Oil companies rake in huge profits amid consumer squeeze

Major oil companies saw profits soar in the third quarter of 2022, continuing a trend of massive industry profits even as Russia’s invasion of Ukraine causes soaring prices for consumers.  

Exxon Mobil on Friday morning reported its highest earnings ever at $19.7 billion for the quarter, while Shell reported its second highest of $9.5 billion.  

Exxon Mobil’s quarterly profits surpassed the second quarter’s $17.9 billion, beating analyst projections by about $4 billion. The company said on an earnings call that its profits were boosted by record levels of Permian Basin oil and gas production, close to 560,000 barrels per day.  

Shell, meanwhile, announced profits of $9.5 billion for the quarter the previous day. Chevron also beat expectations, raking in $11.2 billion in the third quarter, also its second-highest quarter ever.  

Exxon has been able to offset whipsawing oil prices largely through liquefied natural gas (LNG) exports. LNG demand has surged in Europe after the EU ended imports from Russia. As a result, companies in the U.S. have seized the opportunity. 

The news of soaring profits comes after criticism from Democrats, including President Biden, that companies are fleecing consumers at the pump.  

These latest earnings are likely to intensify Democratic criticism with the 2022 midterms mere weeks away.  

The president’s actual leverage against the companies is limited.  

But Biden and congressional Democrats have frequently sought to highlight both the continued prosperity of oil companies and the role of the Ukraine invasion in high gas prices because voters, fairly or unfairly, tend to blame pain at the pump on the party in power.  

Biden has repeatedly exhorted the industry to lower consumer prices in response to these earnings, particularly since the announcement by the OPEC+ bloc that it will cut oil production.

On Thursday, the president blasted Shell’s announcement that it will buy back $4 billion in stock over the remainder of the year.   

“That’s more than twice of what they made in third quarter of last year.  And they raised their dividends as well, so the profits are going back to their shareholders instead of going to the pump and lowering the prices,” Biden said Thursday in remarks in Syracuse, N.Y.   

The president also took aim at Exxon on Twitter after CEO Darren Woods defended the company’s quarterly dividend as returning their profits to customers.  

“Can’t believe I have to say this but giving profits to shareholders is not the same as bringing prices down for American families,” Biden’s presidential account tweeted.  

Democrats in Congress, meanwhile, called for a windfall profits tax on big oil companies during the summer, when consumer gas prices hit all-time highs.  

“Not in a legal definition, but in most people’s minds, what’s happening with refined products, profits and margins probably qualifies as a windfall,” Tom Kloza, global head of energy analysis at the Oil Price Information Service, told The Hill in an interview.  

“The optics are pretty bad,” Kloza added. “Record profits … aren’t exactly being cheered by a population that says, hey, we need a break from inflation.”  

Moreover, he said, “if you were to have a virtual map of what’s occurred so far in the month of October, which is outside the realm of the third quarter profits, the numbers aren’t just off the charts, they’re off the wall the charts are on.”  

Patrick DeHaan, head of petroleum analysis at GasBuddy, argued that much of the actual consumer prices are outside oil companies’ control. 

“They can decide to raise production or not, and if they raise production that lowers prices, but for now, oil company profits are a sign of the imbalances that exist in oil markets,” he said. “That is, everyone wants oil and refined products and there’s simply not enough to go around.”  

Oil companies can just as easily “lose big” in a scenario that drives down demand, like at the beginning of the COVID-19 pandemic, he noted.   

“When the going’s good, it’s very good, and when the going’s bad, it’s extremely bad,” he said.  

Going forward, Kloza predicted, “I think that we’re entering a chapter where high gas prices, which the White House is laser focused on … are not going to necessarily drop appreciably, but they’re going to slip off the front page.”  

In their place, he added, would likely be the prices of commodities like diesel fuel and heating oil moving into the winter.  

Earlier this year, Energy Secretary Jennifer Granholm called on major oil refiners to limit exports of refined products ahead of hurricane season and winter. 

“I urge you to focus in the near term on building inventories in the United States, rather than selling down current stocks and further increasing exports,” she said. 

In response, however, Exxon CEO Woods pushed back on Granholm’s characterization of limiting exports as beneficial to consumers.  

“Continuing current Gulf Coast exports is essential to efficiently rebalance markets — particularly with diverted Russian supplies,” Woods wrote in September, according to The Wall Street Journal. “Reducing global supply by limiting U.S. exports to build region-specific inventory will only aggravate the global supply shortfall.”  

Democrats in the progressive wing of the party have called on the administration to take more drastic action or sought to take it themselves.  

At the height of gas price increases over the summer, Rep. Ro Khanna (D-Calif.) and Sen. Sheldon Whitehouse (D-R.I.) introduced legislation to impose a windfall profits tax on oil companies, with revenues returned to taxpayers. California Gov. Gavin Newsom (D) has called for a similar tax in the Golden State, which typically outpaces all others when it comes to gas prices.   

Friday morning, Khanna introduced another bill that would bar exporting refined gas products during any seven-day period where domestic average gas prices are $3.12 or more.  

The bill is unlikely to pass, but a ban would go notably further than the voluntary limitations Granholm asked for in her August letter. 

A Shell spokesperson referred The Hill to congressional testimony in which President Gretchen Watkins said, “Because oil is a global commodity, Shell does not set or control the price of crude oil.  Similarly, Shell does not set or control the price that consumers pay.  Indeed, it would be illegal for Shell to do so because nearly all Shell-branded retail stations in the United States are owned by independent operators who set their own prices in the marketplace.”

An Exxon spokesperson, meanwhile, told The Hill, “Our investments over the past five years, including through the lows of the pandemic, are driving [the Q3] results. Our North American refineries set an all-time record for manufacturing volumes at a time when the world needs our products the most. Around the world, our refineries had their best production since 2008.”

The Hill has reached out to Chevron for comment.  

Rachel Frazin contributed.

— Updated at 9:37 p.m.