Energy companies in the US and Europe have shown surprising profits

Thanks to high oil prices last year, the Western energy giants made a lot of money. On January 31, US oil company ExxonMobil reported fourth-quarter earnings of $55.74 billion in 2022, a record profit for the Western oil industry. That means Exxon earned an average of about $6.3 million per hour last year.

In 2022, the international oil price briefly exceeded $120 per barrel as the long-term supply-demand imbalance in the oil and gas market and geopolitical factors roiled the global energy market. Many energy companies in Europe and the US are making staggering profits. Energy has been the best performing sector in the S&P 500 over the past year, according to CNBCNB.com. Analysts expect the five energy giants -- ExxonMobil, Chevron, BP, Shell and Total -- to make a combined $200 billion in profits in 2022 and possibly continue to do so through 2023.

However, the high profits have raised regulatory eyebrows. President Joe Biden complained last June that ExxonMobil made 'more money than God.' The White House press secretary also recently criticized that oil companies should put more of their profits back into production to reduce energy costs for consumers. The Europeans have taken substantial action. In September 2022, the EU Council approved an EU-wide windfall tax on fossil fuel companies to fund households and businesses facing high energy prices.

Levying energy windfall profit tax is to achieve relative fairness, but its negative effect is inevitable. On the one hand, the squeeze on energy companies' profits will be passed on to consumers. A windfall tax, on the other hand, would probably reduce energy supply and push up prices even further. Moreover, energy markets are cyclical. In previous years, when the market was low, oil and gas companies were not very profitable. If companies bear the cost of the economic downturn, only to see profits taken when prices rise, it will discourage investment and slow the transition to green energy.

The bulls continue to be bullish on the international energy market, even though oil prices are well below what they were in the first half of 2022. In its latest monthly report, the International Energy Agency said a series of sanctions imposed on Russia by Western countries could put oil supplies at risk. In the short term, the supply side of the dilemma is difficult to ease, the global energy market is still insufficient supply, the possibility of high international oil prices. Industry insiders believe that the future international energy prices in a higher position will be a large probability event.