By CHRIS ILLING
While the population is carrying the burden of high electricity and gas prices, energy companies are reporting record profits and making their investors happy.
The high energy prices ensure enormous profits for oil and gas companies. The UK-based Shell (RDSA. UK) group reported their second record profit in a row for the spring quarter on Thursday. With a $11.5bn surplus in the months of April to June, profits were again higher than the $9.1bn in the previous quarter.
Shell spoke of “extraordinarily strong” earnings. The group had produced a little less oil than before. However, the sharp rise in prices since the Ukraine war has boosted sales and profits. Shell’s stock market value has risen by more than 25 percent since the beginning of the year. It is currently around $190bn.
Its Italian competitor, Eni (ENI.IT), is also benefiting from the increased prices. Despite a slight drop in production, the oil company’s adjusted net profit rose to 3.8bn Euros between April and June. That was more than four times as much as a year ago, the company announced on Friday.
French competitor Totalenergies (FP.FR), with a market value of $130bn, is now the third most valuable French company behind luxury and consumer goods giants LVMH and L’Oréal. In the spring quarter, the company generated a net profit of 5.7bn euros.
In addition to the high price of oil, Totalenergies benefits from the fact it has been active in the liquid gas business for years. This is more in demand than ever. The group now wants its investors to share in its success with a special dividend of 69 cents per share.
In Germany, the energy giant RWE (RWE.DE) stands out with brilliant dealmaking. The net results of the Essen-based group almost doubled in the first half of the year, which is why the outlook for 2022 was raised unusually sharply. Michael Müller, its chief financial officer, has already announced that the forecast will be raised for the coming year. One driver is global energy trading.
At the same time, the RWE power plants in Germany and the foreign markets are running at full speed thanks to the high demand for electricity. The gas-fired power plants made extraordinarily good profits, while RWE also benefited from better wind conditions than in the previous year at its onshore and offshore wind farms. Electricity generation in the remaining nuclear power plant is also at a high level.
But, while shareholders rejoice in higher profits, the populace groans at the burden of soaring energy bills. The average regulated household bill in the UK, for example, jumped from around £1,300 to nearly £2,000 for gas and electricity in April. According to the latest forecasts, households could end up paying well over £3,000 next winter. Both Conservative candidates to succeed outgoing prime minister, Boris Johnson, have now announced tax cuts in a bid to lower consumer bills.
The British government also wants to skim off excess profits from energy companies. As early as June, the government implemented a “windfall tax” that oil and gas suppliers must pay.
In France, the government urged the energy giants to give a price reduction at the pump, in addition to the state fuel rebate of soon 30 cents per litre of fuel. In Germany, the government introduced a fuel discount, and the energy tax is temporarily reduced.
While the savvy investor benefits, the general population must prepare for an expensive winter.