UK’s oil major BP Plc increased its dividend and share buyback after recording impressive earnings in the second quarter of 2022. The company’s second-quarter underlying replacement-cost profit surged to $8.45 billion, its highest level in 14 years. The strong trading and refining margins prompted the company to increase the dividend and invest in new oil and gas production.
Gains by Overall Industry
BP’s results came after the three biggest western oil and gas corporations, Exxon Mobil Corp., Chevron Corp., and Shell Plc, reported a record $46 billion in collective profits in the second quarter of 2022. The world’s largest energy companies have plenty of cash as economies recovered from the COVID-19 pandemic and the demand for fuel and natural gas exceeds the supply. The major oil companies used part of the huge profits to reward their shareholders with higher dividends and share buybacks. For the second quarter, BP increased its dividend by 10%, bringing it to 6.006 cents per common share, and announced a buyback of $3.5 billion in shares by the third-quarter results.
What’s Driving up Profits?
The massive increase in profits for companies has been aided by higher prices of oil and gas, which increased sharply due to the Russia-Ukraine conflict. In recent months, Russia cut back on supplies to Europe, and there are growing concerns that it could shut off the supplies completely. This worsened the energy crisis, especially in Europe, where countries are scrambling to find new sources of energy to replace the falling gas supplies that were formerly carried by Russian pipelines. Due to the gas supply issues, wholesale prices skyrocketed. As a result, energy companies are forced to pass on these costs to consumers, which led to an unprecedented increase in home energy bills.
Backlash From Consumers
Major oil companies came under political heat in Europe and the US for posting astronomical profits, while customers bear the burden of increasing prices. Environmental activists and labor groups denounced Big Oil’s soaring profits and urged the governments to enact significant policies to reduce the growing energy costs. However, according to oil companies, rising profits from their conventional businesses are helping them to invest in lower-carbon projects as they transition to renewable energy, although those sections of their operations and the profits produced by them remain small.
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