Business
Oil company <a The majors are able to sell their barrels that they produce in the U.S. or Latin America or Europe for much higher prices," he said. "So the Middle East's loss is generally the gain of oil and gas companies in the U.S. and Europe."
During their earnings calls, oil executives stated that a significant portion of these profits would be returned to shareholdersong its largest to date, while Exxon announced its highest-ever quarterly dividend
However, Pickering observes that these companies are largely adopting a wait-and-see approach, opting not to reinvest heavily in new drilling projects because they recognize this is an unusual market environment.
“This is a period where the <a he said. Since it is difficult to forecast how long these conditions will persist, he added, "You put the money in the bank and watch to see what happens as we move into 2027."
Pickering explains that this strategy is logical given that oil is a cyclical industry characterized by fluctuating prices. Companies prefer to retain cash during prosperous times to provide a buffer for when the market inevitably cools.
A supply shock, amid two ongoing wars
Rising oil costs have increased prices at the pump. Gasoline is roughly $1.20 more expensive per gallon than it was a year ago, and diesel, which hit a record high in September, remains near that peak.
Exxon CEO Darren Woods was among the few to address the situation directly during an earnings call, stating, “We recognize the impact high prices have on people’s lives and economic growth.”
Exxon’s strategy, he noted, is to increase production. “ With products in short supply, our teams have done everything they can to keep prices down by maximizing production,” he said.
Chevron CEO Mike Wirth echoed this sentiment, telling <a What we can do is what we can control, and that's help consumers get as much as they possibly can out of our systems."
Executives from all the firms emphasized that they are navigating a massive supply shock. The war in Iran, coupled with Ukraine’s strikes on Russian oil refineries, has significantly reduced global refining capacity.
The leadership teams indicated that they do not expect this situation to resolve in the near future.
“If you’d asked me six months ago, would I have thought that oil prices were going to be where they are today — no,” Shell CEO Wael Sawan said on his company’s call. “Personally, I thought we were at a high there, and we were essentially looking at what was going to be a temporal spike.”
Because the conflict has persisted, global oil reserves have dwindled. The U.S. Strategic Petroleum Reserve is at low levels, and Europe has also tapped into its crude oil and diesel stockpiles.
“We’re now seeing more and more structural stability in that higher oil price simply because we are seeing that inventory levels are being drawn down very quickly, and it’s going to take quite some time to be able to refill that inventory,” Sawan continued.
Calls for a windfall tax
Democrats in both houses of Congress have advocated for a tax on windfall profits—excess earnings generated by geopolitical forces rather than corporate innovation. Legislation introduced this spring aims to return a portion of these profits to Americans through tax rebates.
Climate
Oil companies are making billions. In the U.S., calls to tax their windfall are growing
Earlier this year, Senator Sheldon Whitehouse (D-R.I.), who sponsored a windfall tax bill in the Senate, expressed hope that the measure would highlight how renewable energy is becoming more cost-competitive than fossil fuels. “ Wind, solar, and battery power, they’re not raising their prices,” Whitehouse told NPR at the time.
Isabella Weber, an economist at the University of Massachusetts Amherst, has researched the implementation of windfall taxes in other nations. She argues that these taxes provide a way to bridge the divide between corporate profits and the high costs paid by consumers.
“The companies that are running this essential sector have been reaping record profits amidst the worst energy supply crisis that we have had in several decades,” she said. “This is a contradiction that, I think, raises fundamental questions about how we organize our economy, how we organize our society, who benefits, who loses.”
“When emergencies generate massive windfall profits,” she continued, it creates “this crazy situation where the worst of times ends up being the best of times, which is problematic on a deeper level.”
While oil executives did not discuss windfall taxes during this week’s calls, Exxon’s Woods previously characterized them as a “misguided policy” last quarter, arguing that they penalize companies for succeeding in a volatile market.
As the midterms approach, the Trump administration has implemented measures to lower fuel costs, particularly for diesel. These include temporarily relaxing federal regulations on dyed diesel, which is typically reserved for agricultural use, and lifting sanctions on Russia to increase the global supply of diesel.
However, these actions are unlikely to significantly lower U.S. prices, as the volume of fuel Russia could provide represents only a small fraction of daily U.S. demand, and dyed diesel remains inaccessible to the average driver.
In any event, a significant drop in prices is unlikely to occur by Tuesday.
