Beth Howell Date published: 30 June 2022 10 min read People around the globe are experiencing one of the worst cost of living crises in decades – energy bills have reached new heights, and petrol and diesel prices are breaking records. To make things worse, both of these increases are having a knock-on effect on the price of literally everything.And yet, oil and gas companies are making record profits. In fact, the International Energy Agency has estimated that the industry’s profits at the end of the 2022 financial year will be $2 trillion higher than in 2021.But where are all these profits going?What’s on this page? 01 Who are the ‘oil giants’? 02 Which oil giants made the biggest profits in 2021? 03 Which oil giant has invested the most in renewable energy? 04 Impact of the windfall tax on oil companies Who are the ‘oil giants’?The top-ranking earners in the oil and gas industry fluctuate each year, but as of Q4 2021 (April 2022) the five biggest oil giants in the world were:EquinorTotalEnergiesShellExxonMobilChevron Which oil giants made the biggest profits in 2021?Most oil companies have made huge profits over the past year, with the top ten oil giants all at least doubling their profits year-on-year.ExxonMobil, the US’s largest oil company, reported that its net profit more than doubled from a year earlier, even after a $3.4 billion (£2.7 billion) charge after exiting its operations in Russia.On top of this, Chevron reported its highest quarterly profit in nearly a decade, and Shell announced its highest earnings ever.But which company earned the most in the first quarter of 2022? We’ve outlined the results in the chart below.Data from The Guardian, May 2022These profits are estimated to continue throughout the year too. In fact, global net income from oil and gas production in 2022 is anticipated to be nearly $2 trillion (£1.6 trillion) higher than in 2021.But when it comes to year-on-year growth, the results look a little different.Data from The Guardian, May 2022Where are the oil giants investing their profits?The COVID-19 pandemic impacted oil giants in more ways than one – it dramatically reduced demand and put more pressure on companies to invest in renewables, as various countries introduced green recovery plans.As a result, oil giants are now investing more into greener alternatives to fossil fuels.Generally, European oil giants – including Shell, BP, and TotalEnergies – are investing in renewables more than US companies. In fact, these three oil companies have committed to net-zero emissions by 2050, despite being in the most carbon-intensive industry in the world.This is progress. However, oil giants are still investing heavily in – yep, you guessed it – oil and gas.Overall, there are three key areas that oil giants are investing their profits in: fossil fuels, renewables, and carbon capture.Fossil fuelsIt’s hardly surprising that the world’s biggest oil suppliers are investing in fossil fuels more than anything else. After all, global consumption of oil is currently at 100 million barrels of oil per day, compared to 74 million in 2000.Although the top oil and gas producers have started increasing their investments in renewable energy, they’re still set to generate a lot of fossil fuels in the coming years.In the past year alone, US oil producers have increased drilling activity by 60%. As for oil companies in Europe? Despite promising to be more sustainable, Equinor has opened the largest oil field in Western Europe, providing roughly 535,000 barrels of oil a day, which will increase to 720,000 barrels of oil a day by Q4 of 2022.TotalEnergies has also claimed that 50% of its growth investments will be dedicated to natural gas, or “essentially LNG”.RenewablesAlthough most oil companies claim to be ramping up their investment in renewables, it’s difficult to tell which ones are being genuine and which ones are simply greenwashing their brand.For example, Equinor had only installed 0.7 GW of renewable energy production by 2020, despite claiming that it wants to move away from oil and gas. Similarly, TotalEnergies has vaguely claimed that 50% of its growth investments in 2022 will be dedicated to the development of new energies – “mainly renewables and electricity”.Shell is also planning to invest $3 billion into renewables and energy solutions throughout 2022. Although this seems like a lot, it’s only 12% of the firm’s total $25 billion (£20.4 billion) investment fund for the year. To compare, investments in fossil fuel exploration and production will go up from $6 billion (£4.9 billion) in 2021 to $8 billion (£6.5 billion) in 2022.Rather than focusing sustainability goals on renewable energies, like solar and wind, some oil companies are looking to renewable fuels. ExxonMobil recently announced that it is investing $125 million (£102 million) in Global Clean Energy to advance its renewable diesel production.Sounds like a lot, right? Technically yes, but when you compare that to ExxonMobil’s quarterly turnover of $5.5 billion (£4.4 billion), it’s not so impressive.Any investment in renewables is good, but considering the amount of money oil companies are earning during the energy crisis, these pledges are pitiful.Carbon captureMany oil giants are showing particular interest in carbon capture – technology that literally captures carbon dioxide (CO2) emissions from industrial processes, and stores them in the ground.ExxonMobil believes that carbon capture will be a $2 trillion (£1.6 trillion) market by 2040, which is why it recently announced a $3 billion (£2.4 billion) investment in various carbon capture projects.But carbon capture is quite a controversial topic.On the one hand, the International Energy Agency believes this green technology could remove as much as 20% of total CO2 emissions from industrial and energy-production facilities (if done properly). On the other hand, some experts suggest carbon capture releases more emissions than it saves because it's so energy intensive.Shell’s ‘Quest’ plant in Canada is the perfect example of this hypocrisy. A recent study found that the plant had prevented 5 million tonnes of carbon dioxide from escaping into the atmosphere since 2015, whilst releasing a further 7.5 million tonnes of greenhouse gases over the same period. Which oil giant has invested the most in renewable energy?Some oil giants are making ambitious pledges to switch to renewable energy, but one firm has gone one step beyond the rest in the first half of 2022 – British oil company BP.Bernard Looney, BP’s chief executive, told investors that the company is planning to dedicate 40% of its spending budget to support the green energy transition by 2025. This will then rise to 50% of its budget by the end of the decade.In June 2022, BP also agreed to take a 40.5% equity stake in the Asian Renewable Energy Hub – a proposal that will create one of the world's largest renewable energy plants, located in Western Australia.BP said it would become the operator of the development, adding that it had “the potential to be one of the largest renewables and green hydrogen hubs in the world.”But it’s not all sunshine and roses. Although BP is ramping up its renewable energy output, it’s also increasing its oil production rate. The company’s strategic progress statement claimed: “BP believes that – at an oil price of around $60 (£49) per barrel and subject to board discretion – it has the capacity to increase its dividend per ordinary share by around 4% a year through 2025”.Has the energy crisis affected the level of investment in renewable energy?The energy crisis has impacted renewable energy in more ways than one – some positive, and others not so much.On the one hand, the energy crisis is having a positive impact on long-term investment in renewables.As the cost of fossil fuels continues to increase, more people are investing in things like solar panels and electric vehicles to reduce energy bills and avoid petrol and diesel prices.As the IEA states: “Although the construction costs of renewable energy are going up, they are not rising nearly as much as the costs of power generated by fossil fuels”.On the flip side, the energy crisis is having a negative impact on how governments are powering their nations. Russia is now threatening to withhold natural gas from various countries that are showing support for Ukraine during the war – and has even cut off supplies to some countries.The result? Governments are having to ramp up levels of oil, gas, and coal in their national energy mix to make sure they have enough power to keep countries running.But unless we move away from fossil fuels, supply issues will only become more common – after all, there’s only a finite amount of them left. Impact of the windfall tax on oil companiesThe UK government has imposed a one-off windfall tax on oil and gas company profits. This means UK energy firms will now pay an additional 25% tax for the next 12 months, which should raise around £5 billion.Why is a windfall tax needed? The International Energy Agency (IEA) suggests it could provide a major boost to clean energy investment.In its analysis, the IEA says that the global net income from oil and gas production in 2022 is anticipated to be nearly $2 trillion (1.6 trillion) higher than in 2021. If the global oil and gas industry were to invest this income in low-carbon fuels, “it would fund all of the investment needed in these fuels for the remainder of this decade in the Net Zero Emissions by 2050 Scenario”.Although tax rates on oil companies’ profits are pretty high already – they pay 30% corporation tax on top of a supplementary 10% rate – the actual amount they’ve paid in the UK has been much lower.This is because oil companies have spent a lot of money on things like decommissioning North Sea oil platforms, which has cancelled out profits they were making in the UK. As a result, BP and Shell have both received more money back from the UK government than they paid every year from 2015 to 2020, according to the BBC.Before the tax was implemented, the CEO of BP and the CEO of Shell both claimed a windfall tax would eat into their renewable investments. However, when BP’s Chief executive Bernard Looney was asked by The Times which of BP's planned UK investments would not go ahead if there were a windfall tax, he replied: “there are none that we wouldn't do.”SummaryThere’s no denying it – oil giants are starting to change their colours. Investing in renewable energy and greener alternatives certainly seems to be increasing, but is it happening fast enough?Spoiler alert: it’s not.If we want to keep global warming below 1.5°C, we need to move away from fossil fuels completely, not just add a few renewables to the mix. Beth Howell Writer @Bethany_Howell_ Beth has a real passion for green living. She’s been absorbed in eco research for over three years, and has become quite the expert. Whether you’re after a new set of solar panels, a home energy improvement, or you want to catch the latest eco news, she’s got your back.