Exxon and Chevron Made Their Highest-Ever Profits in 2022. What Does It Mean for Clean Energy?

How the oil majors plan to spend their combined annual profit of $92 billion has reignited debate over what role—if any—Big Oil should play in the energy transition.

Prices for gas at an Exxon gas station on Capitol Hill are seen March 14, 2022 in Washington, D.C. Credit: Win McNamee/Getty
Prices for gas at an Exxon gas station on Capitol Hill are seen March 14, 2022 in Washington, D.C. Credit: Win McNamee/Getty

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ExxonMobil and Chevron, the nation’s largest oil companies and two of the biggest energy corporations globally, posted a combined profit of $92 billion for 2022, more money than either company has ever made.

Exxon’s annual profit for 2022 reached $55.7 billion, the company reported Tuesday, with Chevron posting on Friday a net profit of $36.5 billion for the year. Their European counterparts are expected to report similarly high results soon. The profits were driven by soaring oil and gas prices last year, which were a result of Russia’s invasion of Ukraine paired with lingering effects from the Covid-19 pandemic, and have helped the oil companies pay off debts and sent their stock prices soaring—a full turnaround from a few years ago.

More than anything, those historic profits are a reminder of how dependent the global economy remains on oil and gas, even as calls for more urgent climate action grow and scientific research continues to suggest that the consequences of global warming are accelerating far quicker than previously believed.

On Monday, researchers published yet another peer-reviewed study warning that the more ambitious 1.5 degree target of the Paris Agreement could now be beyond reach. The study, which used artificial intelligence and was published in the journal Proceedings of the National Academy of Sciences, predicted that average global warming will rise and stay above 1.5 degrees Celsius from pre-industrial levels within a decade and 2 degrees Celsius by midcentury, far earlier than previously forecasted, even if greenhouse gas emissions are substantially cut.

“Our predictions … show a high probability of reaching the 2°C threshold by mid-century,” the study’s authors wrote, “suggesting that even with substantial greenhouse gas mitigation, there is still a possibility of failing to achieve the U.N. Paris goal.” 

Those findings are prompting fresh calls from climate scientists to more rapidly slash the world’s rising greenhouse gas emissions, caused predominantly by the continued combustion of fossil fuels.

“We need to accept that this is an emergency, and we haven’t done that yet,” Peter Kalmus, a climate scientist at NASA’s Jet Propulsion Lab who wasn’t involved with Monday’s study, said in an interview. “I just don’t know what it will take for the majority of people to really understand that, because the kinds of climate disasters we’re seeing now, which were unheard of 10 years ago—the heat dome and flooding in South Asia, people dying in their basements in New York City, the kinds of wildfires and flooding and drought that California and the West are experiencing—is just insane.”

The planet has already warmed between 1.1 to 1.2 degrees on average since the Industrial Revolution, data shows, fueling the kind of destructive storms, wildfires and floods that have become noticeably more common in recent years. At 1.5 degrees, scientists warn that a cascade of climate tipping points will boost the likelihood of such extreme weather events even more, with catastrophic and irreversible consequences—including billions of people facing chronic water scarcity and accelerating mass extinctions—becoming highly probable once temperatures exceed 2 degrees of warming.

Now as oil companies report record-high profits, it’s resparking the debate over what role—if any—the fossil fuel industry should take in the clean energy transition and whether oil majors will use their windfalls to speed the development of renewables or slow them down.

Increasingly, the leading oil companies seem to have accepted that some form of energy transition is inevitable. The question is how fast fossil fuels will be replaced, and whether or not oil and gas will continue to be used throughout the rest of the century, even if in diminished form. On Monday, British oil major BP released its annual Energy Outlook, the company’s long-term forecast of global energy trends, which said the war in Ukraine has likely accelerated the transition off of fossil fuels as countries have sought to lessen their dependence on energy imports.

The company framed its report in surprising terms for an oil major, warning that the world’s carbon budget is running out, and that “the longer the delay in taking decisive action to reduce emissions on a sustained basis, the greater are the likely resulting economic and social costs.”

But many in the climate movement, including Kalmus, don’t trust that the oil companies are being sincere when they talk about addressing climate change, pointing to a growing body of evidence that shows that industry executives have known for decades that their petroleum products were causing harmful climate change but engaged in public relations campaigns that downplayed and denied those threats. Some activists have even accused oil and gas companies of pretending to take climate change seriously as a tactic to delay the phase out of fossil fuels and continue profiting from them as long as possible.

Global clean energy investments matched that of fossil fuels for the first time last year, topping $1 trillion. But despite being a watershed moment for renewables, climate advocates say it still isn’t moving fast enough.

The oil majors continue to devote the vast majority of their spending on their core businesses and, increasingly, on rewarding their investors. Last week, Chevron announced it would spend $75 billion to buy back its own shares and increase stock prices, a step that Exxon had also taken last year. It’s unclear how Exxon plans to spend its current windfall, but the company did release new details of a plan to build what would be the world’s largest “low-carbon” hydrogen plant—a technology that has been criticized by climate activists as a distraction from more proven climate solutions like wind and solar energy.

Kalmus, however, still believes that the energy transition would go quicker without fossil fuel companies involved, pointing to the outcome of last year’s COP27 global climate talks, which failed to produce a deal on how nations would phase down their use of fossil fuels. Without such a plan, scientists say the world will remain on track to warm upwards of nearly 3 degrees by the end of the century.

“Look at what they’ve done in the last 40 years, look at the evidence,” Kalmus said, referring to oil companies and their interest groups. “They’ve shown the world that they will put profit above us and above the planet, and so we would be fools to trust them.”

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That’s how many of the nation’s 210 remaining coal power plants are now less cost-effective than wind and solar farms of similar generating capacity, u003ca href=u0022https://insideclimatenews.org/news/30012023/wind-solar-coal-power-plant-costs/u0022u003ea new analysisu003c/au003e from think tank Energy Innovation found. Just one coal plant, in Wyoming, was found to be cost-competitive.

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