Katerina Swanson
The fossil fuel industry makes a lot of money. In 2023, the total revenue of the United States' oil and gas industry was 244.4 billion US dollars, down from 330.8 billion US dollars in 2022. Fossil fuel companies have made huge profits over the last 50 years, with estimates ranging from $2.8 billion to $3 billion a day. In 2022, five of the world's biggest fossil fuel companies—ExxonMobil, Shell, BP, Chevron, and TotalEnergies—reported a total of nearly $200 billion in profits. At the same time, the world is incurring record losses due to extreme weather events, which are worsened by climate change. 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 the industry receives substantial subsidies and support from governments, the costs of fossil fuel use, including environmental and health impacts, are estimated to be significant. The transition to clean energy is necessary to reduce costs, mitigate climate change, and create a healthier and safer world.
| Characteristics | Values |
|---|---|
| Profit made by ExxonMobil, Shell, BP, Chevron, and TotalEnergies in 2022 | Nearly $200 billion |
| Average daily profit of the oil and gas industry over the last 50 years | $2.8 billion |
| Average daily profit of the oil and gas industry over the last 50 years (in £) | £2.3 billion |
| Average daily profit of the oil sector over the last 50 years | $3 billion |
| US direct subsidies to the fossil fuel industry | $20 billion per year |
| European Union subsidies to the fossil fuel industry | €55 billion per year |
| US revenue from fossil fuels from 2015 to 2020 | $138 billion per year |
| US oil and gas industry revenue in 2023 | $244.4 billion |
| US oil and gas industry revenue in 2022 | $330.8 billion |
| Fossil fuel subsidies in 2022 | $7 trillion |
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What You'll Learn
Fossil fuel companies' profits
The fossil fuel industry makes significant profits, with the world's biggest fossil fuel companies reporting substantial earnings. In 2022, five major companies, including ExxonMobil, Shell, and BP, reported a collective profit of nearly $200 billion. The oil and gas industry has generated substantial revenue over the years, with estimates of $2.8 billion per day in pure profit over the last 50 years, totaling $52 trillion. This has resulted in a vast accumulation of wealth by petrostates and fossil fuel companies.
The industry's profits come at a significant cost to global health and safety. The impacts of fossil fuel products are felt globally, contributing significantly to climate change and resulting in extreme weather events and disasters. While people struggle with the aftermath of these events, fossil fuel companies continue to prioritize profits and lobby for policies that maintain high earnings, often at the expense of environmental regulations. This self-perpetuating cycle has led to increased reliance on fossil fuels and further exacerbated the damages caused by climate change.
Fossil fuel companies benefit from substantial subsidies, with estimates of $16 billion per day globally. In the United States alone, direct subsidies to the fossil fuel industry are estimated at $20 billion per year, while European Union subsidies are estimated at 55 billion euros annually. These subsidies have contributed to the industry's profitability but are increasingly criticized as they often outweigh the fiscal losses associated with fossil fuel use. As renewable energy sources become more competitive, the justification for subsidizing fossil fuels weakens.
The transition away from fossil fuels will have financial implications, especially for communities heavily reliant on revenue from the industry. Fossil fuels have generated significant revenue for US localities, states, tribes, and the federal government, amounting to approximately $138 billion annually between 2015 and 2020. However, as the shift towards clean energy accelerates, these revenue streams are expected to decline, necessitating adaptation and support for affected communities.
While the fossil fuel industry continues to generate substantial profits, there is a growing recognition of the need to transition to cleaner energy sources. The costs of fossil fuel use, including environmental and health impacts, are significant, and the profits made by the industry often come at the expense of global well-being. As the world grapples with the challenges posed by climate change, the profits of fossil fuel companies highlight the urgent need for a transition to a more sustainable and equitable energy system.
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Fossil fuel subsidies
According to the International Monetary Fund, fossil fuel subsidies are a negative carbon price and use government money that could be spent on other things. They can make countries more vulnerable to variation in international energy prices. The International Energy Agency adds that fossil fuel subsidies are rarely well-targeted to protect vulnerable groups and tend to benefit better-off segments of the population. The consensus among economists is that the rich get the most absolute benefit from fossil fuel subsidies. For example, the poorest people do not usually own cars. However, removing the subsidies may hurt poor people through indirect price increases, such as food prices.
The fiscal cost of government support for fossil fuels was 1.1 trillion USD in 2023. Under a narrow definition, fossil fuel subsidies totalled around $1.5 trillion in 2022. Under a more expansive definition, they totalled around $7 trillion. Global explicit subsidies for fossil fuels amounted to around $1.5 trillion in 2022, with around 80% going to consumers and the rest going into fossil fuel production. Explicit subsidies are broadly found in the Middle East and North Africa (MENA), Europe, the Commonwealth of Independent States (CIS), and East Asia and the Pacific (EAP). Total (explicit plus implicit) subsidies are predominantly in the EAP. Relative to regional GDP, total subsidies for Europe and North America are the smallest at about 3%, while subsidies are 23% of regional GDP in CIS and 19%, 10%, and 10% in MENA, South Asia, and EAP, respectively.
Removing fossil fuel subsidies would reduce the health risks of air pollution, greatly reduce global carbon emissions, and help limit climate change. It would also reduce energy security concerns related to volatile fossil fuel supplies. Fossil fuel subsidies are projected to grow as developing countries, which tend to have higher-polluting power plants, factories, and vehicles, increase their consumption of fossil fuels toward the levels of advanced economies.
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Fossil fuel industry's negative externalities
The fossil fuel industry generates billions in profits, with five of the world's biggest companies—ExxonMobil, Shell, BP, Chevron, and TotalEnergies—reporting a total of nearly $200 billion in profits in 2022. However, these profits come at the expense of global health and safety due to the industry's dominant role in causing climate change.
One of the significant negative externalities of the fossil fuel industry is its impact on climate change. When fossil fuels are burned, they emit greenhouse gases, such as carbon dioxide, which trap heat in the Earth's atmosphere and contribute to climate change. In 2019, fossil fuels accounted for 74% of U.S. greenhouse gas emissions, with nearly 25% coming from fossil fuels extracted from public lands. The combustion of fossil fuels also leads to local air pollution, causing harm to human health and the environment.
The social cost of fossil fuel energy production is another negative externality. Fossil fuel companies do not internalize the social marginal cost, which reflects the cost to society as a whole. This failure to consider the negative consequences can lead to market failure, as the true cost of fossil fuel usage is not reflected in the market price.
Additionally, the fossil fuel industry receives substantial government subsidies and funding, which further incentivize the production and consumption of fossil fuels. These subsidies, often provided as direct support or tax benefits, can be challenging to quantify and have been estimated at $7 trillion globally. Removing these subsidies and imposing corrective taxes would reduce air pollution, generate revenue, and contribute to slowing climate change. However, it is a complex process that requires careful policy design and implementation to ensure vulnerable households are not disproportionately affected by rising energy prices.
The negative externalities of the fossil fuel industry have severe consequences, including climate-related disasters, loss of life, damage to cultural heritage, and a sense of insecurity. For example, the devastating flooding in Pakistan in 2022 impacted 33 million people, caused up to $40 billion in damages, and resulted in a severely underfunded aid response.
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Fossil fuel industry's impact on climate change
The fossil fuel industry has been a major contributor to climate change, with its products and practices having global impacts. In 2022, the world's largest fossil fuel companies, including ExxonMobil, Shell, BP, Chevron, and TotalEnergies, reported a collective profit of nearly $200 billion. During the same period, the world suffered record losses due to extreme weather events, which have been exacerbated by climate change. The burning of fossil fuels releases greenhouse gases, primarily carbon dioxide, which trap heat in the Earth's atmosphere, leading to global warming and climate change. In 2019, fossil fuels accounted for 74% of U.S. greenhouse gas emissions, with similar trends observed globally. The extraction, transportation, and refining of fossil fuels also pose significant risks, as evidenced by the 2010 BP Deepwater Horizon oil spill, which had devastating environmental and economic consequences.
Fossil fuels, including coal, oil, and natural gas, have been the primary energy sources for decades, contributing to the accumulation of greenhouse gases in the atmosphere. Coal is the most carbon-intensive fossil fuel, responsible for over 0.3°C of the 1°C increase in global average temperatures. Oil releases significant carbon emissions, contributing approximately one-third of the world's total carbon emissions. Natural gas, while promoted as a cleaner alternative, still accounts for one-fifth of global carbon emissions. The continued reliance on fossil fuels has led to rising global temperatures, with 2023 being the hottest year on record, according to NASA.
The impact of the fossil fuel industry on climate change extends beyond carbon emissions. Plastic pollution is another significant consequence, with 99% of plastics derived from fossil fuels. Annually, 300 million tons of plastic waste are generated globally, with a substantial portion ending up in the oceans, harming marine life and polluting the food chain. Additionally, the production and use of fossil fuels result in hazardous air pollutants, such as sulfur dioxide, nitrogen oxides, particulate matter, carbon monoxide, and mercury. These pollutants contribute to air pollution, acid rain, eutrophication, crop and forest damage, and adverse effects on wildlife and human health.
Furthermore, the fossil fuel industry has received substantial government subsidies, totaling $7 trillion in 2023. These subsidies have been implemented to support consumers and businesses during periods of high energy prices, such as the spike caused by the Russia-Ukraine conflict and the economic recovery from the pandemic. While subsidies aim to alleviate energy costs, they have inadvertently perpetuated the use of fossil fuels and hindered the transition to cleaner energy sources. Removing these subsidies could generate significant taxpayer savings and reduce air pollution, contributing to the mitigation of climate change.
The fossil fuel industry's impact on climate change has led to devastating consequences, including extreme weather events, rising sea levels, biodiversity loss, and species extinction. These impacts have resulted in economic losses, displacement of communities, and loss of lives and cultural heritage. As the world strives to limit global warming to 1.5°C above pre-industrial levels, it is imperative to reduce fossil fuel emissions, phase out subsidies, and transition to a clean energy system to mitigate the worst effects of climate change.
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Fossil fuel industry's impact on communities
The fossil fuel industry generates billions in profits, with ExxonMobil, Shell, BP, Chevron, and TotalEnergies reporting a collective profit of nearly $200 billion in 2022. However, this industry has had a detrimental impact on communities worldwide, from environmental degradation to socioeconomic disparities.
Environmental Impact
The burning of fossil fuels is a significant contributor to climate change, leading to extreme weather events such as flooding, hurricanes, wildfires, and droughts. These events have resulted in billions of dollars in damages and have disproportionately affected vulnerable communities. For instance, the flooding in Pakistan in 2022 impacted 33 million people and caused up to $40 billion in damages. Climate change has also led to rising sea levels, threatening coastal communities with frequent flooding and erosion.
Health Impact
Fossil fuel pollution has severe health consequences, including asthma, cancer, heart disease, and premature death. Globally, one in five deaths is attributed to fossil fuel pollution, with communities of color and low-income communities bearing a disproportionate burden. In the United States, 350,000 premature deaths in 2018 were linked to fossil fuel-related pollution, with states like Pennsylvania, Ohio, and West Virginia experiencing the highest rates.
Socioeconomic Impact
Communities dependent on fossil fuels are vulnerable to socioeconomic stressors. The transition to clean energy may disrupt local economies, particularly in areas with high fossil fuel production and consumption. For example, Kern County, a major oil-producing region, may face stark implications due to its more rural and economically distressed characteristics. Additionally, some counties with high-minority populations, including those along the Mississippi River's "Cancer Alley", experience high levels of air toxics, toxic water discharges, and proximity to Superfund sites.
Displacement of Communities
Climate change-induced droughts, floods, and other disasters have led to the displacement of entire communities. Indigenous communities, such as the Torres Strait Islanders, are witnessing the erosion of their traditional lands, homes, sacred sites, and burial grounds due to rising sea levels. By 2050, an estimated 150 to 200 million people are at risk of forced displacement due to climate disasters.
Energy Poverty
The fossil fuel industry's profits come at the expense of communities struggling with energy poverty. As energy prices soar, people are faced with impossible choices between heating and eating. Instead of prioritizing affordable energy access, governments have often subsidized the fossil fuel industry, further enriching corporations while communities bear the brunt of climate change impacts.
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Frequently asked questions
The fossil fuel industry makes billions in profit. In 2023, the total revenue of the United States' oil and gas industry was 244.4 billion US dollars, down from 330.8 billion US dollars in 2022. According to the International Monetary Fund, the fossil fuel industry benefits from subsidies of $16 billion per day.
Fossil fuel companies have made huge profits over the last 50 years by producing fossil fuels, which are a major cause of climate change. Fossil fuel companies have also been accused of using their excessive profits to enrich investors through stock buybacks.
The fossil fuel industry's profits come at the expense of global health and safety. Climate change, caused in large part by the burning of fossil fuels, has led to extreme weather events and climate-related disasters, such as the 2022 flooding in Pakistan, which caused up to $40 billion in damages and impacted 33 million people.
Shifting to a carbon-neutral energy system based on renewables is the only way to end the cycle of increased reliance on fossil fuels, more industry profits, and more damages induced by climate change. Removing fuel subsidies and imposing corrective taxes would also lead to significant cuts in global carbon dioxide emissions and improve public health.
