TOWARDS THE end of the second world war Franklin D. Roosevelt attended a fateful gathering of world leaders that helped determine the course of geopolitics for decades. No, not the Yalta summit. Immediately after FDR, Churchill and Stalin had carved up the world into spheres of influence, the American president slipped away onto an American naval vessel to meet quietly with Abdel Aziz ibn Saud, king of Saudi Arabia. In return for protection of the Sauds’ sovereignty in the Holy Land, the monarch agreed to grant American oil firms access to his country’s petroleum.
Building on the long-standing exploitation of Persian reserves by the Anglo-Persian Oil Company (now BP), the Saudi-American alliance formed the axis of oil that led Western majors to look longingly first to the Persian Gulf, then to other distant longitudes. For decades the world’s five biggest private-sector oil companies—America’s ExxonMobil and Chevron, Britain’s BP and Shell, and France’s TotalEnergies—have drilled from South America to Siberia. Now a swirl of geopolitical, economic and environmental factors is leading these “supermajors” to increasingly look not east and west but north and south.
This realignment comes as big oil’s coffers are overflowing after two years of high energy prices (see chart 1). On February 2nd Britain’s Shell unveiled annual net profits for 2022 of nearly $40bn, more than double the figure a year earlier and its highest in over a century as a listed company. That came on the heels of America’s ExxonMobil announcing a record annual net profit of $59bn (excluding one-off charges). Its main domestic rival, Chevron, also reported that its net profit more than doubled, to $36bn. BP and TotalEnergies will add to the haul on February 7th and 8th, respectively.
All told, reckons Amy Wong of Credit Suisse, a bank, those five supermajors may have raked in around $200bn in profits last year. A slug of this bounty will flow to shareholders; in January…
2023-02-06 18:32:44 Where on Earth is big oil spending its $200bn profit bonanza?
Link from www.economist.com
The world of oil and gas has enjoyed a fruitful year. With profits of over $200 billion across 2021, this windfall has left many wondering how big oil will spend its newfound wealth.
The short answer is that the bulk of the money is going to dividends, bond repayments, and share buybacks. This is not surprising, given that a large portion of these oil companies’ shareholders are institutional investors like pension funds, who are looking to maximize the return on their investments.
However, some of the money is also being funneled into various green energy initiatives. A number of oil giants have invested heavily in sustainability projects, such as replacing greenhouse gas-emitting offshore platforms with solar-powered water desalination plants.
Another key area where profits have been invested is in research and development, particularly in the field of Artificial Intelligence (AI). Through the development of AI-powered applications, oil companies are hoping to make their operations more efficient. This will help them adapt to the changing energy landscape and remain profitable in the years to come.
Finally, big oil has been putting profits into its workforce. The industry is facing a talent shortage in its ranks, due to the diminishing workforce of the traditional oil and gas sector. As a result, big oil has been investing in initiatives to recruit and retain top talent, with a focus on newer technologies like drilling automation and digital oilfield operations.
In short, big oil is committed to investing its $200 billion profit bonanza in a range of industries across the globe, from green energy projects and technological advancements to the recruitment of top talent. Despite criticism, it is clear that these investments will have a far-reaching impact on the planet and society, both now and in the future.