Oil Be Back

“Oil creates the illusion of a completely changed life, life without work, life for free. Oil is a resource that anaesthetises thought, blurs vision, corrupts.” – Ryszard Kapuściński

(This blog post previously appeared in Common Weal’s weekly newsletter. Sign up for the newsletter here.)


Who won the energy crisis? The obvious answer is “not us”. The bank accounts of the oil barons are absolutely glowing right now with all of the major corporations publishing their 2022 profit figures this week. Many of them are showing record levels of profit while folk are freezing in their houses despite this being one of the mildest winters in UK history. Shell announced profits of $40 billion, BP made $28 billion, Norwegian state-owned Equinor made $79 billion and Exxon – who infamously predicted with “shocking accuracy” the climate change impact of their operations almost 50 years ago but covered up the data and kept on going – made $56 billion.

A large chunk of these profits will go towards share buybacks – where the company reduces the amount of shares in the company out there in the wild and therefore increases the value and the voting power of remaining holders – but much of it will go out in dividends. You paid more than you ever have to keep your house colder than it’s ever been but all that did was make someone else richer.

What won’t be happening will be bumper payouts in windfall taxes. The UK Government’s own windfall tax included gaping loopholes that have allowed these companies to pay basically nothing. Other countries haven’t been so spectacularly feeble but they haven’t been great either. The UK’s major windfall tax loophole is particularly misguided and allows companies to avoid their windfall tax almost entirely so long as they invest in even more oil and gas extraction – a policy that completely blows a hole in whatever was the shredded remains of the UK’s climate commitments.

One of the defences of these obscene profits is that, actually, we do all benefit from them because all of us are shareholders via our private pensions. However, the England-based think tank Common Wealth (no relation) has recently shown that private UK pensions are extremely diversified and most of the shareholders in these companies are actually hedge funds, dedicated investors, other energy companies and the like. Only around 0.25% of there shares in companies like BP and Shell are owned by the pension funds of UK workers. The ONS says that there are around 22.6 million workers currently paying workplace pensions (if that seems low to you even with automatic enrolment, remember that many workers are on casual or zero-hours contracts or are self-employed and often can’t afford to save into a pension – a storm of retirement poverty is rapidly approaching Britain). If we use Common Wealth’s figures for shareholder payouts and assume that every worker is equally invested in BP (and they’re not because wealth inequality, including pension inequality, is even more acute than income inequality) then this means that each one of you can expect an oil dividend from this company of around…£1.30. Less than a week’s worth of standing charges on your gas bill even if you don’t turn the heating on.

Worse than the profiteering of these companies has been their reaction to the crisis windfall – several of them have now pledged to reduce their climate commitments and to double down on destroying the planet and charging us for the privilege. Governments must reign in these companies but we see time and time again that attempts to do so will be resisted by the oil barons even to the point of them capturing lobby groups and regulatory bodies. As sci-fi author Charles Stross said in a remarkably prescient talk a few years ago “when regulators end up staffed by people drawn from the industries they are supposed to control they frequently end up working with their former office mates to make it easier to turn a profit”.

This week, we published a new policy paper on the ongoing saga of political failure that is ScotWind. We showed that the framework of the auction of Scotland’s largest set of offshore renewable resources to date has cost Scotland tens of billions of pounds in direct auction fees and lost supply chain contracts. We also see that this auction is heavily represented by the same fossil fuel supermajors who made massive profits this year – BP and Shell won around 20% of ScotWind between them. As I wrote last year, the oil barons can’t survive a true Green New Deal – the oil industry entirely vanishes as fuel demand dries up and non-fuel demands on oil are either displaced or rely on biofeedstock – but what they can do is stretch out timeline of that transition long past the point of no return for the climate (a point we’re balancing on right now) and then they can transition themselves into capturing and profiteering from the new age of renewables.

The only way to prevent your cold, damp house remaining cold and damp (so as to maximise the profits from your heating bill) while your pay packet feeds the ever expanding, never satiable demands of these barons, their shareholders, their private jets and their hermetically sealed, “climate proof” bunkers is to demand that our politicians listen to voters rather than industry lobbyists, revive plans to create a National Energy Company and work on a plan to ensure that energy resources are developed and sustained for the good of the public and the planet, not those who seek to undermine both.

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