Not everyone’s pumped… Oil profits are booming and President Biden isn’t pleased. This week oil giants Chevron, BP, Saudi Aramco, Marathon Petroleum, and Phillips 66 posted jaw-dropping profits thanks to rising prices. Exxon tripled its quarterly profit to a record. Though gas prices have fallen from summer peaks, they’re still much higher than when Biden took office.
- Harsh words: This week Biden accused gas titans of “profiteering” off Russia’s war on Ukraine and threatened them with a windfall tax (a one-time tax on excess profits).
- Empty promises: Only Congress (which won’t be in session till January) can pass a new tax. Plus, analysts expect Congress to remain divided after next week’s midterms.
You don’t need a meteorologist… to know which way the windfall blows. Biden’s not the only one monitoring oil profits: lawmakers in Greece, Hungary, Italy, Romania, Spain, and the UK have implemented windfall taxes. But some investors are seeing the glass as half full:
- Buffett’s gas: In recent months Warren Buffett’s Berkshire Hathaway has boosted its massive stake in Chevron and Occidental, making oil one of its largest investments. Berkshire has gained $13B on those holdings in the past few years.
You can’t fill a Camry with stock buybacks… but oil execs insist they’re returning their profits to Americans through stock dividends and share buybacks — and say taxes could cut into investors’ returns. Oil giants Chevron, BP, Exxon Mobil, Shell, and TotalEnergies spent $20B+ on buybacks in the first half of this year and are expected to splurge more in the second half. Their shares have risen an average of 37% this year, while the S&P 500 has fallen 20%.