Perhaps it is almost philosophical to wonder what profits God makes up there in his cloud. These could be especially big wins, after all, many churches are simply shining with gold. But maybe they are rather average returns, but very ethical. Current US President Joe Biden seemed to opt for the former reading when he spoke of the fact that some oil companies in his country made “more money than God”. A surprising metaphor, especially since Biden is a devout Catholic.
Apart from that, the 79-year-old had his harshest words about oil majors like Exxon Mobil. Their profits have grown so much in just the last three months that even established stockbrokers are speechless. Since oil giant BP also presented its figures on Tuesday, it is clear that the five oil multinationals Shell, Exxon, Total, Chevron and BP made profits of more than $60 billion in the second quarter. The so-called “super-majors” now want to make their shareholders happy with billions. But motorists, critical investors and environmentalists are asking: What’s so great about it?
Oil multinationals earn twice as much
Perhaps that question is best answered at the Frankfurt Stock Exchange, where stock market strategist Robert Halver stands in one of the large, white circles in front of a light fixture with six screens. While the major stock indexes have plunged in recent months following the Ukraine war, oil stocks have made stunning gains: “These oil stocks are the task force in a world where there’s a gas crisis,” says Halver, typing around its colorful financial keyboard. “Especially since they also pay very nice dividends.”
The stock market is pinning the result on rising stock prices: shares of oil giant BP are up 20 percent year-to-date, those of rival Chevron up nearly 50 percent, and investors in Exxon Mobil were even able to post an increase of more than 65 percent. After all, oil companies have made double profits in recent months: as a result of the war in Ukraine, oil prices on the world market rose, which brought billions to the coffers of the companies (see graphic).
Added to this were the rich profits from the refinery business, where crude oil is converted into gasoline or heating oil. At German refiners, the average profit margin has quintupled since the start of the year, according to the Energy Information Administration. According to its own statements, oil giant BP made a profit of about $46 per barrel of oil with its refineries last quarter, compared to just around $14 a year earlier. “It’s like old age,” says stock expert Robert Halver: “These stocks are experiencing their second spring.”
Billions of dollars – for shareholders
However, if you drive a little further out of the city from the financial center of Frankfurt, you can quickly get a completely different perspective. The sun beats down on the black concrete in front of the Shell gas station on Friedberger Landstrasse, and there is a strong smell of gasoline. The red letters in the price column show from afar that a liter of Super E10 currently costs 1,759 euros here. “It’s lucky that I take the train so much that I almost never need the car anymore,” says a man in a red shirt. “I’m mad at the oil companies,” complains another, “they’re lining their pockets.”
At least that’s not the whole truth, because while oil companies make billions in profits, they distribute a good chunk of that money to their shareholders. Only BP increased its dividend to six cents a share and plans to pay out ten percent more to investors than in the previous quarter. In addition, the company plans to spend $3.5 billion in the third quarter alone to buy back its shares in the market. Because the demand for the security then increases, the price usually goes up as well.
In total, the five global oil giants have already invested about $20 billion in the first half of the year to buy back their shares. Chevron recently raised its takeover cap this year by five billion euros. Exxon plans to buy back about $30 billion of its own stock this year and next. And Shell, in turn, announced purchases of about six billion dollars for the next three months.
Cash the excess profits?
What pleases the bankers on the Frankfurt trading floor are what critics call crisis profits, even war profits. Or “windfall profits” in English. Although they don’t always have much to do with wind in the strict sense, but more with oil. In the UK, the government passed a special tax on profits in June that oil and gas companies will have to pay. In France, on the other hand, President Emmanuel Macron was less sympathetic to a tax but urged oil companies to offer “voluntary” discounts at petrol stations. In Germany, too, politicians such as SPD leader Lars Kleinbeil and Green Party leader Ricarda Lange had floated an excessive profits tax.
Why do many experts criticize such a tax: because on what number should employees base their excess earnings? Thus, the current year’s earnings can be roughly compared to the previous year’s earnings. However, if a restaurant shut down by the coronavirus destroyed business there, they don’t necessarily make exorbitant profits a year later with better business. Even compared to an average price for the previous five or ten years, companies like vaccine makers Biontech will also be asked to pay.
Even two studies by German economic research institutes confirmed that oil multinationals “substantially” passed the discount on German tanks. While prices in France continued to rise after June 1, average prices per liter of Super E10 in Germany fell sharply, so the discount may have been passed on to customers. “In the case of super petrol, it was 29 to 30 cents from the 35-cent tax cut,” says expert Florian Neumeier from the ifo Institute in Munich.
But not all statistics are good for oil multinationals. Figures from oil giant Exxon show that it plans to invest only about 12% of its investments in green technologies and CO2 storage in the coming years. “So only a small part actually goes to renewables,” says Greenpeace economic expert Mauricio Vargas. “The fact that it takes big oil multinationals to finance renewables is simply not true.”
In London, oil multinationals now want to score points with better news, especially better images. Shell recently opened a futuristic service station there: under warm, orange wooden arches, electric cars recharge their batteries at charging stations, and electric cars can be fully refueled in just 15 minutes. gas pumps? If you look in vain for the future of the London petrol station.