26 months ago, almost to the day, the financial pages were awash with news of Exxon’s departure from the Dow after 92 years.
“Oh, how the mighty have fallen,” I wrote, on August 24, 2020.
As it turns out, reports of Exxon’s demise were greatly exaggerated. Like an oil-soaked phoenix from the ashes, the “pride” of American fossil fuels rose again. Two years on from an existential crisis, business is booming. On Friday, the company reported the largest quarterly profit in its 152-year history.
The iconic supermajor, which, in the ESG era, conjures more visceral aversion than it does nostalgia, dug up nearly $20 billion in profits during the third quarter, $2 billion more than Q2’s haul, which was impressive enough on its own.
As Bloomberg helpfully pointed out, analysts now expect the company to make more in 2022 than Amazon, P&G and Tesla combined. Exxon is raking in “roughly $7 million per hour,” the same linked article noted. We’ve come a long way from Q2 2020, when Exxon rang up a $1.1 billion loss and reported no cash from operating activities.
Exxon thanked “higher refining throughput and cost control, which more than offset margin declines.” The company also took the opportunity to chastise Europe’s energy policies. “Competitive, predictable and rational fiscal policy is required to attract development investment and to improve energy security,” Exxon said.
Chevron, meanwhile, likewise blew away estimates on the way to reporting its second-best profit ever. Net income of $11.2 billion was just short of last quarter’s all-time mark of $12 billion. At $31 billion, the combined haul for Exxon and Chevron exceeded Apple’s quarterly net income by 50%.
Joe Biden wasn’t amused. “Can’t believe I have to say this but giving profits to shareholders is not the same as bringing prices down for American families,” he said, on social media Friday, in the middle of Exxon’s call.
And I “can’t believe I have to say this,” particularly because, as longtime readers are well apprised, I lean unapologetically Progressive, but Biden’s ongoing verbal crusade against America’s oil and gas industry is as counterproductive as his economic live-blogging is political.
It’s not clear what Biden would have Exxon and Chevron do, but if he really does believe they can snap their fingers and reduce gas prices by 50% overnight, he’s just plain wrong. And therein lies the problem. He surely doesn’t believe that. Which means he’s just posturing for the midterms, like any other politician.
Demanding American energy companies forgo profits and forsake shareholders as part of an increasingly quixotic, overtly political effort to help protect Democrats’ tenuous grip on Congress by driving down pump prices, is a suboptimal strategy. As are SPR releases. I realize this might not go over well with some readers, but $4 gas isn’t a national emergency.
From the perspective of the midterms, Biden’s flagrant scapegoating is so transparent that it could backfire. Most voters understand that America’s current bout with inflation isn’t all Democrats’ fault. Anybody who doesn’t understand that is going to vote Republican no matter what, so there’s no use trying to persuade them. Further, nobody needs to be reminded that Exxon and Chevron are making a lot of money right now, nor has anyone forgotten that Vladimir Putin’s army is marauding through eastern Ukraine with deleterious consequences for the global economy. The daily exhortations from the White House for oil companies to do something, and the incessant allusions to Russia’s mad dictator, are superfluous at best. At worst, they might feel, to some voters, like an example of “The President doth protest too much.”
Biden’s Friday tweet was meant as a rebuttal to an admittedly tone-deaf remark from Exxon CEO Darren Woods, who said the company’s dividend was a good example of the oil industry’s commitment to “returning some of our profits directly to the American people.” It’s hard to believe Exxon’s PR department let that slip by unedited, but Biden could’ve left it to the media to tear it apart — I guarantee somebody would’ve.
On Friday’s call, BofA’s Doug Leggate told Woods that “the only folks [who] are probably not happy with your results this morning might be the [Biden] administration.” He asked Woods to weigh in on potential policy risks, including export bans and “things of that nature.”
“[I’ve] been very explicit” about the “mechanics and the fundamentals of our industry, how it works and the implications [of] the policies being considered,” Woods responded. “I would say that in the short-term, it may solve a political problem, but all the policies I’ve heard people talking about… will carry significant long-term negative consequences.”
I’ve recently done some work for a large American oil driller (that I will not name). The experience surprised me, though I was probably naive. But the people I worked with who administered the business tended to have their heads where the sun doesn’t shine.
Maybe the cause is attributable to the hot Texas climate. I just don’t know. But they didn’t seem to engage with my team or give a damn about my work in trying to help them. All they seemed to care about was the money coming in and their vacations. My work, and how it helped the company to drill or frac or whatever, was an afterthought. They’re a different kind of critter than I’m familiar with.
In my lifetime I look forward to seeing a preponderance of alternative energy sources and dramatically reduced usage of fossil fuels. The invasion of Ukraine by Russia and the anti-western market actions of certain middle eastern countries have raised energy costs for the US and the western countries generally. With any luck, the war will somehow be resolved in the coming year. But it may have changed the prevailing thought about urgency to change energy policy.
Biden seems to be using the strategic oil reserve to check oil prices and cause them to drop, which is very good in the circumstances. At the same time, Biden is helping Europe by encouraging US producers to drill and sell oil products in Europe.
Biden and his administration are not at all good at messaging and rhetoric. He passively sits and takes it when republican campaigns around the country sling mud at him. I have to agree with Bernie that democrats totally throw in the towel and let the republicans win the messaging game. Bernie is absolutely correct. The democrat’s messaging incompetence is giving the House (and maybe the Senate) to the republicans.
We agree on many things, not everything, but we agree on this: $4 for a gallon of gas is not a national emergency.
H-Man, once upon a time, not too long ago, you paid someone to take your oil production. Times have changed.
I have to roll my eyes when I hear people complaining about gas prices. The same people who insist that they need to drive big pickup trunks and SUVs gas guzzlers are suddenly worried about the price of gas? I’ve driven fuel efficient cars for decades precisely because I know how volatile gas prices can be. Whenever I mention this to someone who is looking at some Sherman Tank for the road they claim that they can afford it. As far as I am concerned, if $6/gallon will get more people to switch to more fuel efficient cars then we should have hiked the gas tax to $2/gallon a long time ago.
I consider myself a moderately progressive independent but I have to say that anyone who thinks that any politician has the slightest understanding of how real business works must also believe that economists have magic powers. Only with the blessing of inside information can any of our so-called “leaders” make a nickel in the market. Most people (who vote) think the government controls prices, business strategies, etc. On the other hand when it suits them these same people will tell you they think government should stop interfering with companies. I hate to say this but Biden has got to stop wasting our strategic reserves for what he imagines is political gain. Where I live (KC) gas is $3.49. In Europe, when available, petrol can easily sell for $9+/gal. It is sold by the quart! That’s an emergency. Today, stupid reigns supreme. Wait a couple weeks and see. We are going to be in for a rough two-year ride.