Rajan Wilcox
Fossil fuel companies are making billions in profits while climate disasters are causing billions in losses. In 2022, ExxonMobil and Chevron, two US-headquartered companies, reported earnings of $55.7 billion and $35.5 billion, respectively. That same year, the US experienced 18 climate and weather-related disasters, including droughts, floods, severe storms, and wildfires. As the field of attribution science advances, researchers are better able to link specific extreme weather events to human-caused climate change, which could provide a pathway for seeking compensation from fossil fuel companies for the damage caused. While there are global efforts to phase out fossil fuels and transition to renewable energy, fossil fuel companies continue to expand their operations and lobby for new permits.
| Characteristics | Values |
|---|---|
| Fossil fuel subsidies in 2023 | $7 trillion |
| Fossil fuel companies' profits during climate and weather-related disasters in 2022 | Billions of dollars |
| ExxonMobil and Chevron's earnings in 2022 | $55.7 billion and $35.5 billion, respectively |
| ExxonMobil's acquisition of Pioneer Natural Resources | $59.5 billion |
| Chevron's acquisition of Hess | $53 billion |
| Diamondback Energy's merger with Endeavor Energy Resources | $26 billion |
| ExxonMobil, Chevron, Shell, TotalEnergies SE, and BP Plc's spending on dividends and stock buybacks in 2023 | $113.8 billion |
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What You'll Learn
Fossil fuel companies' profits come at the expense of the planet and people's lives
In 2022, just five fossil fuel companies (ExxonMobil, Shell, BP, Chevron, and TotalEnergies) reported a total of nearly $200 billion in profits. During the same year, the world experienced devastating climate-related disasters, including flooding in Pakistan that impacted 33 million people, caused up to $40 billion in damages, and resulted in the loss of 1700 lives. These companies' activities contribute to rising temperatures, sea levels, and ocean acidification, leading to extreme weather events that result in billions of dollars in losses and irreparable harm to cultural heritage and human lives.
The fossil fuel industry's profits are often made at the expense of global health and safety. While these companies reap enormous financial gains, people worldwide bear the burden of worsening climate change impacts. The growing field of attribution science enables researchers to establish a causal link between human activity, climate change, and specific extreme events. This scientific advancement strengthens the case for holding fossil fuel companies accountable for the damages caused by their products.
Furthermore, fossil fuel subsidies surged to a record $7 trillion last year, exceeding global spending on education and approaching two-thirds of global healthcare spending. These subsidies contribute to environmental degradation by undercharging for supply costs and failing to reflect environmental costs in fossil fuel prices. Removing these subsidies could prevent 1.6 million premature deaths annually, raise government revenues, and help achieve global warming targets. However, phasing out subsidies requires careful policy design and implementation to ensure that vulnerable households are compensated for higher energy prices.
The fossil fuel industry's high profits result from the world's continued addiction to its products, driven by the companies' lobbying efforts and global conflicts. As climate change impacts intensify, with record-breaking temperatures and increasing heat-trapping emissions, the industry's profits stand in stark contrast to the growing needs of disaster recovery efforts. It is crucial to hold these companies accountable, ensure they compensate for the economic and humanitarian damages they have caused, and prioritize the planet and people's well-being over profits.
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Fossil fuel companies' profits during climate disasters
The profits of fossil fuel companies continue to soar while climate disasters wreak havoc globally. In 2022, the United States alone experienced 18 separate climate and weather-related disasters, including droughts, floods, severe storms, and wildfires, each causing over $1 billion in damage and leading to 474 deaths. ExxonMobil and Chevron, two US-headquartered fossil fuel giants, reported earnings of $55.7 billion and $35.5 billion, respectively, in 2022. While these companies profit, people worldwide suffer losses due to the worsening effects of climate change.
The trend continued into 2023, with ExxonMobil, Chevron, Shell, and BP collectively earning over $100 billion. Meanwhile, the world experienced extreme air and ocean temperatures, wildfires, floods, and other disasters. The fossil fuel industry's profits come at the expense of global health and safety, as their products drive climate change and worsen its impacts.
Attribution science plays an increasingly crucial role in tying disasters to climate change and attributing responsibility to the fossil fuel industry. Researchers can now rapidly analyze disasters as they unfold and establish the extent to which climate change worsened them. This science is vital for holding fossil fuel companies accountable and seeking compensation for the damages they have caused.
Some US states are considering bills to force fossil fuel companies to pay for the recovery costs of climate disasters. Lawmakers argue that the rapidly increasing costs of climate disasters are becoming unsustainable for state budgets. They aim to hold polluters responsible and ensure that taxpayers are not burdened by the costs of recovery.
The fossil fuel industry's profits and their role in driving climate change highlight the urgent need for a transition to clean energy. Removing fossil fuel subsidies, estimated at $7 trillion globally, can play a significant role in reducing emissions, raising government revenues, and redistributing income. However, phasing out these subsidies requires careful policy design and implementation to minimize negative impacts on vulnerable households.
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Fossil fuel subsidies and their impact
Fossil fuel companies make billions of dollars in profits, while people worldwide suffer billions in losses due to the worsening effects of climate change. The fossil fuel industry plays a dominant role in causing climate change globally, and its profits come at the expense of global health and safety. ExxonMobil and Chevron, two US-headquartered companies, reported earnings of $55.7 billion and $35.5 billion, respectively, in 2022. That same year, the US experienced 18 separate climate and weather-related disasters, including droughts, floods, severe storms, and wildfires.
Fossil fuel subsidies are a significant factor in the industry's profitability and have surged to a record $7 trillion. These subsidies are intended to protect consumers by keeping prices low but have sizable fiscal costs and promote inefficient allocation of resources. They also encourage pollution and contribute to climate change and premature deaths from local air pollution. The vast majority of subsidies are implicit, as environmental costs are often not reflected in fossil fuel prices, especially for coal and diesel. Consumers did not pay for over $5 trillion of environmental costs last year, and this number would almost double if damage to the climate was valued at levels found in recent scientific studies.
The United States provides tax subsidies to the fossil fuel industry to encourage domestic energy production, with conservative estimates of $20 billion per year, 20% allocated to coal, and 80% to natural gas and crude oil. While discussions on repealing fossil fuel subsidies have occurred, no significant action has been taken. Several international institutions, including the G20, the International Energy Agency, and the Organization for Economic Cooperation and Development (OECD), have called for a phase-out of these subsidies.
The removal of fossil fuel subsidies is projected to have several benefits. It would prevent 1.6 million premature deaths annually, raise government revenues by $4.4 trillion, and put emissions on track to meet global warming targets. It would also redistribute income, as fuel subsidies benefit rich households more than poor ones. However, removing subsidies can be challenging, as governments must carefully design and communicate reforms to ensure a comprehensive policy package that addresses potential negative impacts on vulnerable households.
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Fossil fuel companies' mergers and acquisitions
Fossil fuel companies have been engaging in mergers and acquisitions (M&A) to build resilience and optimise their portfolios. While M&A activity in the oil and gas (O&G) sector fell to its lowest level since 2008 due to economic and geopolitical pressures, several notable deals were still made in 2023 and 2024.
In October 2023, Chevron Corporation acquired Hess, an independent producer and explorer of crude oil and natural gas, in an all-stock transaction. This added valuable assets to Chevron’s portfolio, including the Stabroek Block in Guyana and Hess’s Bakken shale assets. The US Federal Trade Commission (FTC) approved the acquisition but barred Hess’s CEO, John Hess, from joining Chevron’s board over concerns about possible anti-competitive behaviour.
Another notable merger was between Diamondback Energy and Endeavor Energy, announced in February 2024. The merger aimed to create a stronger, independent oil and gas company with a focus on the Permian Basin, increasing production efficiency and expanding their influence in this key US oil region.
Other M&A transactions in the O&G sector include ONEOK’s acquisition of Magellan Midstream Partners, which closed in September 2023, creating a stronger energy transportation company with streamlined services across oil and gas markets. Occidental’s acquisition of CrownRock was announced in December 2023 and completed in August 2024, adding valuable oil and gas assets in Texas’ Permian Basin to Occidental’s portfolio.
ExxonMobil, a leading US provider of oil, gas, and petrochemical products, also announced its acquisition of Pioneer Natural Resources, a company involved in hydrocarbon exploration, in an all-stock deal expected to enhance its presence in the Permian Basin. The deal was completed in May 2024, with Pioneer’s former CEO blocked from joining Exxon’s board due to claims of coordinating with OPEC to increase oil prices.
While the volume of M&A activity in the O&G industry has been influenced by external factors such as the economy, interest rates, and geopolitics, strong and efficient companies have had opportunities to develop strategies and pivot towards cleaner energy solutions.
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Fossil fuel companies' responsibility and accountability
Fossil fuel companies have long been aware of the link between their products and global warming. However, instead of taking action to address this, they have engaged in a decades-long campaign of spreading disinformation and obstructing climate policies. They have also lobbied politicians and regulators to protect their interests. This has resulted in a wave of new lawsuits against these companies for their role in the climate crisis and their failure to warn the public about the foreseeable harm caused by their products.
The fossil fuel industry plays a dominant role in causing climate change, and its profits come at the expense of global health and safety. While these companies are making hundreds of billions of dollars in profit, people around the world are bearing the cost of the devastating effects of climate change, including worsening extreme weather events such as droughts, floods, severe storms, and wildfires. For example, the flooding in Pakistan in 2022 impacted 33 million people, killed 1700, and caused up to $40 billion in damages.
As attribution science advances, it becomes easier to trace the link between specific extreme weather events and the heat-trapping emissions produced by fossil fuels. This strengthens the case for holding fossil fuel companies accountable for the damage caused by their products and seeking compensation for those affected by climate change. However, the regulatory structure is currently inadequate to hold these companies accountable, and successful litigations are rare.
To address this, a new social contract has been proposed to redefine the accountability of fossil fuel companies and hold them responsible for their legal and ethical responsibilities in mitigating climate change. This framework would involve a collaboration between citizens, corporates, and the government to stabilize climate change and promote sustainable development. Additionally, scrapping fossil fuel subsidies could prevent 1.6 million premature deaths annually, raise government revenues, and help achieve global warming targets.
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Frequently asked questions
Fossil fuel companies are worth trillions of dollars. In 2023, ExxonMobil, Chevron, Shell, TotalEnergies SE, and BP Plc spent a record $113.8 billion on dividends and stock buybacks.
Fossil fuel companies make their profits by extracting fossil fuels from the ground, lobbying for their interests, and building new infrastructure. They also often misinform the public about climate change.
Fossil fuel companies play a dominant role in causing climate change, which leads to extreme weather events and rising temperatures, sea levels, and ocean acidification. These companies also use taxpayer dollars for exploration and development, further impacting the planet.
Fossil fuel companies receive explicit and implicit subsidies from governments, which cost $7 trillion in 2023. These subsidies support consumers and businesses during energy price spikes but also take funding away from important sectors like education and healthcare.
To address the issues caused by fossil fuel companies, public pressure for a phase-out of fossil fuels is needed. Additionally, their decades of disinformation and denial should be exposed, and they should be held accountable in courts.
