BP has decided that its paltry US$28 billion profit wasn’t up to scratch. Photo / Brett Phibbs
BP has decided that its paltry US$28 billion profit wasn’t up to scratch. Photo / Brett Phibbs
Opinion by Liam Dann
Liam Dann, Business Editor at Large for New Zealand’s Herald, works as a writer, columnist, radio commentator and as a presenter and producer of videos and podcasts.
The reason I don’t virtue signal is that I’m not particularly virtuous.
I like the idea of being virtuous. But I’m lazy and can’t ignore the fact that, as a fairly typical middle-class consumer, I’m complicit in keeping this well-oiled capitalist machine running.
Unfortunately, that makes it harder to write the kind of searing, morally unambiguous rebuke of excessive profiteering that the world needs right now.
I am, however, suspicious of those who complain the most about virtue signalling. I think they’re probably just lazy too and don’t like being made to feel guilty by earnest young people.
Well, guilt is one of the most effective drivers of virtue - as all the great religions know.
If that’s what’s needed to nudge me and the rest of the world along a less environmentally destructive path then I’m happy to roll with it.
Anyway, back to that uncomfortable fact about profits.
The six biggest western oil companies - BP, Shell, Exxon, Chevron, Equinor and TotalEnergies - doubled their net profits in 2022 to almost US$220 billion.
That’s about NZ$350b and just shy of New Zealand’s annual GDP (for those who enjoy quirky unconnected examples of scale that newspapers are famous for).
It seems galling because none of this extra profit has been generated through extra productivity or improved efficiency.
It comes off the back of the war in Ukraine, which sent energy prices soaring early last year.
The big profit number, which was widely reported in the US and UK media last week, doesn’t even include the three largest oil companies in the world - Saudi Aramco, China Petroleum & Chemical Corp and PetroChina.
That’s partly due to different reporting dates, but also because those three are less likely to feel bothered by the headlines and lousy PR implications of their mega-profits.
To be honest, it doesn’t seem like the big western brands are particularly bothered right now either.
Disappointingly, BP has decided that its paltry US$28 billion profit wasn’t up to scratch and it will have to slow the pace at which it shifts its business towards renewable energy.
It had planned to cut its non-renewable business by 40 per cent by 2030 (from 2019 levels). It now says, sorry, it might just aim for 25 per cent.
To be fair, BP chief executive Bernard Looney makes the entirely rational point that it’s all our fault.
“Governments and societies around the world are asking companies like ours to invest in today’s energy system,” Looney told the Financial Times.
In other words, we all panicked and demanded BP pump more oil now to help beat inflation.
He’s right, we did. But it seems very short-sighted.
I know there are reasons why we aren’t supposed to draw a correlation between the extreme weather events this summer and the ongoing use of fossil fuels.
So let’s just call the connection symbolic ... dangerously and destructively symbolic.
The war in Ukraine has affected oil prices. Photo / AP
Drawing moral lines is hard.
Everyone’s other favourite industry - banking - has also been doing great lately.
New Zealand’s (mostly Aussie-owned) banks saw combined profits crack NZ$10b last year according to Reserve Bank data.
The sector reaped the benefits of billions in Covid stimulus money that flowed into the housing market, causing prices to leap 45 per cent from the start of 2020 to the start of 2022 (QV NZ House Price Index).
The banks weren’t responsible for the housing boom. They didn’t cause the pandemic, order the lockdowns or decide how much stimulus was needed.
Banks, by their very nature, earn a cut as money moves around the economy. So if you create more money it’s not surprising their profits rise.
Clearly, there are some high net-worth investors who’ve seen their wealth soar during the pandemic and we can make villains of them.
But most of those bumper bank and oil company dividends flow to big institutional investment funds that manage the retirement savings for billions of people across the world.
It would be a stretch to say we’re all complicit, but a lot of us are.
I looked at my KiwiSaver account this week and I was happy to see it on the rise again.
I assume my fund has some sort of mildly ethical investment charter and I’m not profiting off weapons or tobacco.
Oil and energy investment is less clear-cut. I think all the major KiwiSaver funds have programmes to move away from fossil fuel stocks and are aiming for carbon neutrality in the near future.
I’m no moral philosopher but, if the world keeps running on oil, won’t that just skew all those extra dividends towards the least moral people in society?
I suspect that both the banking and energy sectors are so heavily embedded in the fabric of society that any meaningful change will have to be structural.
It will need to be led by the public, putting pressure on governments to change the way things work.
The virtuous are going to have to signal.
And the rest of us are going to have to talk more about who pays and how much.
