biggies are expected to have earned a combined $200B in profit last year, reigniting talks among US lawmakers about imposing a windfall tax on their excess earnings.
Drilling down… For much of last year, oil giants benefited from rising prices as Russia’s war on Ukraine strained supply and demand rebounded while production stayed tight. But in the last quarter of the year, gassy growth slowed as prices fell. This year, big oil’s profit boom is expected to cool. Pump prices have dropped 30% from last year’s highs, as the global economy slows and recession jitters curb demand. Still, with China’s reopening, analysts predict oil could climb as high as $120/barrel (China’s the world's second-largest oil consumer behind the US).
It could be big oil’s big finale… before the fall. Last week, oil titan BP said it expects renewables will make up 35% to 65% of the energy market by 2050, up from just 10% today. The pivot from fossil fuels to green energy could be accelerated by the “energy trilemma” (affordability, security, sustainability). Last year, clean-energy investment hit a record $1T, matching fossil-fuel investment for the first time. It’s expected to hit $2T by 2030.