Consequence of the energy crisis: The big comeback of the oil companies

The Ukraine war has turned the energy supply upside down: The demand for fossil fuels is increasing again and is generating record revenues for the oil companies. What are these funds used for?

The big oil companies made their comeback this year. Because of the Russian war of aggression in Ukraine, the western world is boycotting some Russian gas and oil – and had to find new sources of energy quickly. That drove up the price of oil. At Shell, Saudiaramco, Chevron and Co. profits bubbled up.

For fear of supply gaps, the topic of climate protection was pushed aside. Oil stocks were suddenly in demand again on the stock market. This is how the analyst Christoph Schürmann from the “Flossbach von Storch Research Institute” describes it in his study entitled “(Un)clean Winners”. The analyst explains: “Since the oil and gas companies were valued very low after the Corona crisis, corresponding profits have now come in with the rising energy prices. Therefore they have done very well on the stock market this year.”

“Oil Beats Clean Energy”

This has reversed a trend: According to the rating agency Morningstar, record sums flowed into so-called sustainability funds during the corona pandemic, but investor interest ebbed significantly this year. “Flossbach von Storch” analyst Schürmann suspects that many investors have been guided by the prospect of profits – and oil is currently beating so-called clean energy.

“This is actually due to the fact that the green companies invest a lot. To do this, they need a lot of outside capital compared to what they have been doing up to now. These are then debts – and they have to be serviced through interest,” says Schürmann. In relation to sales, the debts of the green companies are very high, which weighs on cash inflows.

Oil age before the end?

However, Greenpeace financial market expert Mauricio Vargas does not assume that there is still much money to be made with the oil companies in the long term: “In fact, I assume that the fossil age, including the oil age, is coming to an end. We are probably only experiencing it war a final bull market or so-called super cycle.”

Now the oil age has often been declared dead, but this time politicians have also set their course: The EU wants to stop emitting climate-damaging CO2 by 2050. So the industry has to change. The big oil companies also have to submit to this and in some cases are embarking on the path to the so-called “green transformation”.

Greenpeace economist Vargas believes that this is not very credible: “The big problem is that this narrative works – that you need the big oil multinationals to advance the transformation.” In fact, it is also the case that they are investing in renewable energies – but are not refraining from further expanding their fossil energy business.

Not all oil companies are looking for alternatives

The pressure to change is high. European oil companies such as Shell and BP in particular are looking for alternatives and are investing, for example, in offshore wind power to generate green hydrogen. The American corporations are different: US oil giants like Chevron even increased their budgets in the billions this year to develop new oil and gas fields.

Most of this year’s record profits of the five largest western oil companies, i.e. 30 billion euros, flowed into share buyback programs. This, in turn, supports share prices and was paid to shareholders as a dividend. However, this does not contribute to the green transformation.