The blockbuster results come a day after European company Shell also posted record profits: the three, plus France’s TotalEnergies, collectively earned nearly $51 billion in the last quarter, nearly double what they reported in the same three months in 2021, according to Reuters.
The staggering results are mainly linked to the West’s efforts to punish Russia for the unprovoked attack on its neighbor by cutting off its energy sales. Crude prices that had shrunk in the early months of the coronavirus pandemic have suddenly inflated and are now 37% higher than a year ago. That’s still below what markets were ordering in June, when West Texas Intermediate crude, the U.S. oil benchmark, jumped more than $120 a barrel. On Friday, WTI remained close to $100 a barrel.
Consumers continued to spend in June despite being wary of the future
Energy companies have thrived as the rest of Wall Street has been hammered this year. Vanguard’s Energy Index Fund, an exchange-traded fund that includes major oil companies, is up 37% year-to-date, even as the broad-based S&P 500 index is down 14%. Shares of Exxon and Chevron soared 51% and 36%, respectively.
Consumers and businesses have felt the effects of soaring fuel prices against a backdrop of high inflation for decades.
The US average for a gallon of gasoline prices topped $5 for the first time in June. On Friday, it was $4.26, according to AAA. Consumer gasoline bills jumped nearly 49% that month, the Bureau of Economic Analysis reported Friday, after rising 20% in May. Diesel fuel, which underpins much of the US shipping system, also rose, putting pressure on major retailers in a fragile economy.
President Biden, facing right-wing criticism for his handling of inflation and the economy, called out Exxon for making ‘more money than God’ in a June speech, while imploring him and Chevron to redouble efforts to get more oil to market.
Pump Shock: Why Gas Prices Are So High
In late June, Chevron chief executive Mike Wirth responded with a stern letter chastising the administration for attempts to “criticize, and sometimes defame, our industry.”
He added that Chevron “is also concerned about rising prices that Americans are experiencing,” while pointing to recent capital expenditures by its companies.
Oil companies are pumping more to meet demand, with Exxon increasing its oil and gas production in the Permian Basin by 130,000 barrels of oil equivalent per day from the first half of 2021. But the crude oil market is still suffering from a drastic supply imbalance. and demand, and industry insiders say it will take years to bring new supply online.
Gasoline prices have fallen 10% since their peak in June
“If you look at what it takes to bring in new investment to increase supply in the oil industry, it’s quite a long-cycle investment… three to five years is a reasonable time frame to think about bringing in. significant additional production in the mix,” Exxon Chief Executive Darren Woods told CNBC on Friday.
Along with increasing production, the oil giants are also sending billions of dollars to Wall Street through stock buybacks and dividends. Exxon announced that it had distributed $7.6 billion to shareholders, including dividends, while Shell announced $6 billion in share buybacks intended to boost its share price.
Exxon stock jumped 4.7% on Friday, closing at $96.97, while Chevron jumped 8.9% to settle at $163.78. Shell climbed 3.7% to $53.38.
The gains came as the rest of Wall Street ended July with a third straight winning session. The Dow Jones Industrial Average added 315.50 points, or 1%, to land at 32,845.13. The S&P 500 jumped 1.4% to close at 4,130.29, and the Nasdaq climbed 1.9% to end at 12,390.69.
For the week, the Dow Jones rose 3%, the S&P 500 4.3% and the Nasdaq 4.7%.
For July, the Dow gained 6.7%, the S&P 500 rose 9.1% and the Nasdaq climbed 12.4%. These are the largest monthly gains for all three indices since November 2020, according to MarketWatch.