BP walks back climate pledges as earnings show 2022 was most profitable year ever for Big Oil

Financial results from the biggest energy companies in the world this week show that last year was their most profitable year ever, prompting at least one of them to scale back previous commitments to pivot more toward renewable energy.

U.S. oil company Exxon revealed last week that it earned a profit of $56 billion US last year, the highest figure on record for any publicly traded oil company ever. The eye-popping figure means that even after it paid all of its costs, from exploration, development, salaries, taxes and legal and regulatory costs, the Texas-based company earned a profit of more than $6 million per hour last year.

They weren't the only ones who profited from the sudden spike in oil prices, which languished for most of the pandemic before jumping to over $120 a barrel after Russia's invasion of Ukraine.

U.S. rival Chevron said its profit topped $35 billion last year, more than doubling the $15 billion from the year before, while Anglo-Dutch giant Shell earned $40 billion. British oil major BP wasn't far behind, raking in just shy of $28 billion last year, the highest annual total in the company's 114-year history.

French oil giant Total will post its financial results on Wednesday, and the trend is expected to continue. All in all, profits at those five major oil conglomerates likely topped $200 billion last year, according to data analytics firm Refinitiv.

That's quite the departure from the first two years of the pandemic, when energy demand cratered due to lockdowns and travel restrictions, and capital-intensive oil companies were losing money on every pumpjack.

Red ink had a silver lining

For environmentalists, the sea of red ink all over the books of Big Oil earlier in the pandemic had a silver lining: it forced them to ponder a future in which there is less demand for their oil.

Major oil companies like BP even committed to be carbon-neutral by 2050, while some smaller ones went even further — using carbon capture technology to take more carbon out of the atmosphere than they emit, even as they pump out more oil.

Chevron and Shell are partners in one such project in Alberta and more are in the works. 

In 2020, BP went as far as predicting that demand for fossil fuels may have already peaked, and as part of its carbon-neutral plan said it was planning to slash its oil and gas output by 40 per cent by the end of this decade. But so far things haven't quite worked out that way.

BP laid out its 2023 spending plans this week, forecasting that it plans to spend an extra $8 billion on clean energy investments by 2030, but it has also increased its spending plans on oil and gas projects by the same amount. 

"We are providing the oil and gas the world needs today — while at the same time investing to accelerate the energy transition," CEO Bernard Looney said.

Shell's spending plans show a similar gap, with the company reporting it spent $3.5 billion on green energy initiatives last year, about one-sixth of its total spending of $25 billion. The company has so far resisted making any major promises on reducing emissions, but shareholder activist group Follow This has led a successful pitch to get shareholders to vote on a plan to adopt one at its upcoming annual general meeting.

"Shell can't claim to be in transition as long as investments in fossil fuels dwarf investments in renewables," the group's founder, Mark van Baal, said in a press release.

Chevron booked a profit of about $35 billion last year, and it plans to spend about half that on its various projects around the world. Within that, only about $2 billion is earmarked for finding and developing projects that either produce renewable energy or reduce carbon emissions.

In addition to upping its spending plans on oil and gas, BP also downgraded its pledge to cut its output by 40 per cent to just 25 per cent by 2030, news that came as no surprise to critics of the company.

"This should be the last nail in the coffin of the oil industry's green claims," Keith Stewart, with Greenpeace Canada, told CBC News. "Even as Big Oil rakes in record profits, they are delaying action on the climate crisis to make a few extra bucks while people and ecosystems pay the costs in ever more extreme weather, wildfires, drought and flooding."

Windfall taxes proposed

"Governments should be taxing back those excess profits to invest directly in climate solutions, because the oil companies won't," he said.

Windfall taxes on excessive profits are a popular idea among environmental circles, but others say they do little to decarbonize the world's energy systems while making short-term problems worse.

WATCH | Growing calls to tax excess profits in Canada's oil patch: 

Calls to tax energy sector’s excess profits

2 years ago

Duration 2:02

Canada’s oil and gas industry has achieved record earnings, with some arguing for a tax on excess profits.

Rafi Tahmazian, a portfolio manager with Canoe Financial, says talk of slapping windfall taxes is short-sighted. "That doesn't get rid of your problem," he told CBC News in an interview. "It shows you how myopic everybody is in their thinking. You tax these companies, they're going to reduce their production."

The incentive to pump more oil, not less, is especially great for the three European-based oil majors, since they are currently tasked with keeping Europe's power needs met in the face of Russian oil sanctions.

"They're in Europe where it's all hands on deck right now for any power that you can muster up," he said. "BP is shifting gears to add oil because Europe needs it."

Tahmazian says BP's about-face on reducing oil output makes sense since the company's shares have been relative laggards due to their green initiatives in the first place. "They were penalized in the market for it because they're materially at a disadvantage from a profit perspective."

Dennis McConaghy, a former executive at pipeline company Trans Canada, says record profits at oil giants illustrate "the fundamental dilemma between climate targets and a world that can't do without hydrocarbons."

While he says he expects major oil companies in Canada and around the world will continue to invest in renewables, "it is clear they're going to reinvest a substantial amount in conventional hydrocarbon development."

"Because the reality is … oil demand is robust and will probably increase over the short term, notwithstanding climate objectives."