- Joe Biden, the US President, called for energy companies to increase production or pay a windfall income tax.
- Due to Russia’s invasion of Ukraine, oil majors reported record-breaking Q3 earnings.
- Biden slammed again energy majors profits, saying that they’re “so expensive, it’s difficult to believe”.
US President Joe Biden hit out at energy companies for posting bumper profits this year amid the Ukraine war, calling on them to increase production to help bring down gas prices at the pump — or pay a windfall tax.
He stated Monday that “the oil industry has not fulfilled its commitments to invest in America” according to a Transcript from the White HouseHe predicted that energy companies would need to boost their output and refinement capacity or face severe consequences.
In the lead-up to November 8th’s crucial midterm elections, the Biden administration has been focusing on gas prices as well as profits of energy giants. The president was already announcing record third-quarter earnings for oil and gas companies before that. Exxon was criticized for making “more money that God”,.
Biden stated that while energy companies should be paid a fair amount for work or innovation, the profits at this time are hard to believe.
“Oil companies have record profits today, but it’s not because they are doing something innovative or new. Their profits are a windfall of war — the windfall from the brutal conflict that’s ravaging Ukraine and hurting tens of millions of people around the globe,” the US leader said.
According to data compiled by b, oil majors ExxonMobil and Chevron are expected to make $100 billion in dividends and buybacks to shareholders this year.y Bloomberg.
The end of 2020 saw oil prices begin to recover as the demand for oil increased due to the lifting of pandemic restriction. They rose further after Russia invaded Ukraine on Feb 24, due to disruption in supply and sanctions against Russia’s major exporter.
Benchmark US crude oil futuresThey are approximately 16% higher than last year, while international benchmarks are Brent crude oil futuresDuring the same time, they were up by 22%.
Biden is urging more production. 60% of executives in energy companies are women.This was said in March Dallas Fed survey that they were holding back growth due to shareholder pressure to maintain capital discipline. Some argue that a windfall tax on profits could actually slow down production.
While a windfall profit tax may make for great soundbites, it is not a good policy for consumers. It will likely disincentivize fuel production and make things worse for drivers,” Chet Thomson, President and CEO of American Fuel and Petrochemical Manufacturers Association stated in a Monday statement.
Biden particularly pointed to oil giants Shell and ExxonMobil as recipients of bumper profits. Shell UK-based reported $9.5 billion in third-quarter profit last week — the company’s second-highest quarterly profit ever, while ExxonMobilLast week’s record-breaking profit of $20 Billion was reported. Both companies’ chief executives discussed recently the possibility that there might be a windfall tax.
Ben van Beurden (CEO of Shell UK) seems to be in agreement with the idea that energy companies should pay more taxes. He stated at an industry conference in October that government intervention was needed to shield the poorest members of society from volatile energy markets that could “damage substantial parts” of society. Reuters reported.
Darren Woods, the CEO of Texas-based ExxonMobil said at the company’s earning call on Friday that it is likely to pay $15 billion of its profits back to shareholders — 40% of whom are individuals — by the end of 2022. Woods added Shell did not cut dividend — “even by a penny” — when the company chalked up Losses of $20 billion over 2020.
“In fact, knowing how much our dividend is relied on by so many families, and with confidence in the future cash flows of this business – we’ve increased our annual dividend for 40 consecutive years,” said ExxonMobil CEO Darren Woods at the company’s earning call on Friday, according to an Official copy of his prepared remarks
