A pump jack operates as the sun sets in the Permian Basin near Loving, New Mexico, Tuesday, May 20, 2025.
Susan MontoyaBryan/AP
hide caption
Susan MontoyaBryan/AP
Subscribe to the Planet Money newsletter. The world is confused. The economy can help.
Oil companies made billions this quarter, they told investors in calls this week. ExxonMobil earned $15.4 billion, more than double its profits compared to the same period last year.
Shell almost doubled its own profits, at $10.8 billion.
Chevrons rose 180% to $9.9 billion.
Combined, the three companies raised just over $36 billion this quarter.
As for the surge in oil company profits recorded last quarterthis is largely due to the war in Iran which is disrupting global oil supplies. Less oil is moving through the Middle East, so oil from other parts of the world has become much more valuable.
Brent crude is now trading around $113 per barrel. As a reminder, before the start of the war, the price of a barrel was around 70 dollars.
Meanwhile, demand for oil and refined products like gasoline, diesel and heating oil has not changed much. People still need it to heat housesdrive cars, drive tractors and truck everything we buy across the country.
Dan Pickering, founder of financial services firm Pickering Energy Partners, says big oil companies are profiting from meeting this demand. “The majors are able to sell their barrels that they produce in the United States, Latin America or Europe at much higher prices,” he explained. “So the Middle East’s loss is usually the gain of the oil and gas companies of the United States and Europe.”
On their earnings calls, oil company executives said a good portion of their profits went to their shareholders in the form of dividends and stock buybacks. The Shell takeover was one of the largest ever. Exxon announced its highest quarterly dividend on record.
But for the most part, Pickering says, these companies are in a wait-and-see position: They’re not really spending that money on things like new drilling projects, because they know they’re in unusual times.
“This is a period where high prices are driven more by geopolitical events than anything else,” he said. Since it’s difficult to predict how long this will last, he continued: “You put the money in the bank and watch what happens as we approach 2027.”
Pickering says this makes sense because oil is a cyclical industry: prices go up and down. Businesses want to conserve cash when times are good so they can protect themselves when things aren’t going so well.
A supply shock, in the middle of two ongoing wars
Rising oil prices have increased what drivers pay at the pump. Gasoline costs about $1.20 more per gallon today than it did a year ago, according to AAA. Diesel reached a record high in Septemberand is still close to this peak.
Exxon CEO Darren Woods was one of the few to directly address the issue during an earnings conference call, saying, “We recognize the impact of high prices on people’s lives and economic growth.”
Exxon’s solution, he says, is to increase production. “Faced with product shortages, our teams did everything to keep prices low by maximizing production,” he said.
Chevron CEO Mike Wirth made a similar point, telling investors: “What we can do is what we can control, and that helps consumers get the most out of our systems.”
On these calls, executives from all the companies emphasized that they were facing a huge supply shock. The war in Iran, as well as Ukrainian strikes on Russian oil refinerieshave taken much of the world’s refining capacity offline.
Leaders said they don’t see the situation changing anytime soon.
“If you had asked me six months ago, would I have thought oil prices would be where they are today? No,” Shell CEO Wael Sawan said on his company’s call. “Personally, I thought we were at a high level, and we were basically looking at what was going to be a temporal peak.”
But because the war has been going on for so long, global oil reserves are at much lower levels. United States Strategic Petroleum Reserve is at low levels; Europe released some of its crude oil and diesel.
“We are now seeing increasing structural stability in the context of the rising oil price, simply because we are seeing that inventory levels are declining very quickly and it will take some time to be able to replenish those inventories,” Sawan continued.
Demands tax on windfall profits
Democrats in both houses of Congress have called for a tax on exceptional profits – excess profits that result from geopolitical forces beyond their control, not from innovation. Bills submitted this spring would return some of those benefits to Americans through tax cuts.
Earlier this year, Sen. Sheldon Whitehouse (D-R.I.), who sponsored a blockbuster tax bill in the Senate, said he hoped it would also shine a light on how climate-friendly renewable energy is increasingly being used. more competitive than fossil fuels. “Wind, solar and battery energy, they are don’t raise their prices,” Whitehouse told NPR at the time.
Isabella Weber, an economist at the University of Massachusetts Amherst, studied how exceptional taxes worked in other countries. She says exceptional taxes are a way to close the gap between what oil companies earn and what most people pay for that oil.
“The companies that run this essential sector have reaped record profits in the midst of the worst energy supply crisis we have seen in several decades,” she said. “It’s a contradiction that I think raises fundamental questions about how we organize our economy, how we organize our society, who benefits and who loses.”
“When emergencies generate huge windfall profits,” she continued, it creates “this crazy situation where the worst times end up being the best, which is problematic on a deeper level.”
While oil executives didn’t mention the windfall taxes on calls this week, last quarter Exxon’s Woods called them “misguided policy” He said they penalize companies that try to succeed in a volatile industry.
As the midterms approach, the Trump administration has taken steps to lower the price of fuel, including diesel, including temporarily. relax federal rules for tinted diesel, which is used in agriculture and the lifting of sanctions against Russia for allow more diesel to enter the global market.
But these efforts are unlikely to lower prices in the United States: The amount of fuel Russia can produce would represent only a small portion of U.S. daily demand, and tinted diesel is still not affordable to most drivers.
Regardless, significantly lower prices are unlikely to materialize by Tuesday.
Gn headline
