I am occasionally bemused but rarely surprised. What might initially seem astonishing is often, with a modicum of careful consideration, all too plausible.
This was the end result after learning of an eye-popping US$40 billion profit recently announced by Shell. That’s about $64b in our humble currency. Or, $64,000,000,000. It’s a massive number, whichever way you want to cut it up.
My first thought came in the form of a question. How could such a big number be achieved in the current global climate? There is an inexorable shift away from fossil fuels to more planet-friendly alternatives. The worldwide economy is also in a slump, trying to fight off recession, so surely those factors would impact the bottom line. No.
In fact Shell, which describes itself as a global energy giant, said its annual profits doubled to a record high last year as oil and natural gas prices soared in the wake of Russia’s invasion of Ukraine. I hadn’t factored that in …. war. Nothing like a conflict, it would seem, to help those sales margins along.
London-based Shell is not alone in reporting bumper profits. United States-based Exxon Mobil has also posted record annual profits of US$55b, while rival BP reported huge quarterly profits last year and Chevron announced a US$36b profit for the year.
Shell lauded its “capacity to deliver vital energy to our customers in a volatile world”. No mention of the bonus higher prices courtesy of the conflict.
Not surprisingly, Shell and other global energy giants, have their detractors. The latest figures risk reigniting public anger that the fossil fuel industry is not doing enough to offset high energy bills for households and small businesses as well as cut climate-changing carbon emissions.
Russia’s invasion of Ukraine sent global energy prices surging, with natural gas prices in Europe hitting record levels and oil hovering at US$120 per barrel. Those prices have since come down but are still volatile and natural gas prices are three times what they were before Russia massed troops on the Ukrainian border.
But wait, not all is lost. To ease the pain on households and consumers, the European Union and individual countries such as Britain and Italy have imposed windfall taxes on energy companies, and the US has raised the idea of a war profit tax. A war on war profits, if you will.
It’s a small but not insignificant step if, for no other reason, it acknowledges public outrage at how slowly change is coming. More steps or incentives will be needed to lift the pace of change.
Shell returned US$26 billion to shareholders in 2022. By comparison, it spent about US$21 billion on its low- or zero-carbon businesses last year, about one-third of total expenditure. Of that, about $4b was invested into its renewable energy and other alternative fuel projects, which includes electricity generation, hydrogen production, and carbon capture and storage.
So energy giants are changing, but not particularly fast when there are record profits to be made the old way. Not so bemusing or astonishing after all.
