If BP chief executive Bernard Looney described his company as a “cash machine” just before Russia’s invasion of Ukraine sent oil and gas prices soaring, what does that make it now? Big Oil’s coffers are overflowing. The top western energy companies raked in a record $219bn in profit last year, as the war led to a surge in prices and a renewed focus on energy security. Bumper revenues come as households weather a historic cost of living crisis amid painfully costly energy bills. Calls for even tougher windfall taxes are mounting. There is nothing intrinsically wrong with the supermajors’ super profits; their fortunes sway with boom and bust cycles just like any industry. What is more problematic is how they actually plan to spend them.
Record earnings come at a potentially opportune moment. Governments are reshaping policy agendas to meet climate change goals, and fossil fuel demand is expected to peak this decade, according to the International Energy Agency. Big Oil can — and should — capitalise by recycling its bounties into transforming their business models for the green transition and supporting national net zero targets. Recent earnings reports, however, suggest oil firms may be squandering this opportunity.
BP’s $28bn profit last year was the highest in its 114-year history. Looney, however, pared back its transition strategy, indicating it will cut oil and gas output by 25 per cent by 2030, instead of the 40 per cent it had previously pledged. It did at least commit to increase spending on its transition businesses by £8bn. Shell made a record annual profit of about $40bn, but its capital spending next year, including the proportion spent in its renewables and energy solutions division — $3.5bn in 2022, a mere 14 per cent of its total capex — will stay flat. Both also signalled plans to spend billions on further share buybacks this year.