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Oil's cash bonanza

Presented by ExxonMobil: Your guide to the political forces shaping the energy transformation
Jul 29, 2022 View in browser
 
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By Arianna Skibell

Presented by ExxonMobil

STANTON, TEXAS - MARCH 12: In an aerial view, natural gas is flared off during an oil-drilling operation in the Permian Basin oil field on March 12, 2022 in Stanton, Texas. United States President Joe Biden imposed a ban on Russian oil, the world's third-largest oil producer, which may mean that oil producers in the Permian Basin will need to pump more oil to meet demand. The Permian Basin is the largest petroleum-producing basin in the United States

Natural gas is flared off during an oil drilling operation in the Permian Basin. | Joe Raedle/Getty Images

Cha-ching! That's the sound of the major oil companies' record-smashing $50 billion in second-quarter profits — nearly double the gains from this time last year.

Ballooning energy prices following Russia's invasion of Ukraine delivered the cash windfall to the major Western oil powers: Exxon Mobil, Chevron, Shell, BP and TotalEnergies.

For Exxon and Chevron, the two largest oil companies in the United States, profits more than tripled from this time last year.

The blockbuster earnings come as sky-high gasoline costs eat into consumers' wallets, helping drive inflation to new heights, and weather disasters spurred by burning fossil fuels wreak havoc across the globe.

The untimely cocktail is threatening a political backlash against energy companies as the White House weighs congressional proposals to implement a windfall tax on the profits. President Joe Biden last month said , "Exxon made more money than God this year" and pledged he would "make sure everyone knows Exxon's profits."

Exxon and Chevron have pushed back, saying they are boosting supply to meet new demand, yet their capital spending remains far lower than before the pandemic brought the economy to a halt. (The companies will give more cash to shareholders than they invest in oil and gas production this year, Bloomberg reported.) Republicans, meanwhile, blame Biden for the high gas prices.

The companies also note that they are dealing with the same labor shortage issues playing out across the economy. Oil field jobs have not recovered from the pandemic and recession of two years ago. That may also reflect shifts to new technology and the push for renewable power.

Still, the cash bonanza is already drawing the ire of environmentalists and Democratic lawmakers. Sen. Ron Wyden (D-Ore.) took to Twitter to announce a new bill that would require oil companies to "start paying their fair share."

"It's time for our tax code to reward working families — not oil execs getting rich," he said.

Kelly Sheehan, the Sierra Club's senior director of energy campaigns, called the profit spike "shameful."

"We must act urgently to transition to a more stable clean energy economy, and to hold Big Oil accountable for their price-gouging by taxing their massive windfall profits," Sheehan said in a statement.

That kind of rhetoric is a "distraction," wrote Megan Barnett Bloomgren, the American Petroleum Institute's senior vice president for communications. She said in a blog post that the stunning profits indicate the sector "is a large, robust driver of the U.S. economy — benefiting millions of American households through individually owned stocks, mutual funds, retirement accounts and other financial instruments."

About 58 percent of Americans own stock, including retirement accounts, according to Gallup — though the Federal Reserve notes that the wealthiest 10 percent own 89 percent of all U.S. stocks.

 

Thank goodness it's Friday — thank you for tuning into POLITICO's Power Switch. I'm your host,  Arianna Skibell.  Starting Monday, I will be away for two weeks. But have no fear, my talented co-workers will make sure you get your Power Switch fix. See you all on Aug. 15, when I return! Stay safe out there.

Trends

rhodium

Rhodium Group

In a preliminary assessment of the "Inflation Reduction Act of 2022," the Rhodium Group, a research firm, found the legislation could reduce U.S. greenhouse gas emissions 31 to 44 percent below 2005 levels by 2030, compared with 24 to 35 percent under current policy.

If Democrats pass the bill, which they can do with a simple majority, it would be the biggest and most consequential legislative step ever taken by Congress to address the climate crisis.

Power Centers

schumer

Senate Majority Leader Chuck Schumer (D-N.Y.) at the Capitol yesterday. | Francis Chung/E&E News

Rallying the troops
Democrats finally have a climate deal in hand, but it's far from finished, and Republicans are preparing parliamentary challenges to stop it, writes Nick Sobczyk.

The GOP has already taken issue with drug pricing and health care pieces of the bill. Read the story here .

David Iaconangelo, Heather Richards, Carlos Anchondo and Peter Behr break down how the measure would transform the energy sector, from oil to solar. Here's the story .

Fossil fuel future
The new climate and energy bill includes significant wins for the fossil fuel industry that could extend carbon emissions for decades to come, writes Scott Waldman.

The bill is a "climate suicide pact," said Brett Hartl, government affairs director at the Center for Biological Diversity. Here's the story .

While the oil and gas industry isn't exactly embracing the bill, it doesn't hate it either, writes Ben Lefebvre.

"If you squint hard enough, you can see this being a bipartisan compromise," one lobbyist said. Read more here .

Pie crust promises
Rich countries broke their main climate promise to developing nations, the Organization for Economic Cooperation and Development confirmed, writes Zia Weise.

In 2009, high-income countries pledged to deliver $100 billion a year by 2020 to help poorer countries reduce emissions and prepare for the effects of global warming. Here's the story .

 

A message from ExxonMobil:

Producing for today. Investing in tomorrow. We're doing both. At ExxonMobil, we're investing to increase supplies of oil and gas to help meet today's demand. We're producing more oil and gas than any other American company and adding capacity to refine U.S. crude oil by 250,000 barrels per day. We're also investing over $15 billion in lower-emission initiatives through 2027 to support society's net-zero future.

Learn more at ExxonMobil.com/supply

 
In Other News

migrants

The U.S. Coast Guard processes 150 migrants off the Florida coast. | Joe Raedle/Getty Images

Climate migration: Worsening climate largely from the burning of coal and gas is uprooting millions of people , but the world has yet to officially recognize the problem.

Back to the future: Historical data shows the share of carbon-free sources in the country's energy mix hasn't been this high since the turn of the 20th century.

Today in POLITICO's energy podcast: Josh Siegel and Kelsey Tamborrino discuss why Sen. Joe Manchin (D-W.Va.) finally agreed to a climate deal and if Democrats can get it passed before the August recess.

Question Corner

The science, policy and politics driving the energy transition can feel miles away. But we're all affected on an individual and communal level — from hotter days and higher gas prices to home insurance rates and food supply.

Want to know more? Send me your questions and I'll get you answers.

 

A message from ExxonMobil:

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Subscriber Zone

A showcase of some of our best subscriber content.

Petra Nova, a major carbon capture facility that was shuttered in 2020

Petra Nova, a major carbon capture facility that was shuttered in 2020. | NRG

The Senate climate bill would offer huge incentives for carbon capture and storage, giving the fledgling technology a ticket to the big leagues.

State attorneys general are urging EPA to create a comprehensive standard for addressing greenhouse gas emissions.

Rising natural gas prices are contributing to coal's continuing global surge even as pitfalls loom.

That's it for today, folks. Thanks for reading, and have a great weekend!

 

A message from ExxonMobil:

Investing in energy and the world.

At ExxonMobil, we're working to supply the reliable energy the world needs. We're investing and producing, more than any other American company, to increase supplies of oil and gas today. In fact, we are adding capacity to refine U.S. crude oil by 250,000 barrels per day—the equivalent of adding a new, medium-sized refinery. And we are investing more than $15 billion in lower greenhouse gas emissions initiatives through 2027.

Increasing supplies of reliable energy and decreasing greenhouse gas emissions is not an "either/or" proposition. We can strengthen energy security and help advance the energy transition. Producing for today. Investing in tomorrow. We're doing both.

Learn more about what we are doing to strengthen energy security at ExxonMobil.com/supply

 
 

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Arianna Skibell @ariannaskibell

 

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