The Russian invasion of Ukraine has aggravated the global energy crisis and has forced the European Union to look for alternatives to minimize its dependence on the Kremlin in this area. Within the framework of this energy decoupling plan is, for example, the H2Med gas pipeline that will transport green hydrogen and connect Portugal, Spain and France.
On the other hand, this worsening of the world energy crisis has allowed the big oil companies to obtain stratospheric profits. This has caused some countries like the US to consider the option of increasing taxes on this type of company.
Astronomical profits. The five most important oil companies in the United States and Europe have presented about 200,000 million net profits together. Specifically, between TotalEnergies, Exxon Mobil, Chevron, BP and Shell they add up to 196.3 billion dollars in profits, a figure higher than the GDP of countries such as Morocco or Algeria. All of these firms have posted record profits: France’s TotalEnergies, for example, announced $36.2 billion in profits, doubling the figure obtained last year.
Enrichment with the energy crisis. This is one of the consequences of the war in Ukraine: reduced supply and increased demand cause prices to rise. The oil companies are the real winners of the conflict: the Norwegian Equinor has obtained 28,700 million dollars of net benefits, the highest in its history, and has become the main supplier of natural gas in Europe after the Russian Gazprom cut the supply through Nord Stream 1 to the Old Continent.
Harsh criticism in Washington. On the other hand, these stratospheric benefits were recently criticized by Joe Biden in his State of the Union address. The US president said he was “outrageous” to see how big oil companies had made $200 billion in profits last year amid a global energy crisis.
The US government wants them to pay more. Biden indicated that these corporations “should do the right thing”, and later communicated his proposal to “quadruple the tax on corporate share buybacks to encourage long-term investments”, despite which these firms would continue to obtain a “considerable benefit ”.
The president also pointed out that no billionaire could contribute less fiscally than a teacher or a firefighter and called for “closing the legal loopholes” that allow the richest to evade taxes.
Environmental NGOs agree. Some NGOs have shown their support for this type of measure. Alice Harrison, an activist for Global Witness, acknowledged in an article published by CNBC on February 8, that a tax increase for so-called ‘goddess benefits’ and increased funding for renewable energy and home insulation “They would end the era of fossil fuels that are severely damaging the population and the planet.”
Extra financing for the energy transition. For his part, Sana Yusuf, an activist with Friends of the Earth, acknowledged in the same article that establishing a tax on excessive profits would help finance the national program for domestic thermal insulation and the energy transition, contributing to the reduction of bills and reducing carbon emissions.
The oil companies are not for the job. However, the oil companies do not agree to a tax increase on their profits. They say this would have a negative impact on the energy sector and on their own financing of the energy transition. In a recent interview published by CNBC, Amin Nasser, CEO of the Saudi oil company Saudi Aramco, pointed out that this type of tax did not contribute to the growth of the sector and the financing of alternative forms of energy.
A similar diagnosis was made by Bernard Looney, CEO of the British BP, in May 2022. It should be noted, on the other hand, that this oil company has modified its emission reduction plan in order to continue meeting the demand for oil and gas.
The oil companies pack their bags. On the other hand, it is not the only Western oil company that has changed its plans recently. Chevron, which stopped operating in the United Kingdom and Denmark, obtained permission from the US government in November 2022 to restart its activity in Venezuela. TotalEnergies announced in September last year that it was leaving Canada and is currently negotiating projects in Mozambique and South Africa. In other words, the oil companies are relocating to regions with a regulatory framework favorable to their interests.
UN criticism. In August 2022, Antonio Guterres, Secretary General of the UN, spoke of the “immoral” nature of the benefits that were being announced at the time by the oil companies, adding that this “grotesque greed” was “punishing the poorest people and vulnerable”, as well as “destroying our only home”, in reference to the climate crisis. Now that critical tone is being used by the world’s leading economic power.
Paradigm shift. In this sense, Federico Steinberg, principal investigator at the Elcano Royal Institute, responded in the affirmative when questioned on Cadena Ser about whether Biden had announced a new fiscal order in his State of the Union address. In addition, he pointed to the excesses of financial globalization as the main causes of this “new panorama”; to the pandemic, which has revealed the importance of the role of the state; and to the Russian invasion of Ukraine, which has spelled the end of the liberal order based on mutual interdependencies.
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