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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Oil Major Earnings Will Reignite The Windfall Taxes Debate

  • The collective profits of Exxon, Chevron, Shell, BP, and TotalEnergies for the last quarter would come in at $50.7 billion.
  • Big oil firms are expected to earn less than in the blockbuster quarter that was Q2.
  • Strong oil major earnings will re-ignite the public debate around windfall taxes

Despite weaker oil prices during the third quarter, the oil industry is still booking strong financial results. According to some, this is “awkward” because it is happening during a time of economic hardship. Besides being awkward, however, Big Oil’s profits will likely draw more political pressure from desperate governments.

Bloomberg reported this week that, based on data it had compiled, the collective profits of Exxon, Chevron, Shell, BP, and TotalEnergies for the last quarter would come in at $50.7 billion.

This is palpably lower than the record $62 billion the five supermajors reported for the second quarter—drawing the ire of politicians—but it is still a large number and will, in all likelihood, draw more ire and calls for sharing the money.

“It’s definitely awkward,” Abhi Rajendran, a research scholar at Columbia University’s Center on Global Energy Policy, told Bloomberg. “These companies won’t want to be beating their chest over strong business results that are coming at the expense of consumers and a difficult economic environment.”

This is an interesting take, given that in 2020, when Big Tech raked the cash in thanks to the lockdowns—also at the expense of consumers forced to stay at home, nobody really blamed Amazon or Apple, or Microsoft for it.

Yet the oil industry has a special place in the heart of almost every Western politician, with the energy transition still high on the official agenda even as the cost of renewables soars and Europe returns to coal to survive the winter.

Related: Why Russian LNG Exports To Europe Exploded This Summer

The oil industry made a great culprit for the energy crisis when it began unfolding, and record profits helped strengthen the factually flimsy argument. Now, this argument will probably be made again, and we might hear more talk about windfall profit taxes.

It’s not just the five Big Oil majors, either. Based on the first reports coming in this profit season, the industry had another excellent three months. Halliburton, for instance, saw its profits double between July and September to $544 million. Valero booked earnings of $2.8 billion for the period, noting stronger demand for fuels than in 2019.

Indeed, the Biden administration, for one, has been quick to call on oil companies to “to pass through lower energy costs to consumers right away.” Claiming that input costs for refiners are falling while their margins are rising, the White House said in a recent fact sheet that the industry must immediately share its higher profits with consumers by lowering end prices for their products.

Meanwhile, Energy Secretary Jennifer Granholm talked to industry executives this week to try and get them to boost the production of fuels. This sounds incongruous with the allegations made in the fact sheet but reflects a reality where demand for fuels is on the rise while the capacity to produce fuels has declined.

Unfortunately, oil executives appear to have shattered the administration’s hopes for the return of shuttered refining capacity. Understandably, there are also no plans to build new refining capacity in the context of federal energy policies seeking to reduce the economy’s reliance on fossil fuels.

Meanwhile, the attempts of governments on both sides of the Atlantic to force the oil industry to part with some of its “excess” profits may be about to backfire. Ever since the EU and the UK announced plans for windfall taxes on the oil sector, both the industry and analysts have been warning this would lead to lower investment appetite. Instead, companies will continue to prioritize the return of cash to shareholders, which would further undermine the security of future supply.

“If you’re planning your capital budget, you have to think twice now that you have a new risk,” Christyan Malek, JP Morgan’s global head of energy strategy, told Bloomberg earlier this year. “It encourages majors to return cash to shareholders as they use that free cashflow that could have been used in investment.”

In the UK, the windfall tax was approved in July, and the country’s industry lobby group warned it would threaten investment plans. The head of the body, Deirdre Michie, noted that “Exploring for oil and gas and then bringing it to shore is inherently a risky and expensive business, so our members need the UK’s fiscal rules and other regulations to be stable and predictable before they consider investing the hundreds of millions of pounds needed for such projects.”


It could well be argued that if it were any other industry, governments would celebrate its resilience and the taxes this resilient industry would be paying into the state’s coffers. Yet Big Oil, and the oil industry as a whole, has been picked as the villain of the age, and nothing they do seems right.

Oil companies are damned if they do it—produce more oil and invest in new exploration, which brings prices down—and they are just as damned if they don’t do it, shunning more exploration and focusing on the return of cash to shareholders, while demand exceeds the supply of oil. If they can’t win, why even try?

By Irina Slav for Oilprice.com

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Leave a comment
  • Matthew OLeary on October 27 2022 said:
    Your last sentence states "if you can't win why even try?" Could you please explain how more then 110 billion over the past 2 quarters isn't winning? If the recent policies enacted by western politicians have so devastated the oil industry how did they make record profits over the past 2 quarters?

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