Tag Archives: oil prices

New Analysis Details ‘Master Class in War Profiteering’ by US Oil Giants

“Oil and gas companies are feeding off humanitarian disaster and consumer suffering in order to reward Wall Street,” said Lukas Ross at Friends of the Earth.

An analysis released Tuesday by a trio of groups highlights how Big Oil has cashed in on various crises over the past year—including the Covid-19 pandemic, Russia’s war on Ukraine, and the global climate emergency—while enriching wealthy shareholders.

“Big Oil is living the second half of their unspoken mantra ‘socialize losses, privatize gains.'”

The new report from BailoutWatch, Friends of the Earth, and Public Citizen explains that there are two main tactics that fossil fuel giants use to benefit investors: “First, they repurchase shares of their own stock and retire them, reducing the number of shares outstanding and driving up the value of each share remaining in investors’ hands.”

“Second, they increase dividends, the quarterly payments investors receive for owning shares,” the report continues. “Oil and gas dividends, historically bigger than other sectors’, have spiked in recent months, outstripping every other industry group.”

“Amid high gas prices and war in recent months, oil and gas companies have kicked both tactics into overdrive,” the groups found, based on reviewing public statements and securities filings from the 20 largest U.S.-headquartered fossil fuel corporations.

During the first two months of 2022, “seven companies’ boards authorized their corporate treasuries to buy back and retire $24.35 billion in stock—a 15% increase over all of the buybacks authorized in 2021,” the report states. “Six of those decisions came in February 2022, after Russian warmongering lifted stock prices. The total since the start of 2021 is $45.6 billion.”

The analysis also reveals that in January and February, 11 companies raised their dividends—”often extravagantly”—and notes that “nine were increases of more than 15% and four were increases of more than 40%.”

“Six companies have begun paying additional dividends on top of their routine quarterly payments, including by implementing new variable dividends based on company earnings—a way of directing windfall profits immediately into private hands without any possibility of investment, employee benefits, or other uses,” the document points out.

“So far in 2022, these companies have started paying out an initial $3 billion in special windfall dividends,” the report adds. “Four of these companies—Pioneer, Chesapeake, Conoco, and Coterra—announced variable dividends beginning August 2021, as prices began to rise.”

Chris Kuveke of BailoutWatch said in a statement that “Big Oil is living the second half of their unspoken mantra ‘socialize losses, privatize gains.'”

“Two years after winning multi-billion dollar bailouts from the Trump administration, these newly flush companies are pocketing billions from an international crisis, and they don’t care how it affects regular Americans,” Kuveke added.

As Public Citizen researcher Alan Zibel put it: “Big Oil executives are reaping windfall profits while accelerating the climate crisis and sticking consumers with the bill.”

Zibel also acknowledged efforts to blame President Joe Biden for rising prices, rather than industry profiteering.

“The oil industry and their allies on Capitol Hill falsely claim that the Biden administration’s acceptance of mainstream climate science is stifling investment in the domestic oil industry,” he said. “But the industry’s actions show that they are intently focused on funneling cash to their shareholders rather than lowering prices for consumers.”

According to Lukas Ross, climate and energy program manager at Friends of the Earth: “This is a master class in war profiteering. Oil and gas companies are feeding off humanitarian disaster and consumer suffering in order to reward Wall Street.”

“Oil companies drove us into a climate crisis and are now price gouging us to extinction,” he warned. “Congress and President Biden must take action by passing a windfall profits tax to rein in Big Oil’s cash grab.”

The new analysis follows the introduction of multiple bills targeting Big Oil’s windfall profits, including a proposal spearheaded by Senate Budget Committee Chair Bernie Sanders (I-Vt.) designed to crack down on such behavior in all sectors, not just the fossil fuel industry.

Sanders on Tuesday morning held a hearing to call out how corporate greed and profiteering are fueling inflation. During his opening remarks, the chair took aim at Big Oil specifically while listing some examples.

“Yesterday, at a time when gasoline in America is now at a near-record high at $4.17 a gallon, guess what?” Sanders said. “ExxonMobil reported that its profit from pumping oil and gas alone in the first quarter will likely hit a record high of $9.3 billion.”

“Meanwhile,” he added, “Big Oil CEOs are on track to spend $88 billion this year not to decrease supply constraints, not to address the climate crisis, but to buy back their own stock and hand out dividends to enrich their wealthy shareholders.”

The House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations plans to hold a hearing Wednesday titled “Gouged at the Gas Station: Big Oil and America’s Pain at the Pump.” Top executives from BP America, Chevron, Devon Energy, ExxonMobil, Pioneer Natural Resources, and Shell USA are set to appear before the panel.

Originally published on Common Dreams by JESSICA CORBETT and republished under Creative Commons (CC BY-NC-ND 3.0).

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Biden bets a million barrels a day will drive down soaring gas prices – what you need to know about the Strategic Petroleum Reserve

Several sites, such as one near Freeport, Texas, store the hundreds of million of barrels in the United States’ Strategic Petroleum Reserve. Department of Energy via AP

Scott L. Montgomery, University of Washington

The Biden administration on March 31, 2022, said it plans to release an unprecedented 180 million barrels of oil from the U.S. Strategic Petroleum Reserve to combat the recent spike in gas and diesel prices. About a million barrels of oil will be released every day for up to six months.

If all the oil is released, it would represent almost one-third of the current volume of the Strategic Petroleum Reserve. It follows a release of 30 million barrels in early March, a large withdrawal until the latest one.

But what is the Strategic Petroleum Reserve, why was it created, and when has it been used? And does it still serve a purpose, given that the U.S. exports more oil and other petroleum products than it imports?

As an energy researcher, I believe considering the reserve’s history can help answer these questions.

Origins of the reserve

Congress created the Strategic Petroleum Reserve as part of the Energy Policy and Conservation Act of 1975 in response to a global oil crisis.

Arab oil-exporting states led by Saudi Arabia had cut supply to the world market because of Western support for Israel in the 1973 Yom Kippur War. Oil prices quadrupled, resulting in major economic damage to the U.S. and other countries. This also shook the average American, who had grown used to cheap oil.

The oil crisis caused the U.S., Japan and 15 other advanced countries to form the International Energy Agency in 1974 to recommend policies that would forestall such events in the future. One of the agency’s key ideas was to create emergency petroleum reserves that could be drawn on in case of a severe supply disruption.

The map shows the locations of the oil held in the Strategic Petroleum Reserve. Department of Energy

The Energy Policy and Conservation Act originally stipulated the reserve should hold up to 1 billion barrels of crude and refined petroleum products. Though it has never reached that size, the U.S. reserve is the largest in the world, with a maximum volume of 714 million barrels. The cap was previously set at 727 million barrels.

As of March 25, 2022, the reserve contained about 568 million barrels.

Oil in the reserve is stored underground in a series of large underground salt domes in four locations along the Gulf Coast of Texas and Louisiana, and is linked to major supply pipelines in the region.

Salt domes, formed when a mass of salt is forced upward, are a good choice for storage since salt is impermeable and has low solubility in crude oil. Most of the storage sites were acquired by the federal government in 1977 and became fully operational in the 1980s.

History of drawdowns

In the 1975 act, Congress specified that the reserve was intended to prevent “severe supply interruptions” – that is, actual oil shortages.

Over time, as the oil market has changed, Congress expanded the list of reasons for which the Strategic Petroleum Reserve could be tapped, such as domestic supply interruptions due to extreme weather.

Prior to March 2022, about 280 million barrels of crude oil had been released since the reserve’s creation, including a 50 million release that began in November 2021.

There have only been three emergency releases in the reserve’s history. The first was in 1991 after Iraq invaded Kuwait the year before, which resulted in a sharp drop in oil supply to the world market. The U.S. released 34 million barrels.

The second release, of 30 million barrels, came in 2005 after Hurricanes Rita and Katrina knocked out Gulf of Mexico production, which then comprised about 25% of U.S. domestic supply.

The third was a coordinated release by the International Energy Agency in 2011 as a result of supply disruptions from several oil-producing countries, including Libya, then facing civil unrest during the Arab Spring. In all, the agency coordinated a release of 60 million barrels of crude, half of which came from the U.S.

In addition, there have been 11 planned sales of oil from the reserve, mainly to generate federal revenue. One of these – the 1996-1997 sale to reduce the federal budget deficit – seemed to serve political ends rather than supply-related ones.

A better way to avoid pain at the pump

President Joe Biden’s November decision to tap the reserve was also seen as political by Republicans because there was no emergency shortage of supply at that time.

Similarly, the latest historic release of 180 million barrels could also be seen as serving a political purpose – in an election year, no less. But I believe it also seems perfectly legitimate in terms of fulfilling the Strategic Petroleum Reserve’s original purpose: reducing the negative impacts of a major oil price shock.

Though the U.S. is today a net petroleum exporter, it continues to import as much as 8.2 million barrels of crude oil every day.

[Over 150,000 readers rely on The Conversation’s newsletters to understand the world. Sign up today.]

But in my view, the best way to avoid the pain of oil price shocks is to lower oil demand by reducing global carbon emissions – rather than mainly relying on releases from the reserve.

This is an updated version of an article originally published on Nov. 24, 2021.

Scott L. Montgomery, Lecturer, Jackson School of International Studies, University of Washington

This article is republished from The Conversation under a Creative Commons license. Read the original article.


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