Big Oil and OPEC are holding the world hostage – it’s time to get them under control | Access to energy
As Winston Churchill reportedly said in the 1940s as he worked to co-form what would become the United Nations: “Never let a good crisis go to waste. It’s advice the oil and energy giants and OPEC, encouraged by politicians, have taken to heart. This is reflected in the price of gasoline and our skyrocketing heating bills.
A new study has calculated that the oil and gas industry has made more than $2.8bn (£2.4bn) in profit a day over the past half-century. In the second quarter of 2022, Exxon posted a profit of $17.9 billion, the highest ever recorded by a publicly traded oil company. Chevron took in $11.6 billion, while Shell took in $11.47 billion and BP took in $9.3 billion, its biggest windfall in more than 14 years.
National oil companies such as Saudi Aramco saw their profits increase by 90% year-on-year during the second quarter. The Saudi kingdom raked in $88 billion in the first half of 2022. Norway’s Equinor paid out $3 billion in dividends last month, while France’s Total tripled its revenue. Glencore, the world’s largest coal shipper, has made record profits and will pay shareholders an additional $4.5 billion.
As shareholders and executives reap the benefits of this crisis, families are grappling with exorbitant fuel and energy bills on top of rising food prices. The UN reports that 50 million people in 45 countries face starvation.
UN Secretary-General António Guterres has called super-profits from fossil fuels “grotesque greed” and urged governments to tax huge windfall corporate gains, while reiterating that it is unethical for business to achieve record benefits at enormous cost to the poorest. communities and climate.
“The combined profits of the largest energy companies in the first quarter of this year are nearly $100 billion,” he said. “I urge all governments to tax this excessive profiteering and use the funds to support the most vulnerable people in these difficult times.”
This “energy crisis” has less to do with economic forces than with greed. Gasoline prices are lowest in Venezuela ($0.022 per litre), while a few miles away Trinidad and Tobago pays $0.994. In Saudi Arabia it is $0.62, in Russia $0.837, in the United States $1,083, in China $1,285, in the United Kingdom $2,003 and in Norway $2,218. The price at the pump is made up of the costs of crude oil, refining, shipping and distribution, marketing, wholesale and retail margins and, of course, taxes. The main driver is the price of crude, which fluctuates between 50% and 60% of the total. Therefore, an increase in crude increases gasoline prices.
Another driver is inflation. Quantitative easing, or “printing money”, during the pandemic is equivalent to £895bn injected into the UK economy alone. This has contributed to Britain’s inflation rate, which is 10.1% and heading towards 15% – not the other way around as some might have us believe. Stagflation is now a real possibility around the world. All this against the backdrop of the mind-boggling debts of many countries.
This brings us to Ukraine. For decades, even the rumor of war was enough to send oil prices skyrocketing. Most believed that Western sanctions against Russia, in response to Vladimir Putin’s invasion, would create a huge economic blow.
Enter OPEC+, the cartel of the 13-member Organization of the Petroleum Exporting Countries and an informal group of non-OPEC members led by Russia. OPEC now includes its five founders – Iran, Iraq, Kuwait, Saudi Arabia and Venezuela – as well as Libya, the United Arab Emirates, Algeria, Nigeria, Gabon, Angola, Equatorial Guinea and the Congo. OPEC+ members include Russia, Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Sudan and South Sudan. OPEC+ accounts for about 50% of all crude oil but over 90% of proven reserves.
As the world went into lockdown at the start of 2020, demand for rough plummeted. Production was reduced, hoping for a resurgence in prices, and then, at the end of 2021, demand increased. Russia invaded Ukraine and crude prices skyrocketed. The OPEC+ gang met on June 30 and agreed to add 648,000 barrels a day to oil markets in July and August, while President Joe Biden rushed to woo Saudi Crown Prince Mohammed bin Salman. a man he had harshly criticized for his human rights abuses. Biden and Boris Johnson, however, failed to secure an increase in oil supply that would lower the price of Saudi or Emirati oil. In recent days, Opec+ has kindly agreed to increase production by just 100,000 barrels per day.
This cartel wields incredible power over an oil-dependent world. Some might argue that investments have been blocked during the pandemic and that some countries can no longer catch up. In reality, it is both the influence of Russia and the relentless thirst of corporations to recoup lost 2020 profits, while creating the perception that they are striving to increase production. In reality, they are choking off supplies. Gazprom’s closure of the Nord Stream 1 gas pipeline for “repair” amounts to Russia’s war against the West. Gazprom has posted $41 billion in profits over the past six months while operating at just over 40% capacity.
So the world is once again at the mercy of big business. After being plundered by Big Pharma during Covid, we now have to grit our teeth and endure the onslaught of Big Oil, the “seven new sisters” – Saudi Aramco, Gazprom, China’s CNPC, the National Iranian Oil Company, Venezuela’s PDVSA, Brazil’s Petrobras and Malaysia’s Petronas – as well as Exxon, Chevron, Shell, BP, Total and others.
However, any man-made crisis can be resolved. There are tools available to our politicians to end this pseudo-crisis, including capping energy costs and retroactively imposing windfall taxes. Reform of the energy market must be on the horizon.