OPINION: Surging oil prices have brought an embarrassment of riches to the oil majors.

The river of corporate cash is a huge turnaround from 12 months ago when oil prices were still in the Covid doldrums.

Brent oil prices surged to almost $140 per barrel in mid-March and have stuck steadfastly above $105 since then.

Unveiling a quarterly profit of $5.5 billion last week, ExxonMobil again shrugged off calls for a spending spree and tripled its share buy-back programme to $30 billion.

Less exposed to Russia, rival US supermajor Chevron turned in earnings of $6.6 billion for the first three months of 2022.

Chevron, which has seen its stock price hit record levels this year, intends to double its own share buy-back programme to $10 billion a year.

Stock-listed oil companies are beneficiaries of an oil price driven up by the post-Covid economic bounce-back and the war in Ukraine.

Most oil majors seem determined to keep rewarding their investors for sticking with the industry during the dog days of the Covid pandemic when stock prices plummeted, profits dived and dividends were frozen.

In the US, many see the majors’ refusal to respond to the allure of high oil prices with expansive spending as a lesson learned from the last boom.

Pleasing Wall Street, however, comes with dangers in the court of public opinion where consumers are faced with soaring fuel poverty.

Motorists tends to lump the blame on their fuel providers, accusing them of profiteering while this, in turn, goads politicians to attack Big Oil, not least to avoid being blamed themselves over policy decisions.

President Joe Biden’s administration sees US inflation reaching a 40-year high, and it wants the oil companies to share some of the the blame.

Nancy Pelosi, the Democrat speaker in the House of Representatives, and Senate majority leader Chuck Schumer held a press conference accusing oil companies of vulture-like price gouging and profiteering, grabbing record profits.

In a polarised America, there are those who sense churlishness in the oil companies' stance, given Biden’s campaign messages about ditching fossil fuels and his apparent flip-flopping when price hikes stoked up voters' ire.

Over in Europe, oil companies are facing growing demands for taxes on windfall profits.

The Italian government was the first to act, announcing a 10% windfall tax in March and has already decided to increase this to 25% to help fund a €14 billion ($14.7 billion) support package to help families and businesses cope with high prices.

The UK government is under growing pressure to do something similar, and opposition lawmakers feel they have latched onto a winner ahead of local elections.

The governing Conservatives under Prime Minister Boris Johnson have previously argued that such a move would deter the North Sea investment needed to counter the use of Russian imports, but pressure is growing.

Critics ignored the $20 billion loss that BP announced due to its retreat from Russia and pointed an accusing finger at the company’s underlying profits to reinforce the windfall tax demands.

These criticisms are not just about how much money the oil companies are making, but how they are spending it.

Spending on renewable energy projects — a growing demand from environmentalists but also increasingly some shareholders — has also been muted, especially in the US, where much of the energy transition focus is on decarbonisation through mitigation and abatement.

Making bundles of cash out of oil and gas which is then funnelled off to shareholders rather than spent on decarbonisation will attract more ire.

A review done by the Florida-based non-profit Poynter Institute for Media Studies suggested ExxonMobil’s spending on low-carbon activities was 0.16% of its total, while the figure for Chevron was 2%.

The picture was different in Europe with Shell up to 10% and BP as much as 20%.

Forking out billions of dollars to shareholders while investing little in renewables at a time of growing fuel poverty is courting trouble — and windfall taxes.

The industry will not be heard in the decarbonisation debate — as it wants — if it continues acting like this.

(This is an Upstream opinion article.)

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