Oil companies reap unprecedented profits as Americans struggle to pay for food and gas

Oil companies have posted record profits in recent months at a time when many Americans have struggled to afford gas, food and other basic necessities.

On Friday, Exxon Mobil reported a record $17.85 billion profit for the second quarter and Chevron made a record $11.62 billion. The sky-high profits come a day after UK-based Shell broke its own profit record.

Soaring energy prices have rattled consumers and become a political flashpoint. Last month, President Joe Biden said, “Exxon has made more money than God this year.”

Consumers face high fuel prices, not just at the pump, but soaring energy prices are baked into delivery costs, driving up the cost of everything from apples to toilet paper.

The record profits marked a stunning turnaround from the early days of the Covid-19 pandemic, when cities were closed and demand for fuels fell. There have been numerous bankruptcies and thousands of layoffs.

The industry has long gone through boom and bust cycles. But due to the ongoing war led by Russia against Ukrainewhich has led to lower oil and gas in the Russian market, as well as other global supply constraints, high prices could persist for some time.

“It’s devastating,” said Mark Wolfe, executive director of the National Energy Assistance Directors Association, who added that high energy prices are hitting low-income families and frontline workers the hardest. “You live on a tight budget and that’s an extra $40-50 a week.”

Wolfe wants the federal government to tax energy companies and “redistribute some of those profits to struggling families.”

Inflation is already changing where Americans go and what they eat. It also changes the way they consume energy.

Two-thirds of Americans have changed their driving habits and lifestyles, with the vast majority choosing to drive less or combine errands, AAA spokesman Andrew Gross said. Of those polled by AAA, 2% said they had purchased an electric vehicle since March, he said.

“They really changed their lifestyle to deal with these high prices,” Gross said.

Exxon, based in Irving, Texas, increased its oil and gas production as crude prices surged above $100 a barrel. Exxon’s revenue soared to $115.68 billion from $67.74 billion in the same quarter last year.

Natural gas and liquefied natural gas (LNG) prices are also high due to Russia’s invasion of Ukraine and subsequent sanctions against Russia, a major natural gas supplier. Many European countries have scrambled to find alternatives to Russian natural gas and competed for LNG shipments, driving up natural gas prices both globally and in the United States.

Inflation in Europe has also increased, including soaring energy costs.

The price spike has been a boon for investors, including energy executives who receive a significant portion of compensation in the form of company stock. Exxon earned $4.21 per share, beating analysts’ expectations of $4.02 per share, according to analysts polled by Factset. Chevron earned $5.95 per share, beating analysts’ expectations of $5.16 per share.

Shares of Exxon Mobil Corp. jumped 4% at the opening bell on Friday and Chevron was up 8%

Exxon CEO Darren Woods attributed the company’s success to its investments in oil and gas fields in Guyana and the Permian Basin, as well as its investments in liquefied natural gas, which is in high demand around the world.

“Given the long investment cycles, supply growth will not happen overnight,” Woods said in a conference call Friday.

Gasoline prices rose particularly rapidly during the quarter, due to limited global supply, high oil costs and fewer refineries operating in the United States than before the pandemic.

Plans to increase exports to Europe

Exxon plans to increase its refining capacity by about 250,000 barrels per day in the first quarter of 2023 by expanding its Beaumont refinery. This represents the industry’s largest single capacity addition in the United States since 2012, the company said.

To alleviate Europe’s energy crisis, Exxon sees potential for fracking and unconventional gas in Germany, and “there is an opportunity where ExxonMobil could certainly play a key role,” Woods said.

Exxon also plans to increase its LNG exports to Europe. Golden Pass, its LNG export facility under construction in Port Arthur, Texas, will increase Gulf Coast LNG exports by 20% when it starts up in 2024, he said.

“Bringing in more LNG supplies to help offset some of the Russian gas coming into Europe will be another really critical step in diversifying supplies for Europe,” Woods said.

Climate scientists and residents who live near Gulf Coast LNG export facilities warn that expanding fossil fuel infrastructure could worsen disasters caused by climate change.

Exxon plans to increase oil-equivalent production in the Permian Basin by 25% this year compared to 2021 and eliminate routine flaring – the burning of natural gas in the oil extraction process – in the Permian. by the end of the year.