The world’s largest oil corporation, Saudi Aramco, announced on Sunday that it made $161 billion last year, the highest yearly profit ever recorded by a publicly traded company. This news drew swift criticism from campaigners.
Once Russia began its conflict with Ukraine in February 2022, energy costs rose as a result of sanctions that prevented Moscow from selling its oil and natural gas in Western markets. This resulted in the company, officially known as the Saudi Arabian Oil Co., making a monstrous profit.
In order to capitalize on market demand when China enters the international market again following the relaxation of its coronavirus limitations, Aramco also plans to raise its production. That might generate the billions required to fund Crown Prince Mohammed bin Salman’s plans to build cutting-edge cities as a way to wean Saudi Arabia off of its reliance on oil.
Nevertheless, those intentions come despite growing international concerns over how climate change is being accelerated by the burning of fossil fuels. Yet, rising energy costs have already strained ties between Riyadh and Washington and increased inflation globally.
Amin H. Nasser, CEO and President of Saudi Aramco, said in a statement that “given that we think oil and gas will remain crucial for the foreseeable future, the risks of underinvestment in our industry are significant” and might lead to increased energy costs.
In comparison to the company’s $110 billion in revenue from 2021, profits increased by 46.5%. In 2020, when the world was dealing with the worst of the coronavirus pandemic lockdown, travel difficulties, and briefly falling oil prices, it made $49 billion.
Aramco estimated its daily crude production at 11.5 million barrels in 2022 and stated that it aimed to increase that to 13 million barrels daily by 2027. It intends to invest as much as $55 billion in major projects this year to increase that production.
Aramco also announced a $19.5 billion dividend for the fourth quarter of 2022, which will be paid in the first three months of this year.
The performance of Aramco, a leading indicator of the global energy market, in 2022 will be compared to the enormous profits made by BP, Exxon Mobil, Shell, and other major energy companies. Nonetheless, the $161 billion profit was so large that it eclipsed not just its own prior performance but also records set by Apple, Vodafone, and the United States Federal National Mortgage Association, or Fannie Mae.
Despite reaching above $120 per barrel back in June, benchmark Brent crude oil prices are currently hovering around $82 per barrel. Because of the rise in oil prices in the third quarter of 2022, Aramco, whose success depends on them, reported a record $42.4 billion profit.
Because of the tensions with Iran, those high prices have further strained relations between the kingdom and the United States, which has long served as a security guarantee for Gulf Arab nations. The kingdom claimed that the Biden administration attempted to delay an OPEC and ally decision to reduce production before the November midterm elections, which could have kept gasoline prices lower for voters. This would have made public the typically confidential negotiations that are common in the area.
There will be “some consequences for what they’ve done,” according to President Joe Biden, in terms of the price of oil. Nevertheless, as Saudi Arabia and Iran traveled to Beijing on Friday to reach a diplomatic agreement, those repercussions have not yet been observed. The average price of gasoline in the US is currently $3.47 a gallon, down just over a dollar from the previous year.
Higher crude oil prices can support Prince Mohammed’s aspirations for the country, notably the $500 billion Neom desert metropolis project.
Additionally, those profits might be invested in Riyadh Air, a brand-new airline Prince Mohammed unveiled on Sunday. By 2030, Riyadh Air hopes to fly to over 100 cities worldwide. According to The Wall Street Journal, which cited unnamed sources, Saudi Arabia may spend up to $35 billion on aircraft from Boeing Inc.
But, they also go against the concerns of climate campaigners, especially given that the COP28 climate negotiations of the UN will start this November in the neighboring United Arab Emirates.
Like China and Russia, Saudi Arabia has committed to having net-zero carbon emissions by the year 2060, though it is still unclear how it intends to do it. Aramco created a $1.5 billion Sustainability Fund in October and plans to build a carbon capture and storage facility, according to the company’s quarterly report.
Agnès Callamard, the secretary-general of Amnesty International, attacked Aramco’s annual profit given the rising worldwide concern about climate change.
The sale of fossil fuels, which are the main cause of the climate catastrophe, generated a profit of more than $161 billion for a firm in a single year, she said in a statement. It is even more alarming because this excess was built up during a global crisis in the cost of living and helped by the rise in energy costs brought on by Russia’s aggressive campaign against Ukraine.
Callamard added that Saudi Arabia continues to be one of the world’s top executioners, is still engaged in a protracted war in Yemen, and represses opposition.
“These unusual revenues, and any future income earned from Aramco, should not be used to pay, try to cover up, or otherwise obscure human rights abuses,” she warned.
The massive oil reserves of Saudi Arabia, which are found near the surface of its vast desert, make it one of the least expensive areas in the world to produce crude. According to the Institute of International Finance, Saudi Arabia stands to gain an additional $40 billion annually for every $10 increase in the price of a barrel of oil.
On the Tadawul stock exchange in Riyadh, Aramco shares were trading at $8.74. This is lower than the recent high of $11.55 per share. Aramco is now valued at $1.9 trillion, making it the second most valuable business in the world (after Apple) at that price.
The majority of the company’s shares are still owned by the Saudi government. Late in 2019, Saudi Aramco publicly disclosed a small portion of its value. On Monday, Aramco will present a thorough earnings report
