The country’s largest oil companies made more money in 2022 than ever before, eclipsing windfalls of earlier years and making themselves a potential target for driver frustration as prices at the pump rise.
ExxonMobil on Tuesday reported a record-smashing annual profit of $55.7 billion for 2022, soaring past its earlier record of $45 billion in 2008. The news comes just days after another American oil behemoth, Chevron, drew the ire of the White House when the company announced its biggest windfall ever, with $36.5 billion in profits for the year.
The eye-popping numbers, industry analysts say, are fueled by a variety of factors that drove up demand last year, largely connected to the war in Ukraine. The sanctions levied on Russian fuel because of the invasion threw the global market out of balance, leaving the supply of energy so tight that prices for crude oil, refined products such as gasoline and diesel, and natural gas all shot up at once.
“All three dials on the slot machine lined up in a way they rarely do,” said Kevin Book, managing director at ClearView Energy Partners, a research firm. The national average price for a gallon of regular gasoline exceeded $5 at its height in 2022, as available shipments of fuel dropped and refiners struggled to replace Russian products, while the U.S. government tried to blunt the cost surge by releasing millions of barrels of oil from its Strategic Petroleum Reserve.
The profits being posted now are not linked to the current upward swing in gasoline prices, with the average cost of a gallon of regular back up to $3.51, according to AAA, and likely to continue rising in the coming months. But they are giving drivers and politicians plenty to vent about.
“These profits are coming right out of your pockets,” California Gov. Gavin Newsom (D) wrote on Twitter. “It’s time for a gas price gouging penalty to keep greedy oil companies in check.”
The oil companies are largely ignoring the attacks, with the political fallout not mentioned in Chevron’s earnings call Friday morning. Industry officials have long said the attacks on the profits are misplaced, as oil prices are set by global markets that no private business can control. They warn the windfall profit taxes that Democrats champion would backfire by discouraging companies from investing in production.
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Gas prices have been increasing for five consecutive weeks, according to the price-tracking company GasBuddy. It attributes the rise partly to a December cold snap that knocked refineries offline. Also, some refining facilities have scheduled maintenance that had been put off last spring in response to the surge in prices then.
“There appears to be little good news on the gas price front, with prices unlikely to turn around anytime soon,” said Patrick De Haan, head of petroleum analysis at GasBuddy. Adding to the pressure on prices are China reopening its economy, which is expected to increase energy demand, and a European Union ban on Russian gasoline and diesel that kicks in Feb. 5.
The White House has few levers left to keep prices down. It has already depleted a substantial portion of the strategic reserve, and the chances of windfall taxes on oil profits are slim, now that Republicans control the House of Representatives.
The House on Friday passed a bill that would restrict the administration from further drawing down the nation’s emergency reserve unless the federal government expands available leases for oil and gas drilling on federal lands every time it is tapped. The measure is unlikely to advance in the Democratic-controlled Senate.
One thing the White House does have is a megaphone, which it is using to try to shame oil companies and steer motorist frustration their way. That includes taking aim at Chevron’s decision to launch a massive $75 billion stock buyback for shareholders, a move that will fatten returns for investors.
“Companies clearly have everything they need - record profits and thousands of approved permits - to increase production,” said a statement from Abdullah Hasan, a White House assistant press secretary. “The only thing getting in the way is their own decision to keep plowing windfall profits into the pockets of executives and shareholders instead of using them to boost supply.”