Imperial Oil came to illustrate the phenomenon on Friday with the announcement of a 30% increase in its quarterly dividend and a buyback of up to $1.5 billion in shares. Oil and gas company shareholders are reaping the benefits of the global energy crisis.
The Calgary-based company posted third-quarter profit 2.2 times higher than the same period last year, which reached 2.03 billion compared to 908 million a year earlier, against a 49% increase in income. That of ExxonMobil was multiplied by 3.8 between the second quarters of 2021 and 2022, going from 4.7 billion $US to 17.9 billion. Same propulsion for that of Chevron, from 3.1 billion to 11.6 billion, while that of Shell doubled, jumping from 5.5 billion $US to 11.5 billion. To name only them.
Thus, 97% of American and Canadian companies had increased or maintained their dividends in the second quarter, and the oil companies claim 40% of the growth. Not to mention the special dividends and share buyback programs. Statistics Canada has calculated that Canadian non-financial industries saw their pre-tax profits jump 30.7% between the second quarters of 2021 and 2022, compared to a 3% increase for financial industries. In the first camp, companies engaged in the manufacture of petroleum products reaped a pre-tax profit up 313% and those active in oil extraction, 212%.
Data collection specialist IHS Markit concluded that 2021 was the most profitable year for the oil sands industry, with the top four operators generating, on average, C$6 billion in free cash flow (before dividends ). It predicts a new record this year, with an average flow estimated at 10 billion. Shareholders can only be pampered once again, those who have traded the priority given to revenue growth for that given to maximizing the return on their investment.
Joe Biden threatens
A week before the mid-term elections, the American president, Joe Biden, therefore returned to the charge: he once again urged the oil giants to invest these superprofits in lowering energy costs and in increase in their production, under the threat of asking Congress to tax them and subject them to other restrictions, according to a White House official quoted by Agence France-Presse.
Meanwhile, in Europe, while some countries have implemented a tax on excess profits, consensus is not reached. There is still debate at European Union level about the feasibility and applicability of what is sometimes called a tax, sometimes an exceptional tax, or even a solidarity contribution. We are still torn between a tax increase and voluntary initiatives. While acknowledging that the state is also a big beneficiary of the situation, in the form of taxes, levies and/or royalties.
Especially since we do not agree on the definition and measurement of surplus profits. Some ask whether we should limit ourselves to oil companies or include all energy companies benefiting from the surge in electricity prices, including nuclear and renewables. Even to those other companies profiting from the soaring prices of basic materials caused by the war against Ukraine. Incidentally, to all these large companies benefiting from the inflationary slippage and the distortions in the supply chains.
UN Secretary-General António Guterres had suggested this path in early August, saying it is immoral that oil and gas companies are making record profits from this energy crisis, at a massive cost to the climate. But to quickly create a link with this other crisis, that of the climate. He recalled that global greenhouse gas emissions must be reduced by 45% by 2030 if we can hope to reach zero by 2050. “Yet emissions are reaching record levels: they are on track to increase by 14% during this decade”, he denounced. “Our world is in dire straits,” he added, stressing that the climate crisis is the defining issue of our time.
This should not prevent the Canadian industry from posting production of more than 3.5 million barrels per day at the turn of 2030, predicts IHS, or 500,000 barrels per day or 17% more than currently. In addition, 80% of the expected increase is expected to materialize in the early years of the 2021-2032 forecast interval, in an effort to fill the supply gap caused by the sanctions against Russia.
On a global scale, the cartel of the Organization of the Petroleum Exporting Countries released a report on Monday forecasting global growth in oil consumption until 2035. Declining demand from OECD countries would be more than offset by the increase in needs expressed in particular by Africa, India and other Asian countries, mainly to supply transport and petrochemicals, “driven by an expansion of the middle classes, strong demographic growth and potential for growing economic growth”.