LONDON — BP reported a profit of $8.5 billion for its second quarter on Tuesday, its highest in 14 years, making it the latest oil giant to cash in on inflated crude prices as Russia’s war in Ukraine has disrupted global energy markets.
BP profits highest in 14 years, raking in $8.5B amid gas pump pinch
The windfall comes as consumers around the world are feeling the hurt of decades-high inflation and a cost-of-living crisis that’s particularly painful at the gas pump. The price of crude oil surged above $120 per barrel in March and again in June before falling back, and remains up 34 percent compared to a year ago. The national average gas price in the United States jumped in tandem to over $5 dollar a gallon for the first time, AAA reported, although prices are now dropping.
President Biden has warned the industry that he is considering all options to curb their profits if gas prices remain high. The president and other Democrats have consistently railed against the oil industry’s earnings at a time when drivers are struggling to cover the cost of filling up.
While Biden’s tools are limited – there is not enough congressional support to advance his plan for a windfall profits tax – that could change should he declare a “climate emergency,” as the administration has said is possible. Energy analysts predict that if gas prices start shooting up again, Biden could use his presidential powers to assert more government control over domestic oil and gas producers.
Oil executives have pushed back on the Biden administration’s criticisms, saying the only way to remedy the imbalance of supply and demand in global oil markets is to pump more oil.
“I want to be clear that Chevron shares your concerns over the higher prices that Americans are experiencing,” Chevron chief executive Mike Wirth told Biden in an open letter. “And I assure you that Chevron is doing its part to help address these challenges by increasing capital expenditures to $18 billion in 2022, more than 50% higher than last year.”
BP’s second-quarter results, up from $6.2 billion in the first quarter, were driven by strong refining margins, “continuing exceptional oil trading performance” and higher fuel prices, the company said in a statement. A surge in global demand and the war in Ukraine have been key to the rise in prices, directly increasing the company’s profits.
“Today’s results show that bp continues to perform while transforming,” CEO Bernard Looney said in a statement. “We do this by providing the oil and gas the world needs today — while at the same time, investing to accelerate the energy transition.”
As a result of the high profits, the company said it would boost dividend payments by 10 percent, to 6.006 cents per ordinary share, more than it had previously expected. “This increase reflects the underlying performance and cash generation of the business,” the company said.
BP said it expects oil and gas prices to remain high into the third quarter “due to ongoing disruption to Russian supply” and “reduced levels of spare capacity.” The geopolitical outlook has also led to a lack of European gas supply that is “heavily dependent on Russian pipeline flows,” which are expected to keep prices “elevated.”
Russia’s invasion of Ukraine has upended global energy markets, as Western countries seek to punish Moscow by cutting off its energy sales. With less oil and gas in the market, prices have soared. Lingering disruptions from the coronavirus pandemic have also contributed to rising costs and higher profits for fossil fuel companies.
“BP’s expecting higher oil prices to continue into the third quarter and whilst that’s not good news for consumers, who are battling with higher energy and petrol prices already, it’s good news for cash flows,” equity analyst Matt Britzman of financial services company Hargreaves Lansdown said in a statement. “Markets reacted favourably to what was a set of results that beat estimates across pretty much all metrics.”
Headquartered in London, BP also pointed to its offshore work in Brazil, Indonesia and Canada as part of its “resilient hydrocarbons” operations.
Chief Financial Officer Murray Auchincloss said in the report that “bp continues to build a track record of delivery against its disciplined financial frame.” “We are investing with discipline to advance our strategy; and we are delivering on our commitment to shareholder distributions — raising our dividend by 10% and announcing a further $3.5 billion share buyback.”
Blockbuster profits for the second quarter were also reported by oil giants Shell, Chevron and ExxonMobil last week, which along with BP’s results bring the profit tally for major Western oil and gas companies to almost $60 billion, according to Reuters.
President Biden has accused U.S. oil giants of capitalizing on the tight circumstances. Speaking at the Port of Los Angeles in June, he said: “Exxon made more money than God this year.” The company pushed back, admonishing his administration for its attempts “to criticize, and at times vilify, our industry” as oil companies deny accusations that their policies are keeping prices artificially high.
In May, Britain’s government announced a 25 percent windfall tax on the profits of oil and gas firms that would be used to assist low-income households struggling with a sharp spike in the cost of living. U.S. lawmakers have considered a similar tax, but it would be unlikely to pass in the evenly divided Senate.
British lawmaker and opposition finance minister Rachel Reeves criticized BP’s profits, tweeting: “People are worried sick about energy prices rising again in the autumn, but yet again we see eye-watering profits for oil and gas producers.”
Anger is also expected in some quarters of the United States as consumers feel price hikes across the board, including for food, gas, rent and medical care. Economic head winds are leading to a precarious outlook for millions of households, financial analysts warn, making huge corporate profits such as BP’s hard to swallow for many.
Leftist politicians and advocacy groups in both the U.S. and the U.K. called for additional taxes on oil companies’ windfall profits.
Greenpeace U.K. tweeted “there’s something particularly obscene and cruel about gas companies like Shell and BP making record profits while consumers are going to struggle to keep warm this winter.”
Rep. Rosa De Lauro (D-Conn.) tweeted “corporate monopolies are outsizing their market power, hurting families at the pump and driving up inflation,” later adding: “Americans don’t deserve to be price gouged at the pump.”
Source: WP
