Vantage | How Big Oil won big from war and why we should be worried

The Big Oil group doesn’t mind the war, whether in Ukraine or Gaza. War equals instability, and instability equals higher oil prices, which means bumper profits.

As much as the amount of 281 billion dollars the five largest listed oil companies—BP, Shell, Chevron, ExxonMobil, and TotalEnergies—have made since February 2022, that is since the beginning of the Ukraine war.

All of them are European or American, and Shell made 94 billion dollars. The other three made 187 billion dollars. After all, companies are designed to make money, which also means more returns for investors. But, there are two problems:

Number one: These profits coincided with a tough time for households. Our inflation was through the roof. In some countries, it was in double digits.

Yet, Big Oil was making big money. Their profits fueled our inflation.

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Number two: It is the setback to climate goals. The oil industry makes up 15 percent of total emissions. It is one of the biggest causes of climate change, but the same oil industry is making big bucks and giving massive returns to investors.

In 2022, Big Oil rewarded shareholders with 104 billion dollars. In 2023, with around 100 billion dollars.

The question is: Why will oil companies turn green if oil is making so much money? They have no reason to change. So most Big Oil companies are going back to default.

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Big Oil is going back on its promise of sustainability, and why is that? For starters, oil prices have shot up in the last few years. The pandemic years were tough for Big Oil. Most factories were closed. Cars were locked away in the garage, so oil demand was very low. The prices fell to 32 dollars per barrel in 2020.

By December 2021, things looked up, and oil prices had recovered to 67 dollars per barrel, but then came Russia’s war on Ukraine.

By mid-2022, the prices had topped 112 dollars per barrel. Big oil firms were minting money. Another jolt came in late 2023 when Hamas launched an attack on Israel and West Asia plunged into war.

Oil prices rose once again, and today they are around 82 dollars per barrel. So it makes sense to invest in fossil fuels again. There is a lot of money to be made.

Big Oil has found a solution to keep investors quiet—shower them with money. Shell will give rewards worth 23 billion dollars in 2023. Their profits had fallen compared to 2022. Yet Shell decided to splurge on investors.

In fact, 23 billion dollars are six times what Shell invested in green energy. BP did something similar. They had promised to raise dividends by 4 percent every year. But the actual raise in 2023 was 10 percent. So investors are more than happy to give their blessings. Activists have tried to put pressure on them—some have disrupted investors’ meetings—but nothing seems to work.

The solution lies in government policy; there has been talk of imposing windfall taxes on Big Oil or maybe a Green Cess. But we need more than just talk. We need action. Governments must incentivise Big Oil to invest in green energy through carrots like subsidies and sticks like taxes. If not, Big Oil won’t change its ways.

Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.