Exxon Mobil’s annual figures for 2022, posted on Tuesday, January 31st, have provoked the White House. In absence of increased production, it finds the U.S. oil and gas group’s $55.7 billion in profits, a historic high for the Western oil industry, “outrageous.”
With the reported profit, the largest U.S.-based oil company eclipses its previous record from 2008, when it garnered $45.2 billion.
Chief Executive Officer Darren Woods said the company was reaping the rewards of investing in fossil fuels at a time when critics had argued against it. During a conference call with analysts on Tuesday, he said that their work “began years ago, well before the pandemic, when we chose to invest counter-cyclically,” adding they had “leaned in when others leaned out, bucking conventional wisdom.”
The news follows Chevron’s announcement of a $35.5 billion profit last week, which had also been met with criticism from the White House. The Biden administration accused U.S. oil companies in general of using profits to pay their shareholders instead of boosting supply.
In a statement, the White House said Exxon’s profit margin made it clear that
oil companies have everything they need, including record profits and thousands of unused but approved permits, to increase production, but they’re instead choosing to plow those profits into padding the pockets of executives and shareholders.
The White House went on to lament that while firms like Exxon make large profits, Americans, due to a lowered supply, are paying record-high prices at the pump.
The imbalance between supply and demand on the oil market, which explains the increased oil prices, is, according to Exxon, a result of several factors: The decline of demand during the COVID pandemic—when the industry suffered monumental losses, investments dropped, and refineries closed—was followed by western sanctions against Russia, which removed Russian oil from the global market and further decreased the oil supply.
Regardless of cause, skyrocketing profits made by western energy firms are now drawing the eye of their governments.
Last year, the European Union introduced a windfall tax for the energy sector, causing consternation among energy firms. In late December, in an attempt to challenge what they called “counter-productive” measures, ExxonMobil decided to take the EU to court.
Amid calls for more countries—including the U.S., where some analysts say the idea is unlikely to gain traction—to adopt the European model of taxing ‘excess profit,’ top executives at these companies show no sign of letting up.
Exxon Chief Financial Officer Kathryn Mikells told Reuters that such windfall profit taxes are “unlawful and bad policy,” and “have the opposite effect of what you are trying to achieve,” as they in fact discourage new oil and gas production.
Within the next two weeks, Shell, BP, and TotalEnergies are expected to announce strong earnings.