Oil and gas conglomerate Shell has reported robust profits, capitalizing on the recent upswing in oil prices. The company disclosed earnings of $6.2 billion (£5.1 billion) for the period spanning July to September, marking a significant improvement compared to the previous quarter.
However, these profits fell short of the $9.4 billion reported during the same period last year, which experienced a surge in oil and gas prices due to Russia’s invasion of Ukraine. While oil prices still remain below that level, they have been trending upward recently. This resurgence is predominantly attributed to the coordinated efforts of the OPEC+ alliance, comprised of oil-producing nations, to curtail output and stabilize the market.
The World Bank has cautioned that ongoing conflicts in the Middle East could potentially push crude oil prices higher, possibly reaching $150 per barrel, compared to the current rate of $85 per barrel.
Shell attributes its improved earnings over the past three months to higher oil prices, increased oil and gas production, and augmented profits from refining and gas trading. In 2022, oil prices experienced a surge before declining earlier this year, impacting the profitability of energy firms. However, prices have been on an upward trajectory again after the production cuts were enforced in the summer.
These production cuts were initiated by OPEC+ members, with Saudi Arabia and Russia leading the way, citing concerns about weakening global demand. Moscow also cited Western “interference with market dynamics,” alluding to the limitations imposed on Russian oil following the invasion of Ukraine.
Shell has outlined a plan to return $3.5 billion to shareholders through a share buyback program. In total, the company will distribute $23 billion to shareholders throughout the current year.
This move has faced criticism from climate advocacy groups. Jonathan Noronha-Gant of Global Witness expressed apprehension that Shell’s shareholders have profited from the upheaval in fossil fuel markets resulting from the Ukrainian conflict. Greenpeace campaigner Charlie Kronick criticized oil companies for prioritizing dividends, share buybacks, and new fossil fuel projects over investments in renewable energy and job security.
Shell’s CEO, Wael Sawan, who assumed the role in January, repositioned the company’s strategy to emphasize oil and gas while also announcing plans to reduce the workforce in its low-carbon solutions division by at least 15%.