United States oil companies shattered their profit records last year, according to earnings reports released over the last two weeks. Five of the biggest American companies — Exxon, Chevron, BP, Shell and TotalEnergies — raked $190 billion in 2022 CNBC reported.

Too much of that money has gone back to shareholders and executives, a White House spokesperson said in a Jan. 31 statement to the Hill, and not enough has gone into investments to increase production and thus lower prices. 

At a press conference with several Democratic members of Congress Feb. 1, Ward 6 ANC commissioner Rhonda Hamilton spoke about the impact high gas prices have had on her own community.

“Big Oil companies are using these massive profits for record stock buybacks to their CEOs and wealthy shareholders. My [district’s] families are facing evictions and worried about how they’re going to pay and catch up on their utility bills,” Hamilton said. 

“This is not fair. And it is not right that they have failed to ease the financial suffering that their pricing has placed on these families,” she continued.

The market forces drove oil prices skyward, explained

Shell reported over $41 billion in 2022 earnings on Feb. 2, and ExxonMobil announced Jan. 31 that its profits for the year totaled $55.7 billion. Both companies made over $10 billion more last year than their previous record, which was in 2008. Chevron, with $36 billion, more than doubled its earnings from 2021.

The high profits stem from a perfect storm of market forces in 2022 that caused major jumps in oil prices. One major factor: the Russian invasion of Ukraine. In the spring, the U.S., the E.U. and Canada first imposed sanctions on Russian crude oil in the spring of last year; starting Feb. 5, additional sanctions by the E.U. will take effect. The decrease in energy supply — and the increase in demand as pandemic lockdowns eased — drove up prices for crude oil, natural gas and refined fuels like gasoline and diesel all at the same time. 

“They’re actually taking advantage of a war in Ukraine, of the human rights violations there by Putin,” Democratic California Congressman Ro Khanna said at Wednesday’s press conference.  “They’re saying let’s use this opportunity to have price volatility and make record profits.”

In a June article for Time, oil historian Gregory Brew wrote that the notoriously volatile oil market became particularly vulnerable in the years before Russia’s invasion. U.S. production had steadily increased over the previous decade, doubling between 2008 and 2019. That increased supply lowered oil prices globally. Then when COVID-19 hit in 2020, lockdowns slashed demand for oil; the market collapsed, with prices hitting historic lows. Private companies started selling aging oil refineries and stopped investing in new production infrastructure. 

So when Russian oil supplies went off the market for many countries, companies had few avenues available to increase production quickly. At the same time, the world’s biggest oil-supplying countries, collectively known as the Organization of Petroleum Exporting Countries, cut their output toward the end of 2022. Gas prices hit an average of nearly $5 in June of last year. 

Oil Companies Put Profits Over People — But Not Necessarily in the Way That You’d Think

Khanna and other Democrats have called the oil companies out for “profiteering” or price gouging consumers. But some experts, including GasBuddy’s head of petroleum analysis Patrick De Haan, disagree with that description. Individual oil companies don’t set the price of oil, which rests on the global market. And less than 1% of American gas stations are actually owned by oil companies, even if stations use company franchise logos. 

In fact, gas stations lost money on average in 2022 even as oil companies’ profits soared, according to a study by financial news magazine Barron’s. Individual station owners set prices based on what they expect to pay for the next shipment of oil — and analysts like De Haan say data points to oil companies charging market price for gas without unusual markups.

But even if the major oil companies may not be directly price gouging consumers, they have still contributed to the problem of high energy prices. On Jan. 25, Chevron announced the oil industry’s most ambitious shareholder payout to date, with plans to spend $75 billion buying back its stock over the next five years. The White House has called on companies to spend money on increasing oil production rather than rewarding shareholders.

“The latest earnings reports make clear that oil companies have everything they need, including record profits and thousands of unused but approved permits, to increase production,” White House spokesperson Abdullah Hasan said in the statement to the Hill. “They’re instead choosing to plow those profits into padding the pockets of executives and shareholders.”

Encouraging oil companies to increase fossil fuel production does not fit neatly into the Biden administration’s efforts on climate change. Climate scientists have said that limiting the planet’s warming to 1.5 degrees celsius and averting some of climate change’s most catastrophic impacts will be essentially impossible if new fossil fuel projects continue to develop. 

Private U.S. companies have increased oil production modestly over the last year, with barrels of crude oil produced per day increasing by about 5.4%. But, per NPR energy reporter Camila Domonoske, Chevron’s plans for next year include just a 0-3% increase in production, and Exxon plans to hold production flat.

Despite major extra profits this year and minimal plans to invest in new production next year, the major oil companies still do not intend to put substantial money toward renewable energy projects. The Wall Street Journal reported Wednesday that BP executives plan to further reduce its spending on renewable energy projects because the company was not seeing high enough returns on those investments. According to Barron’s, BP’s stock price began to rise immediately after that report came out. 

Transitioning to renewable energy will be expensive — but the impacts of unabated climate change will be far more so. American healthcare costs related to fossil fuel air pollution also total in the hundreds of billions, according to a 2021 report by the Medical Consortium on Climate & Health. Oil companies, however, are not on the hook for any of those costs. 

“[In] my community in Buzzard Point in Southwest, we’re living every day near environmental hazards that are polluting the air and reducing our life expectancy,” Hamilton, the ANC commissioner, said. “The hardships to these families do not end with financial ones.”

Kayla Benjamin

Kayla Benjamin covers climate change & environmental justice for the Informer as a full-time reporter through the Report for America program. Prior to her time here, she worked at Washingtonian Magazine...

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