Big oil companies celebrate record profits

Big oil companies celebrate record profits

Between securing short-term security of supply and the transition to a green energy future. Examining the obstacles and market trends of the previous year, as well as the transition towards renewable energy by major oil corporations and their initial forays into its implementation.

A record 2022 for big oil companies

The combined profits of the five largest oil companies in the West reached almost $200 billion in 2022, despite the challenges posed by changing consumer demand, fluctuating prices, and potential supply cuts from geopolitical issues. These companies, including TotalEnergiesExxon MobilChevronBP, and Shell, faced the daunting task of ensuring short-term supply while transitioning to clean energy in the long run.

TotalEnergies saw its full-year profits double to $36.2 billion, while the other companies also recorded significant increases in annual profits. BP reported an adjusted profit of $27.7 billion, a significant increase from the previous year’s $12.8 billion. Shell reported its highest-ever annual profit of nearly $40 billion. Exxon Mobil reported a profit of $56 billion, an all-time high for the Western oil industry, and Chevron recorded a record profit of $36.5 billion.

The five “Big Oil” companies generated a total of $196.3 billion in profits, which is higher than the GDP of many countries. This was largely due to Russia’s invasion of Ukraine, which caused disruptions and bottlenecks in deliveries, leading to tight oil supply and prices near record highs above $100 per barrel.

A look into the future of oil companies

It is anticipated that the demand for oil will reach its peak around 2035, which will result in a major transformation of the oil industry. This shift will bring about convergence, new players, and new approaches. The successful oil company of the future is expected to be one that is able to adapt to these changes and leverage them to its advantage. To endure and profit from this new landscape, companies will have to devise innovative strategies to remain competitive and profitable.

The global energy landscape is forecasted to witness a decline in the share of coal and oil, which will force oil-rich countries to diversify to withstand changes in energy markets. While the abundance of natural gas reserves in unconventional deposits and reduced delivery costs from production to consumption will lead to a “gas-heavy” trend. Renewable energy sources will partially substitute for hydrocarbon demand, while other energy sources such as nuclear and hydropower are expected to reach a stable point. 

Clean energy ventures

For the past decade and a half, major oil companies have poured in over $6 billion into clean energy ventures. Similarly, smaller firms have taken part in these investments, with Shell and Total investing in small-scale renewable energy projects and companies.

Shell has stated its plan to allocate between $1 billion and $2 billion each year towards new energy sources such as biofuels, hydrogen fueling stations, electric vehicle charging stations, and onshore and offshore wind. On the other hand, Total has placed its focus primarily on solar power generation as well as enhancing energy storage through advanced battery technology.

Statoil, previously known as ‘Equinor’, has shifted its focus to offshore wind farms, solar, and onshore wind power, and is also a leading company in carbon capture and storage technologies (CCSs). BP and Chevron, although at a slower pace, have also announced their commitment to renewable energy sources.

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