Governments and oil and gas companies in particular benefit from energy crisis | NOW

The sky-high energy prices are starting to affect more and more Dutch people. You may think that your energy supplier benefits from those record prices, but the profits are mostly taken by governments and the companies that extract the gas from the ground.

On Friday, EU energy ministers will meet to discuss emergency measures against the extreme rise in gas and electricity prices. On the table, among other things, is a plan to tax the high profits of electricity producers.

Some companies that supply electricity take advantage of the enormously high electricity price. This has risen along with the gas price, but a nuclear power plant or a wind farm does not have to purchase gas at all. As a result, they can make a lot of profit.

The nuclear power plant in Borssele has a turnover of 4 million euros per day due to the increased electricity price. That is more than ten times as much as a few years ago, general manager Carlo Wolters told Broadcasting Zeeland.

Record profit for Shell, Exxon and BP

But by no means all electricity companies make such record profits. Vattenfall and E.ON, the owner of Essent, saw their profits remain stable in the first half of 2022. They earn more from the electricity they sell, but they also have to buy much more expensive gas to run power plants. Due to those high costs, the German Uniper even had to be rescued with 15 billion euros in state aid.

The really big profits are at the source: the companies that extract the gas from the ground. For companies like Shell, Exxon Mobil and BP, the energy crisis is a gift: they all saw their profits skyrocket during the first half of this year. From April through June, Exxon made more than $2,000 in profits per second, for a total of nearly $18 billion.

A large part of those record profits end up with shareholders, because the oil companies pay a dividend or buy back shares. It is a thorn in the side of environmental organizations that the oil and gas companies hardly seem to invest their profits in sustainable energy. Shell’s CO2 emissions will increase significantly in the coming years, according to an analysis of Global Climate Insights.

“Share buybacks will increase shareholder profits in the short term, but failure to act on climate change will entail many risks in the long term and cost billions worldwide,” said Mark van Baal of activist shareholder group Follow This. He calls on Shell and other oil companies to invest in renewable energy and reduce emissions.

Record profits oil companies, January-June

Governments are also coming in

Some governments are also taking full advantage of the energy crisis. In many countries, oil and gas giants are state-owned. Think of Aramco in Saudi Arabia or Equinor in Norway.

According to analysts at the bank Nordea The Norwegian government will earn 150 billion euros this year from oil and gas. If prices remain high, another 190 billion euros will be added next year. With the income from these two years, the state could then pay out more than 60,000 euros to every resident of the Scandinavian country.

De Poolse Prime Minister Mateusz Morawiecki called out Norway in May to share its “huge” profits with allies, for example by selling gas below market price. The country has not complied.

Russia has also made a lot of money from its gas exports in recent months, even as less natural gas comes through the pipelines to Europe. Fossil fuel revenues will reach more than 300 billion euros this year, according to government documents released by the news agency Reuters got hold of.

Oil and gas revenues Norway

The Netherlands earns 10 billion euros

The Dutch government also benefits, because about 70 percent of the profits from Dutch gas fields go to the state. This year, the treasury will earn about 10 billion euros from the gas that is still being extracted in Groningen and under the North Sea. This is apparent from an analysis that the Central Planning Bureau (CPB) and the House of Representatives shared.

Next year, the government is expected to bring in another 10 billion euros in gas revenues. That is an “almost complete windfall”, said Diederik Dicou of the CPB in the House. Before the war in Ukraine, the CPB still assumed that gas revenues would be “virtually nil”.

Gas revenues flow to NAM

The disadvantage for the cabinet is that a large part of the gas revenues this year will be passed on immediately to Shell and Exxon Mobil, the shareholders of NAM. The government has to pay this year for the import of 5 billion cubic meters of gas, at the extremely high market price. This was agreed when the gas extraction from Groningen was reduced. As a result, NAM misses out on income, which the government compensates.

The Ministry of Economic Affairs and Climate darling the costs in April amounted to about 5 billion euros for this gas year, but due to the increased prices, the bill could be even higher. Next year the government will pay less, because then ‘only’ will have to pay for 1.8 billion cubic meters of gas compensation.

Source: NU by

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