US President Joe Biden is challenging national oil companies to do more to increase gasoline supplies to lower prices for consumers. He also tackles their record profits in the first part of the year, while Americans pay record prices for a gallon of gasoline.
After suffering huge losses in 2020 due to the pandemic, oil companies have rebounded. Net income in 2021 offset most, if not all, of these COVID-19 related losses.
But with high demand and prices, the start of 2022 is breathtaking:
- Shell’s net income was over $7 billion from January to March.
- Chevron earned $6.2 billion, 354% more than the same three months in 2021.
- Conoco Phillips posted a profit of $5.7 billion, a 486% year-over-year increase.
- Finally, ExxonMobil, with net income of $5.5 billion, doubled last year’s gains in the first quarter.
Despite the eye-opening economic gain, Cam Harvey, a finance professor at Duke University’s Fuqua School of Business, said it’s not fair to just point the finger at those profits and blame the oil industry for where we are now.
“It’s a complex question,” Harvey said. “And it takes more than just telling the president the oil companies to ramp up production. It’s not something that can be turned on and off very quickly.”
WRAL News found data from the Energy Information Association showing U.S. oil companies will be operating between 94% and 96% capacity this summer.
Harvey said the quickest solution is outside our borders.
There is no silver bullet if the United States remains focused on domestic oil and gas production.
In 2014, global energy capital expenditures were approximately $400 billion. It is the money spent to find new oil and the cost of extracting it. By the end of 2021, that spending was closer to $125 billion.
WRAL News asked Harvey why there has been a dramatic drop in exploration.
He said there were two connecting factors. First, the increased focus on renewable and cleaner energies like solar and hydrogen. Many oil and gas companies are beginning to diversify. Second, with this focus on renewable energy, oil companies have found it increasingly difficult to convince banks to finance new projects.
“Eventually, oil and gas will be replaced by clean energy sources so investors and businesses will take notice,” Harvey said.
Oil company greed is not to blame for our prices, according to Harvey.
“I know a number of people will point to oil and gas company profits and say they’re underinvesting and limiting supply and that’s why we’re in this mess. I think it’s naive,” he said. .
The US Federal Reserve’s recent decision to raise interest rates to keep inflation under control won’t have much of a positive impact at the pumps, according to Harvey.
In fact, it could do more harm. If companies have projects they are sitting on and have decided to take advantage of high crude oil prices, it will be even harder to get financing for those projects because of the higher rates.