One thing that’s certain about the war in Ukraine is that the major oil companies – BP, Shell, Chevron, Exxon and TotalEnergies – are absolutely raking it in. According to a Global Witness report, those five companies have made $281 billion since Russia invaded in February 2022. Yep, really.As far as the UK-based companies are concerned, BP and Shell made a combined $94.2 billion in profits since the start of the war, while the remaining three, Chevron, Exxon and TotalEnergies have made over $187 billion.
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In 2023, BP recorded their second-highest profit in a decade – the first being in 2022, the year the war broke out. While one country and its people lost everything, the largest Western oil companies more than doubled profits to $219 billion, in 2022, and made $134 million in excess profit alone.All the while, the cost of our household energy bills have skyrocketed, as you well know. In the UK, the average annual energy bill rose to £1,928 per year in the first quarter of 2024 – up £94 from the end of 2023, and a staggering £602 more than the early 2022 average. But why on god’s barely-green Earth is this happening? How exactly are these oil companies allowed to make all that money, while we wither into recession? I spoke to Antonia Juhasz, senior researcher on fossil fuels at Human Rights Watch, who recently uncovered the devastating human toll of fossil fuel pollution in Louisiana’s “Cancer Alley”, to find out more.VICE: Hi Antonia! How exactly have the major oil companies made $281 billion off the war in Ukraine?
Antonia Juhasz: The obnoxiously large earnings of the major oil companies are due to the fact that we’re still far too reliant on fossil fuels. The profits come from the high oil prices that happened in the wake of Russia's invasion of Ukraine. Russia used fossil fuels as a weapon of war – it was even one of the motivators for the war. The way the price of oil is set is not purely based on demand and supply: You also have energy traders – entities that buy and sell energy contracts – that pushed the price of oil up, on the expectation that the war would create a supply shortage.
Antonia Juhasz: The obnoxiously large earnings of the major oil companies are due to the fact that we’re still far too reliant on fossil fuels. The profits come from the high oil prices that happened in the wake of Russia's invasion of Ukraine. Russia used fossil fuels as a weapon of war – it was even one of the motivators for the war. The way the price of oil is set is not purely based on demand and supply: You also have energy traders – entities that buy and sell energy contracts – that pushed the price of oil up, on the expectation that the war would create a supply shortage.
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A shortage was the expectation, particularly as many Western governments imposed sanctions on Russian oil. But instead, Russian companies got around sanctions by redirecting the sale of oil to China, India and Turkey, shipping it via a clandestine network of traders and tanker companies. Overall, the amount of oil coming out of Russia has remained largely unchanged. When there are times of crisis, like a war, the price of oil will go up whether or not a supply shortage even materialises – either way, the industry benefits. That spike of uncertainty and volatility leading up to, and after, the war began are what drove the big profits of 2022 for big oil companies. When prices settled, their profits fell – in the case of BP, dropping by half between 2022 and 2023.Are there any other takeaways from Global Witness’ analysis?
What I think Global Witness really wants to point out is that we’re not taxing fossil fuel companies appropriately. Governments continue to expand and over-subsidise (meaning tax breaks or direct payments that reduce the cost of production) the production of fossil fuels. Global Witness is supportive of a windfall profits tax: If the fossil fuel companies made these huge profits off of the war – which they clearly did – the profits should be taxed as a windfall generated. This categorises their profits as not because the companies did something important or different, but because they simply reaped the benefits of a war.
What I think Global Witness really wants to point out is that we’re not taxing fossil fuel companies appropriately. Governments continue to expand and over-subsidise (meaning tax breaks or direct payments that reduce the cost of production) the production of fossil fuels. Global Witness is supportive of a windfall profits tax: If the fossil fuel companies made these huge profits off of the war – which they clearly did – the profits should be taxed as a windfall generated. This categorises their profits as not because the companies did something important or different, but because they simply reaped the benefits of a war.
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So why are we paying more on energy bills when these so-called “super-major” fossil fuel companies are flush with cash? Are we essentially paying into their profits?
Energy bills went up because we’re too dependent on fossil fuels. This is complicated because a lot more companies are involved, but to simplify it: the supply of methane gas, or “natural gas”, was significantly constrained due to the war, sending the price skyrocketing. Companies that purchase gas, such as electricity companies, had to pay more. Companies selling gas, including the super-majors, are reaping higher profits as a result. Basically, they’re choosing to keep those profits to themselves rather than, say, sell the fuel at a lower price. That's expected, though – left to their own devices, they’ll seek to make as much profit as possible on each stage. That's where governments come in, to tax them more, reduce their subsidies, and to invest in moving rapidly away from their product. What could help the UK, where energy prices are reportedly higher than elsewhere in Europe?
In the UK, there’s actually been a big increase in both wind and solar use and production, and interest in producing more, but there’s a bottleneck in getting connected to the grid. Greater investment in the grid will make it much easier to access renewables, which will reduce the price of energy.
Energy bills went up because we’re too dependent on fossil fuels. This is complicated because a lot more companies are involved, but to simplify it: the supply of methane gas, or “natural gas”, was significantly constrained due to the war, sending the price skyrocketing. Companies that purchase gas, such as electricity companies, had to pay more. Companies selling gas, including the super-majors, are reaping higher profits as a result. Basically, they’re choosing to keep those profits to themselves rather than, say, sell the fuel at a lower price. That's expected, though – left to their own devices, they’ll seek to make as much profit as possible on each stage. That's where governments come in, to tax them more, reduce their subsidies, and to invest in moving rapidly away from their product. What could help the UK, where energy prices are reportedly higher than elsewhere in Europe?
In the UK, there’s actually been a big increase in both wind and solar use and production, and interest in producing more, but there’s a bottleneck in getting connected to the grid. Greater investment in the grid will make it much easier to access renewables, which will reduce the price of energy.
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A study by the Institute for Energy Economics and Financial Analysis found that the UK can save £100 billion by 2050 by cutting dependence on gas by increasing renewable power generation, electrification of heating and efficiency measures. Increased social spending will also ease the transition. This requires an investment and a policy decision: Where do we want to put money right now? That's all about how you redirect investment, and one of the things the UK could do is implement a windfall profits tax.Shell is cutting up to 330 jobs from its low carbon solutions unit to focus on high-profit oil projects. BP has scaled back its climate goals. What does this tell us about the priorities of these companies?
The companies are definitely doubling down on fossil fuels – something they've consistently done over the decades. When the public seems most interested in renewables, they talk about investing more in renewables and they might do a little, but then they go back to fossil fuels. Take BP: In 2000, it renamed itself Beyond Petroleum to highlight investments outside of fossil fuels. But, over a decade later, I calculated that at its highest point, it was still probably only spending around six percent of its money on “alternative energy”, AKA anything “beyond petroleum”.Last year, BP announced that rather than scale back fossil fuel investments, it would expand them. The fossil fuel industry is doing the same thing again right now. It talks a good game, but overall oil and gas producers account for only one percent of total clean energy investment globally. It's retreating into its core business because it knows how to make money that way. It's looking for cheap oil fields to produce as cheaply as possible, in places it can have the least regulations possible, with the aim to continue to expand its fossil fuel production and, basically, use techniques that’ll allow it to keep producing fossil fuels, such as carbon capture and storage.
The companies are definitely doubling down on fossil fuels – something they've consistently done over the decades. When the public seems most interested in renewables, they talk about investing more in renewables and they might do a little, but then they go back to fossil fuels. Take BP: In 2000, it renamed itself Beyond Petroleum to highlight investments outside of fossil fuels. But, over a decade later, I calculated that at its highest point, it was still probably only spending around six percent of its money on “alternative energy”, AKA anything “beyond petroleum”.Last year, BP announced that rather than scale back fossil fuel investments, it would expand them. The fossil fuel industry is doing the same thing again right now. It talks a good game, but overall oil and gas producers account for only one percent of total clean energy investment globally. It's retreating into its core business because it knows how to make money that way. It's looking for cheap oil fields to produce as cheaply as possible, in places it can have the least regulations possible, with the aim to continue to expand its fossil fuel production and, basically, use techniques that’ll allow it to keep producing fossil fuels, such as carbon capture and storage.
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Is there anything else these companies could do now to improve things for consumers and the planet?
We’ve seen what these companies have done when we've entrusted the use, production and distribution of these natural resources: It's been catastrophic, it's harmed our health, it's caused war. What it’s not done is create energy justice – energy that is more equitable, accessible, more affordable, and better for our health. I don't want to see these same companies now harness the wind and the waves and the sun. That is not the solution.What we want to do instead is phase out fossil fuels and protect human rights. Governments are still overly invested in fossil fuels, in expanding and subsidising the production of fossil fuels, and in not taxing or regulating the companies enough. Governments haven't invested enough in supporting people to make the transition and in transitioning to localised renewable energy systems. The more localised your energy access is – like a solar panel on your roof – the less energy it takes to get it to you. You actually use about 60 percent less energy overall, simply by using renewables instead of fossil fuels. And the faster we transition, the more money we’ll save.Is there any hope in all this?
Well, the obnoxious profits in 2023 are significantly down from 2022. Those large profits that it did earn in 2023 are not a sign that this industry continues to be the powerhouse that it once was. The oil sector is extremely out of favour with the public, and it's increasingly out of favour with investors, as it doesn't really make that much compared to other investments anymore – it only had that peak in profits because of the war. This continues to be an industry in decline, not an industry that is thriving.
We’ve seen what these companies have done when we've entrusted the use, production and distribution of these natural resources: It's been catastrophic, it's harmed our health, it's caused war. What it’s not done is create energy justice – energy that is more equitable, accessible, more affordable, and better for our health. I don't want to see these same companies now harness the wind and the waves and the sun. That is not the solution.What we want to do instead is phase out fossil fuels and protect human rights. Governments are still overly invested in fossil fuels, in expanding and subsidising the production of fossil fuels, and in not taxing or regulating the companies enough. Governments haven't invested enough in supporting people to make the transition and in transitioning to localised renewable energy systems. The more localised your energy access is – like a solar panel on your roof – the less energy it takes to get it to you. You actually use about 60 percent less energy overall, simply by using renewables instead of fossil fuels. And the faster we transition, the more money we’ll save.Is there any hope in all this?
Well, the obnoxious profits in 2023 are significantly down from 2022. Those large profits that it did earn in 2023 are not a sign that this industry continues to be the powerhouse that it once was. The oil sector is extremely out of favour with the public, and it's increasingly out of favour with investors, as it doesn't really make that much compared to other investments anymore – it only had that peak in profits because of the war. This continues to be an industry in decline, not an industry that is thriving.