Oil companies post massive profits as consumers feel squeeze from high gas prices

High gas prices are on the minds of Americans a week before the election. At the same time, oil and gas companies are reporting record-breaking profits. President Biden lashed out and called for a new windfall tax if companies don't use some of that money to lower energy costs for American consumers. New York Times energy correspondent Cliff Krauss joined William Brangham to discuss.

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  • Amna Nawaz:

    Well, as voters cast their ballots this month, gas prices are still very much on the minds of many Americans.

    Nationally, the average price is now down to $3.76 a gallon, but that's still higher than many drivers have gotten used to paying. At the same time, oil and gas companies are reporting record-breaking profits for this past quarter.

    William Brangham takes a closer look.

  • William Brangham:

    Amna, those profits were in the tens of billions of dollars for just the past three months.

    For example, ExxonMobil pulled in nearly $20 billion in profit. Chevron took in more than $11 billion, Shell $9.5 billion, BP over eight billion. And, today, the world's largest oil company, Saudi Aramco, reported making $42 billion this quarter.

    President Biden again lashed out at the oil companies yesterday.

    Joe Biden, President of the United States: Oil companies' record profits today are not because they're doing something new or innovative. Their profits are a windfall of war, the windfall from the brutal conflict that's ravaging Ukraine and hurting tens of millions of people around the globe.

    At a time of war, any company receiving historic windfall profits like this has a responsibility to act beyond their narrow self-interest of its executives and shareholders.

  • William Brangham:

    The president called for a new windfall tax on what he called those companies' excess profits, if they don't use some of that money to lower energy costs for American consumers.

    For some perspective on all of this, I am joined by Cliff Krauss. He's the energy correspondent for The New York Times.

    Cliff Krauss, great to have you back on the program.

    Can you help us understand why profits are so high? I mean, gas prices did decline during the summer, but then they went back up again.

  • Clifford Krauss, The New York Times:

    This is a commodity business.

    Profits actually have been very skimpy over the last 10 years, as prices fluctuated and frequently collapsed, the last time in 2020. But, this year, they're having record profits. Just a couple of years ago, ExxonMobil was taken out of the Dow Jones industrials. Now they are reaching record highs and their stock price is high.

    This is because the oil and the natural gas prices have come up so far, partially because of the invasion of Ukraine and sanctions on Russia, a major producer, and partially because there's been a lack of investment in refineries and in production the last few years.

  • William Brangham:

    The president and other critics of the industry, they call this, in essence, war profiteering and that these companies are gouging American consumers. Is that a fair accusation?

  • Clifford Krauss:

    Certainly, they're making a lot of money, and there's a war going on. And so that's not a pretty picture, and you don't see oil company executives crowing about it.

    The frustration on the part of the American administration is, why aren't these companies producing more oil, the thinking being, they're not producing more oil because they want to keep the prices high. If only they would produce more, which is what they did years ago when prices went up, they would bring the price down.

    That is not what the investment community wants. The investment community wants exactly what the oil companies are doing. And that is returning the cash to their shareholders in the form of dividends and stock buybacks.

    The oil executives say, look, if we produce more, we are going to bring the price down in a year or two. And the oil that we are going to — the oil and the gas that we're going to get out of the ground is going to be worth less, and we're paying more now to get it out of the ground. So we're going to lose money.

    And this is exactly what happened several years in the last few years. So the oil companies are saying, we are not going to make that mistake again.

    Now, of course, the oil companies are thinking about their bottom line. The president is thinking about national security. How you square that circle is tough.

  • William Brangham:

    And the president — again, also, we can't overlook the fact that the midterms are coming, and the president is being beaten up about this.

    I mean, the president says he's going to then try to get this windfall tax through. It sounds like that's not going to go anywhere on Capitol Hill because of Republican opposition. Is there anything then that the president can tangibly do to try to lower prices more?

  • Clifford Krauss:

    So, the president, for several months now, has been releasing oil from the Strategic Petroleum Reserve, up to a million barrels a day.

    It's been effective in bringing down gasoline prices, by the accounts of some experts, as much as 40 cents a gallon for regular, on average, across the country? Will he continue to do that? He might. He might have to because of the strengthening sanctions from Europe, particularly on the Russians, who produce one out of every 10 barrels of oil consumed in the world.

    On the other hand, oil prices may come down. If we are heading into a recession, there are economists who say that oil could go down to the $70s or $60, a barrel, and then oil prices, gasoline prices, even natural gas prices, are going to come down to earth.

  • William Brangham:

    Help me understand something here. The president is both pressuring the companies to produce more oil and gas, while simultaneously arguing that we, as a nation, need to wean ourselves off of fossil fuels because of climate change.

  • Clifford Krauss:

    Yes.

  • William Brangham:

    There seems to be a tangle of contradictions there.

  • Clifford Krauss:

    Absolutely.

    The president campaigned during the campaign against fossil fuels, saying that we have to quicken the transition. And, in fact, much of his agenda has — on the Hill has been to do exactly that. And so investors are saying and oil companies are saying, wait a minute, you want us to invest more now. Then we're going to have stranded assets, LNG, export terminals, oil fields, that in a few years are going to be out of date because of the stimulation for electrification of the transportation system.

    And so there are a lot of contradictions there. The main theme that we are facing now or the dilemma we are facing now is, how do we do two things at one time, secure our nation and the world's energy, which we must do, particularly in a time of war, but, at the same time, combat climate change?

    And that is a tough thing to do, especially when it comes to private corporations that are looking at their bottom line.

  • William Brangham:

    All right, Clifford Krauss of The New York Times, thank you so much for being here.

  • Clifford Krauss:

    Great to be with you.

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