November 1, 2022—A week away from the U.S. Midterm elections, inflation is grabbing the attention of voters and politicians alike. As Republicans play up the impact of rising prices and pin the blame on their opponents, Democrats point the finger at companies benefiting from higher prices.
It doesn’t take long for the focus to fall on energy companies, specifically those earning profit from the high price of oil on global markets. That’s precisely the play President Joe Biden pulled from his playbook on Monday.
“In a difficult time, Americans across the country have stepped up, and they — to do the right thing. But not everyone has stepped up,” Biden said. “The oil industry has not — has not met its commitment to invest in America and support the American people. One by one, major oil companies have reported record profits, not just a fair return on — for hard work.”
‘Outrageous’ Profits
Bolstered by his secretaries of Treasury and Energy at his side, Biden complained about “outrageous” profits by U.S.-based energy companies. He zeroed in on Shell and ExxonMobil, which recently announced higher profits in their third-quarter statements.
Company Positions
Indeed, earnings are up at both ExxonMobil and Shell plc.
Exxon made about $19.6 billion in the third quarter and nearly $44 billion for the year. But the company also withdrew from its interests in Russia this year. Moreover, it managed a diversified portfolio in a global marketplace and faced windfall taxes imposed by the European Union.
Shell, meanwhile, ended up with a net expense of $571 million for the quarter despite bringing in $9.5 billion in its third quarter.
Share Profit, Or Pay More Taxes, Biden Says
Biden said he’s a capitalist, but he wants companies making “windfall profits” in a war economy to lower their prices for consumers. And if they don’t share their gain, he and Congress might just make them.
“You know, if they don’t, they’re going to pay a higher tax on their excess profits and face other restrictions,” Biden said. “My team will work with Congress to look at these op- — these options that are available to us and others.”
Profits To The People
So what’s Exxon’s answer to the plea to return profits to the people? The company says it is already doing just that.
“In the U.S., there’s been discussion about us returning our profits directly to the American people,” said Darren Woods, chairman and CEO of ExxonMobil. “In fact, that’s exactly what we are doing in the form of our quarterly dividend. By the end of the year, we will have paid out about $15 billion to directly shareholders, about 40 percent of whom are individual shareholders.”
Oct. 28, 2022 Earnings Call
The company’s boss says the only way to impact price is through supply and demand.
Conclusion
Biden may have better luck in encouraging energy companies to invest in production and refining capacity and transform the system to greener energy.
It’s not likely oil companies will reduce prices at the pump for politicians—at least not before the November 8 election. The bigger blow came to Biden at OPEC’s October meeting when the oil cartel agreed with other gas exporters to reduce production as a means to raise prices.
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