Big oil companies are more interested in returning cash to shareholders than investing in renewables, according to a leading oil analyst.
British oil and gas giant BP yesterday posted a net profit of $8.5bn for the second quarter of the year – a threefold increase on the same period last year.
The company is the latest energy firm to report massive profits during the cost-of-living crisis – with Shell and British Gas owner Centrica also posting bumper results this week.
The profits have been described as “obscene” with calls for new taxes on the sector to help people struggling with inflation.
In its latest release, BP said its ‘underlying replacement cost profit’, which is the company’s preferred measure of profit rose to $8.5bn (€8.35bn) between April and June.
That is up from $6.2bn (€6.09bn) in the first quarter and three times the profits reported in the same quarter last year.
On Breakfast Business this morning, oil analyst Robert Maxwell said the second quarter has seen “record profits across the spectrum of oil majors and big oil companies”.
He said the profits are largely going to shareholders rather than investment in renewables.
“While typically over the last ten years or so, CapEx (capital expenditure) spending at big oil companies had been a relatively high percentage on production, that has now come down to less than half versus ten years ago,” he said.
“The priority now is very much returning cash to shareholders via buybacks and dividends opposed to increasing their capital expenditure.”
Mr Maxwell said the International Energy Agency last year published a Zero Mandate encouraging companies to become net zero by 2050.
He said companies have reduced spending on fossil fuels; however, the percentage of revenue invested in renewables has also fallen as profits soar.
“It is amazing and it is obviously disappointing particularly as we go through a cost-of-living crisis at the moment,” he said.
“It makes things difficult for all of us.”
He said there has been a notable increase in pledges to invest in renewables – but far more needs to be done.
“BP came out recently with an €18bn pledge to invest in these renewables but of course more can be done and we need to see other companies come forward with similar pledges of mandates to invest in alternatives,” he said.
“For sure fossil fuels are out of vogue now. It is difficult to raise money or even to get investor appetite for these oil-related investments and I think investors are now kind of encouraging or mandating for more climate-based initiatives going forward.”
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