Workers' Weekly On-Line
Volume 52 Number 10, May 7, 2022 ARCHIVE HOME JBCENTRE SUBSCRIBE

Economic Issues of Serious Concern

Energy Oligarchs Profiteering from the War in Ukraine

Shell announced record quarterly profits "as it capitalised on the volatility in global energy markets" amid the war in Ukraine, reports the Financial Times [1]. "Shell has less exposure to Russia than European rivals BP and Total though it has a complicated set of business positions to unwind as it exits the country," according to the newspaper.

The article exposes the global set-up where the production, distribution and exchange of oil and gas are controlled by giant, competing oligarchic business cartels. The FT explains: "Shell is the world's largest trader of liquefied natural gas and a big trader of oil. Prices for LNG, in particular, have soared as European efforts to reduce dependence on piped gas from Russia have increased competition for cargoes of the fuel. Shell produced 8mn tonnes of LNG in the first quarter and sold 18.3mn tonnes..."

One aspect of the war is contention over energy markets and corridors, and over which energy corridors dominate in the world. The part of the world integrated into NATO, and therefore into the US imperialist war-machine, is seeking independence from Russian gas. Private oligarchy interests are at stake, and contradictions are breaking out over whether to boycott or continue to use Russian fuels.

LNG, natural gas in liquid form, is increasingly being used both industrially and domestically, and is seen as key in disconnecting from Russia. It should be noted that this has environmental consequences, as the process of liquefaction itself consumes a significant amount of energy [2].

Shell is a global oil and gas monopoly headquartered in London, with historical roots in Britain and the Netherlands, and is a major global power in LNG, operating a fifth of the world's LNG vessels [2]. Such cartels analyse developments and take individual positions, lining up with others, contradicting yet others, according to their own narrow interests aimed at making the biggest scores. All of these oligopolies at present are making vast sums out of energy price inflation.

"Adjusted earnings at Europe's largest oil company rose to $9.1bn in the first three months of the year, almost three times the $3.2bn it recorded a year earlier. That beat average analyst estimates of $8.7bn and was up from $6.4bn in the final three months of 2021," writes the FT. "The results complete a set of bumper first-quarter earnings for the world's biggest oil and gas companies... BP reported underlying profits of $6.2bn, its highest since 2008, while Norway's state-controlled Equinor recorded its highest ever quarterly pre-tax earnings of $18bn."

"The group's profits were driven by its oil production and integrated gas divisions, which generated $4.1bn and $3.5bn in adjusted earnings respectively, and by a strong performance from its traders," added the newspaper, and noted that "Shell shares rose more than 3% in early trading on Thursday."

"It's not just a war profit as some people would like to point out," Shell chief executive Ben van Beurden said unashamedly. "It is very much also the performance of the company, which has significantly strengthened in the run-up and also during the pandemic."

Giving further details, the Financial Times writes:

"Shell had been able to redirect some of its cargoes of LNG to Europe to meet surging demand, chief financial officer Sinead Gorman said, resulting in trading and optimisation earnings that were similar to the previous quarter for gas and 'significantly higher' for oil products."


"Shell had less exposure to Russia than European rivals BP and Total. Before the war, Russia was expected to contribute 5 per cent of Shell's total oil and gas production in 2022, compared with 16 per cent for Total and 28 per cent for BP, according to investment bank Jefferies.

"Nevertheless, it has a complicated set of business positions to unwind as it exits the country, including a 27.5 per cent stake in the Sakhalin-2 liquefied natural gas project with Gazprom, two other joint ventures with the state-owned company, a retail network, a lubricants business and a stake in the now shelved Nordstream 2 project.

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"Despite the lack of potential buyers given Russia's growing isolation, van Beurden insisted Shell was making 'good progress' in its efforts to sell its Russian assets. 'It is a commercial process, it is not abandonment,' he said."

This is hardly the first time that the energy oligarchs, in particular those in charge of the Shell monopoly, have made a killing taking advantage of global crises. For instance, in 2008 Shell recorded the biggest annual profits in British corporate history at £14bn, which were branded by trade union leaders and others as obscene. At the time, Shell said that it had no intention of cutting back on its operations, saying it needed to increase production to meet rising demand and unveiling controversial plans to start oil operations in Iraq. Then as now, trade union leaders demanded a "windfall tax". In 2008, Tony Woodley, then joint general secretary of Unite, now Baron Woodley, said that a special tax was needed for greedy companies such as Shell. Now trade union leaders such as Howard Beckett of Unite, together with MPs such as Ed Miliband and others, are echoing this call. Nor is Shell the only oil company under fire for record profits. BP reported its highest quarterly profit in more than a decade, as the reports point out.

Calls for a windfall tax have been rebuffed by claims that the majors will start to clean up their acts. Experience shows that this is not going to happen. The claim flies in the face of the control and ownership of these mega-companies by rich oligarchs, who are in effect holding working people to ransom. These private interests are what is at stake and must be challenged.

1. "Shell makes record profits as Ukraine war shakes energy markets", Financial Times, May 5, 2022
2. "For Your Information: The LNG Canada Project", TML Weekly (Supplement), April 11, 2020


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